Did the Great Resignation class of 21-22 just pick the worst time to retire?

[dividendman]

Inflation is a bitch.

Look at the bright side, now we can tell our children or grandchildren: "I remember when I could buy a chocolate bar for $2, now it's $200!"

[EscapeVelocity2020]

Inflation is a bitch.

110% agree ;)  Although painful, I cheer when Powell claims that the Fed is committed to getting inflation back down to 2%...  Folks like Musk don't care if inflation rages and advocate for rate cuts because their uber wealth is more at risk from stock losses than inflation.  Regular people like us are sensitive to increases in daily expenses should be worried if the Fed abandons the inflation fight...

[force majeure]

If you are truly Mustachian, you will find a way to cheat inflation.
I retired in 2021, as I could not take it any more.
Looked at cutting more expenses, I have recently decided to cut the the cable, to save more money.
I chucked the TV into a neighbour's dumpster.

[tooqk4u22]

If you are truly Mustachian, you will find a way to cheat inflation.
I retired in 2021, as I could not take it any more.
Looked at cutting more expenses, I have recently decided to cut the the cable, to save more money.
I chucked the TV into a neighbour's dumpster.

There is no beating inflation.....your portfolio keeps up or better or it doesn't.   If you're cutting things that's adjusting, not beating.  Granted cable is not one to argue about but for some that may be important to them.  I could adjust for inflation by reducing travel or lowering what I plan to pay for kids college but that would not be beating inflation, it would be adjusting (maybe smartly so) by reducing things important to me. 

[taco_sushi]

Been absent on MMM, chiming in - FI'd 3/2022 into the depths of SORR. I wish I read ERN deeply a year prior, but better late than never. ERN's "SORR content and glide-path suggestions" is super helpful. Anyone approaching FI in 3-5 years should read it. I experienced serious portfolio shock from having a tech heavy portfolio due to past stock awards. I've since rebalanced, but wish I had read/adopted ERNs glide path advice.

For several months, I've deployed ERN's Options Income strategy (1DTE) as an overlay on my portfolio (half index, half blue chips), and that's now supplementing income for my expenses (often covering more than my expenses), like ERN. He has all his backtesting and returns published -- better him to explain the details. My adjustments: I reduce my downside risk (and return) by using $5000 wide spreads, instead of naked puts. I may also close positions early for small amount to avoid extreme tail risks in this environment.

To be fair, I have a few years of options experience and am an active investor. But ERN's strategy is fairly consistent and conservative. It meets my needs for addressing SORR. ERN also has other suggestions to reducing SORR.

My situation is also different from most because I don't have a pure SP500 portfolio. I also have a small rental income, and recently bought 2 year CD ladders.

Like some have said, I think 4% Rule is great as a rule of thumb and for getting to the destination. But near/post FI, I found more helpful is ERN's thinking around SWR, SORR / creating a glide-path, and how he approaches spending as dynamic 40-60 (spending more) vs 70-90 (spending less).

I will also agree that MMM is living something quite different now. He's remodeling kitchens during a downturn. Same with 1500 Days, who's flipping houses. Plus their blog incomes. Great for both of them!  That's not helpful for the cohorts facing needing to reduce SORR, the failure part of 4% rule. 

Anyhow, ERN is a dense read, but well worth it!  And if you can withdraw only 3.3-3.5%, you should be 99% good.

thanks - have looked at some ERN, but not too in-depth. I would not be a person who would do call/puts/spreads etc. and even if I tried to force myself to learn, 99% of my money is in 401k/roth, so I don't even think it is allowed?

Would you think a deep dive into the ERN SORR information still be useful to me?

@mistymoney I would read his Table of Contents Summary on SWR, that summaries his many re SORR to find your interest. The two below, you should definitely read: Part 13 - Dynamic Stock Bond Allocation, and Part 55 - Bucket Strategy.

https://earlyretirementnow.com/2017/04/19/the-ultimate-guide-to-safe-withdrawal-rates-part-13-dynamic-stock-bond-allocation-through-prime-harvesting/
https://earlyretirementnow.com/2023/01/25/discussing-retirement-bucket-strategies-with-fritz-gilbert-swr-series-part-55/

Options are certainly allowed in 401K/Roth, but the strategy would differ a bit from ERN Options Income because he uses margin, by leveraging a taxable portfolio holding Preferred Shares as collateral. But with a 401k/Roth, you cannot use margin. So you would then need to sell your shares and hold them as cash collateral to make the options trades.

So I would recommend focusing on better stock/bond allocations and withdrawing via bucket strategies. Maybe lock in some 2-year Treasuries or CDs at 4.5% yields, if you're in or near retirement next couple of years.  And of course, if you can reduce your withdrawal by 0.5-1% that will help in the tougher years.

Hope this helps!

[mistymoney]

Been absent on MMM, chiming in - FI'd 3/2022 into the depths of SORR. I wish I read ERN deeply a year prior, but better late than never. ERN's "SORR content and glide-path suggestions" is super helpful. Anyone approaching FI in 3-5 years should read it. I experienced serious portfolio shock from having a tech heavy portfolio due to past stock awards. I've since rebalanced, but wish I had read/adopted ERNs glide path advice.

For several months, I've deployed ERN's Options Income strategy (1DTE) as an overlay on my portfolio (half index, half blue chips), and that's now supplementing income for my expenses (often covering more than my expenses), like ERN. He has all his backtesting and returns published -- better him to explain the details. My adjustments: I reduce my downside risk (and return) by using $5000 wide spreads, instead of naked puts. I may also close positions early for small amount to avoid extreme tail risks in this environment.

To be fair, I have a few years of options experience and am an active investor. But ERN's strategy is fairly consistent and conservative. It meets my needs for addressing SORR. ERN also has other suggestions to reducing SORR.

My situation is also different from most because I don't have a pure SP500 portfolio. I also have a small rental income, and recently bought 2 year CD ladders.

Like some have said, I think 4% Rule is great as a rule of thumb and for getting to the destination. But near/post FI, I found more helpful is ERN's thinking around SWR, SORR / creating a glide-path, and how he approaches spending as dynamic 40-60 (spending more) vs 70-90 (spending less).

I will also agree that MMM is living something quite different now. He's remodeling kitchens during a downturn. Same with 1500 Days, who's flipping houses. Plus their blog incomes. Great for both of them!  That's not helpful for the cohorts facing needing to reduce SORR, the failure part of 4% rule. 

Anyhow, ERN is a dense read, but well worth it!  And if you can withdraw only 3.3-3.5%, you should be 99% good.

thanks - have looked at some ERN, but not too in-depth. I would not be a person who would do call/puts/spreads etc. and even if I tried to force myself to learn, 99% of my money is in 401k/roth, so I don't even think it is allowed?

Would you think a deep dive into the ERN SORR information still be useful to me?

@mistymoney I would read his Table of Contents Summary on SWR, that summaries his many re SORR to find your interest. The two below, you should definitely read: Part 13 - Dynamic Stock Bond Allocation, and Part 55 - Bucket Strategy.

https://earlyretirementnow.com/2017/04/19/the-ultimate-guide-to-safe-withdrawal-rates-part-13-dynamic-stock-bond-allocation-through-prime-harvesting/
https://earlyretirementnow.com/2023/01/25/discussing-retirement-bucket-strategies-with-fritz-gilbert-swr-series-part-55/

Options are certainly allowed in 401K/Roth, but the strategy would differ a bit from ERN Options Income because he uses margin, by leveraging a taxable portfolio holding Preferred Shares as collateral. But with a 401k/Roth, you cannot use margin. So you would then need to sell your shares and hold them as cash collateral to make the options trades.

So I would recommend focusing on better stock/bond allocations and withdrawing via bucket strategies. Maybe lock in some 2-year Treasuries or CDs at 4.5% yields, if you're in or near retirement next couple of years.  And of course, if you can reduce your withdrawal by 0.5-1% that will help in the tougher years.

Hope this helps!

Thanks, will check these out! If allowed in 401k, maybe I need to expand.

Things to ponder!

[mistymoney]

I found one super-interesting tidbit in @taco_sushi second linked article that I thought was significant for this thread:

The way to manage Sequence Risk is to a) acknowledge that it exists and b) understand when Sequence Risk is more likely and less likely. If you retire while equities have been in a long bull market, you likely want to start with a lower initial safe withdrawal rate. But on the flip side, if equities have already fallen by enough, for example, in 2022, we can also afford to raise that safe withdrawal rate; see my recent post in the SWR Series on this topic.

Reading these today - I was dispairing a bit as I've been racing towards getting to 4% and it was increasingly dawning on me with the examples that 4% wasn't even really going to cut it.....so I found it pretty hope-inducing that SWR can be more flexible after a market wobble than before....

Still more reading to do! But I guess I am taking this at the moment to mean "all is not lost!" or - maybe - rather - given the previous long bull market, I should not have been planning on 4% to pull the plug!

[Must_ache]

Inflation is a bitch.

Look at the bright side, now we can tell our children or grandchildren: "I remember when I could buy a chocolate bar for $2, now it's $200!"

I remember when they were 20 cents

[mistymoney]

Inflation is a bitch.

Look at the bright side, now we can tell our children or grandchildren: "I remember when I could buy a chocolate bar for $2, now it's $200!"

I remember when they were 20 cents

LOL!

Nickel!

[mistymoney]

oh - here is another GEM! My optimism is restored...

Likewise, with the adjusted CAPE quite close to dropping below 20 and the S&P 500 dropping more than 25% in real terms since the beginning of the year, I am also ready to announce that even in the traditional static SWR calculations, we should now safely move the withdrawal rate to 4% and above. Well, you heard it here first; the 4% Rule works again! And with a little bit of flexibility and a generous pension and Social Security benefits later in retirement, you can certainly go crazy and justify 4.5% or higher!

https://earlyretirementnow.com/2022/10/12/dynamic-withdrawal-rates-based-on-the-shiller-cape-swr-series-part-54/

from Oct 2022.....

[mistymoney]

Inflation is a bitch.

Look at the bright side, now we can tell our children or grandchildren: "I remember when I could buy a chocolate bar for $2, now it's $200!"

I remember when they were 20 cents

LOL!

Nickel!

Just got a blast from the past memory on this.....I was just learning about money when inflation hit super hard and it seemed one summer I learned how to buy my own candy bar for a nickle, and then winter was shut in, and then the next summer it was a dime, and then the next a quarter. Not undersanding inflation - I kept thinking I "forgot" how to buy a candy bar....it's the big silver coin, no it's the small silver coin, no it's the really big silver coin......

[GuitarStv]

I'm so old, I remember when there were pennies.

[PhilB]

I'm so old, I remember when there were pennies.

I'm so old, I remember when there were 240 of them to the pound.

[wageslave23]

oh - here is another GEM! My optimism is restored...

Likewise, with the adjusted CAPE quite close to dropping below 20 and the S&P 500 dropping more than 25% in real terms since the beginning of the year, I am also ready to announce that even in the traditional static SWR calculations, we should now safely move the withdrawal rate to 4% and above. Well, you heard it here first; the 4% Rule works again! And with a little bit of flexibility and a generous pension and Social Security benefits later in retirement, you can certainly go crazy and justify 4.5% or higher!

https://earlyretirementnow.com/2022/10/12/dynamic-withdrawal-rates-based-on-the-shiller-cape-swr-series-part-54/

from Oct 2022.....

Be careful.  We are currently back up to a CAPE of 30.

[mistymoney]

Was thinking about this thread. Market is recovering and been mostly up the past 6 months or so.....don't mean to jinx it, but might be a pretty average downturn statistically, and not too big blip for SORR.

I'm thinking the Great Resignation class of 21-22 should be doing pretty ok! Wondered if any of them had updates, or thoughts to share?

[daverobev]

Was thinking about this thread. Market is recovering and been mostly up the past 6 months or so.....don't mean to jinx it, but might be a pretty average downturn statistically, and not too big blip for SORR.

I'm thinking the Great Resignation class of 21-22 should be doing pretty ok! Wondered if any of them had updates, or thoughts to share?

I stumbled on https://www.federalreserve.gov/econres/feds/end-of-an-era-the-coming-long-run-slowdown-in-corporate-profit-growth-and-stock-returns.htm the other day. Pretty bleak.

[Fru-Gal]

I feel good!

No guarantees in life but I still believe there’s no better investment than the US stock market. I don’t keep close tabs on my total annual withdrawals, but my taxable accounts, which I’m drawing down for living expenses, have not diminished too much since I fired. I’m still about 99.9% stocks.

Sold off some of my former employer stock out of media-stoked fear that it would go down to zero (even though it’s a nice steady one)… of course it went up after I sold but that’s OK because when I do the calculation, I realize we’re only talking about a difference of profit of maybe one grocery trip.

[dividendman]

Was thinking about this thread. Market is recovering and been mostly up the past 6 months or so.....don't mean to jinx it, but might be a pretty average downturn statistically, and not too big blip for SORR.

I'm thinking the Great Resignation class of 21-22 should be doing pretty ok! Wondered if any of them had updates, or thoughts to share?

I stumbled on https://www.federalreserve.gov/econres/feds/end-of-an-era-the-coming-long-run-slowdown-in-corporate-profit-growth-and-stock-returns.htm the other day. Pretty bleak.

I vaguely recall "The Death of Equities" being the headline somewhere around 1979 with the inflation rate at 11.35%, the 30 year fixed rate about the same and an unemployment rate of 6%.

Did anyone do a follow-up to see if equities died or not?

I pulled the plug at just about the market peak and it doesn't seem so bad... not worried at all.

[MrGreen]

Was thinking about this thread. Market is recovering and been mostly up the past 6 months or so.....don't mean to jinx it, but might be a pretty average downturn statistically, and not too big blip for SORR.

I'm thinking the Great Resignation class of 21-22 should be doing pretty ok! Wondered if any of them had updates, or thoughts to share?

I stumbled on https://www.federalreserve.gov/econres/feds/end-of-an-era-the-coming-long-run-slowdown-in-corporate-profit-growth-and-stock-returns.htm the other day. Pretty bleak.

I vaguely recall "The Death of Equities" being the headline somewhere around 1979 with the inflation rate at 11.35%, the 30 year fixed rate about the same and an unemployment rate of 6%.

Did anyone do a follow-up to see if equities died or not?

I pulled the plug at just about the market peak and it doesn't seem so bad... not worried at all.

Another 6% rise and were right back at the peak!

[daverobev]

Was thinking about this thread. Market is recovering and been mostly up the past 6 months or so.....don't mean to jinx it, but might be a pretty average downturn statistically, and not too big blip for SORR.

I'm thinking the Great Resignation class of 21-22 should be doing pretty ok! Wondered if any of them had updates, or thoughts to share?

I stumbled on https://www.federalreserve.gov/econres/feds/end-of-an-era-the-coming-long-run-slowdown-in-corporate-profit-growth-and-stock-returns.htm the other day. Pretty bleak.

I vaguely recall "The Death of Equities" being the headline somewhere around 1979 with the inflation rate at 11.35%, the 30 year fixed rate about the same and an unemployment rate of 6%.

Did anyone do a follow-up to see if equities died or not?

I pulled the plug at just about the market peak and it doesn't seem so bad... not worried at all.

Right, so in the paper it's explaining that the tailwinds the stock market has had over the last 40+ years are likely not repeatable. That's the point. It's not saying anything about the death of equities, just that two really strong tailwinds (cutting corporate tax rates and interest rates falling) are unlikely to be repeated.

Perhaps bleak was the wrong choice of words.

[wageslave23]

Was thinking about this thread. Market is recovering and been mostly up the past 6 months or so.....don't mean to jinx it, but might be a pretty average downturn statistically, and not too big blip for SORR.

I'm thinking the Great Resignation class of 21-22 should be doing pretty ok! Wondered if any of them had updates, or thoughts to share?

I'd guess down about 15% in real terms from the peak minus 6% for 18 months of 4% withdrawals. So down 20% in real terms. All depends if we get the recession or soft landing.

[BeanCounter]

Was thinking about this thread. Market is recovering and been mostly up the past 6 months or so.....don't mean to jinx it, but might be a pretty average downturn statistically, and not too big blip for SORR.

I'm thinking the Great Resignation class of 21-22 should be doing pretty ok! Wondered if any of them had updates, or thoughts to share?

I'd guess down about 15% in real terms from the peak minus 6% for 18 months of 4% withdrawals. So down 20% in real terms. All depends if we get the recession or soft landing.

I FIREd Aug of 2020 so I'm almost a 2021 class. I haven't experienced any of this. I'm pretty close to where I was during the peak. But I had cash set aside to spend in case of a downturn so it was really just a matter of riding it out.
So NO not down 20% AT ALL. I think that's a gross exaggeration for most in the class.

[salt cured]

Was thinking about this thread. Market is recovering and been mostly up the past 6 months or so.....don't mean to jinx it, but might be a pretty average downturn statistically, and not too big blip for SORR.

I'm thinking the Great Resignation class of 21-22 should be doing pretty ok! Wondered if any of them had updates, or thoughts to share?

I'd guess down about 15% in real terms from the peak minus 6% for 18 months of 4% withdrawals. So down 20% in real terms. All depends if we get the recession or soft landing.

My last day working was 6/30/22. Currently I’m up 12-13% nominal, minus 3% inflation.

[tooqk4u22]

Was thinking about this thread. Market is recovering and been mostly up the past 6 months or so.....don't mean to jinx it, but might be a pretty average downturn statistically, and not too big blip for SORR.

I'm thinking the Great Resignation class of 21-22 should be doing pretty ok! Wondered if any of them had updates, or thoughts to share?

I'd guess down about 15% in real terms from the peak minus 6% for 18 months of 4% withdrawals. So down 20% in real terms. All depends if we get the recession or soft landing.

I FIREd Aug of 2020 so I'm almost a 2021 class. I haven't experienced any of this. I'm pretty close to where I was during the peak. But I had cash set aside to spend in case of a downturn so it was really just a matter of riding it out.
So NO not down 20% AT ALL. I think that's a gross exaggeration for most in the class.

From 8/2020 to 6/2023 inflation totals 17% so if you had $100k then you would need $117k no, ignoring of course personal impacts of inflation of course like already owning your house.  Sp500 is up 28% since then (not including dividends) so if you were 100% sp500 you would be up 10% real terms so you shouldn't be feeling.   Heck, even if you 50% sp 500 and 50% bnd you would be up 18% (+divi & int) so +1% up in real terms.   If you fired at your targeted wr in 8/2020 that would have been a good time to go.

From 12/2022 - sp still down 6%, bnd down 14% and inflation is 3% so from then it's down 9% if all equities and 13% if 50/50 still not crazy given the run up but vastly different than an 8/2020 fire.

Interestingly enough, if you had a house say in 2019 with a mortgage you could have refinanced at a lower rate and you would have experienced personal deflation.   There were winners and losers but it all averages out. 

[Fru-Gal]

Thanks for reminding me — I and many folks I know refinanced mortgages at 2.75% or lower in 2019. That definitely helped make FIRE possible.

[daverobev]

Does make you think, doesn't it... 'don't time the market' and all that, but a bit of good timing can make suuuuch a difference.

People in the UK and Canada are feeling the pain, or will shortly, with their mortgages because most are on 5 year fixed rates. Those that locked in for 5 years just before this all went up are sitting pretty, for now. The number of people crying, though, over 5% is insane when you look at rates prior to the GFC. 16 years, that's all! This is what stress tests are for! At 6% your mortgage payment would be...

[vand]

Say hello to Bob. Bob is the world's worst market timer. He picked what could be the worst time in history to retire.  But it should be OK, because despite the rocky start, all the backtests say his portfolio should still outlive him, and Bob trusts in the process.

Here is how his portfolio has fared since he retired at the top of the recent market.



sorry, couldn't help myself with that. 

Bob was feeling  sense of relief after a great first half of the year clawed back most of the stock market losses (Bob only cares about his stonks) as it appears markets were a stones throw away for the old all time highs - his portfolio saw some traction - though not as much as he thought it should - but after just a couple of rocky months in the markets, the continual withdrawals and effects of inflation have weighted on the portfolio's real value, its now  back near the inflation-adjusted lows of last year around 70% -73% of its starting value in real times (depending on Bob's preference for growth/moderate/conservative portfolios as his financial advisor explained it to him - Bob has since sacked his financial advisor in retaliation for putting him in the supposedly safer conservative portfolio and then couldn't explain why its even done worse that the other funds in the conditions where they promised it would hold up better).  What the hell!? from being a stones throw from the old all time highs to scraping all time lows.. what is going on, Bob asks himself.

At least Bob has been able to enjoy 2 years of retirement not having to worry if his portfolio will run out of money - or so he keeps telling himself. In reality he's not sure if his blood pressure or cost of living is going up faster.

Godammit, thinks Bob. what happened to those days when the market would just go up for 14 straight months in a row.

[2Birds1Stone]

@thorstach, is that you?

[wageslave23]

Say hello to Bob. Bob is the world's worst market timer. He picked what could be the worst time in history to retire.  But it should be OK, because despite the rocky start, all the backtests say his portfolio should still outlive him, and Bob trusts in the process.

Here is how his portfolio has fared since he retired at the top of the recent market.



sorry, couldn't help myself with that. 

Bob was feeling  sense of relief after a great first half of the year clawed back most of the stock market losses (Bob only cares about his stonks) as it appears markets were a stones throw away for the old all time highs - his portfolio saw some traction - though not as much as he thought it should - but after just a couple of rocky months in the markets, the continual withdrawals and effects of inflation have weighted on the portfolio's real value, its now  back near the inflation-adjusted lows of last year around 70% -73% of its starting value in real times (depending on Bob's preference for growth/moderate/conservative portfolios as his financial advisor explained it to him - Bob has since sacked his financial advisor in retaliation for putting him in the supposedly safer conservative portfolio and then couldn't explain why its even done worse that the other funds in the conditions where they promised it would hold up better).  What the hell!? from being a stones throw from the old all time highs to scraping all time lows.. what is going on, Bob asks himself.

At least Bob has been able to enjoy 2 years of retirement not having to worry if his portfolio will run out of money - or so he keeps telling himself. In reality he's not sure if his blood pressure or cost of living is going up faster.

Godammit, thinks Bob. what happened to those days when the market would just go up for 14 straight months in a row.

Bob's now praying for a soft landing to bail him out.

[vand]

I mentioned in the first couple replies on this thread that the answer to the OP's question was "it's too early to tell," but to get us back on track I'll just drop this 2022 update to my vaunted SORR chart.

Ironically, my thresholds for Green, Orange, and Red highlights of the "Starting Year" column do not match the success definition that people are arguing over in absolute math terms, but rather the psychological terms that someone is actually going to live by. Green means you ended the 30 year period with more than you started with. Orange means you have less than what you started with but more than 200k. Red means you have less than 200k.

I arbitrarily chose "less than 200k" as my psychological failure scenario because I think that is a reasonable line below which people will really start freaking out unless they know they're on death's doorstep. I'm know some would argue that line is even higher.

To the original question, the correlation of returns during the first decade and portfolio failure (actual zero) are so strong that one can practically bank on that data as a indicator of how they will fare over 30 years. And as you can see, the average return over the first 10 years has to be really bad for a stash to be beyond saving by a strong second and/or third decade. Returns essentially have to be zero or worse after 10 years to know your portfolio is going to fail. Though even then it's not a guarantee. Look at 1970. And there are multiple starting years with returns worse than 2022 where the portfolio was fine after 30 years.

In summary: It's too early to tell.

Note: My SORR graph uses cfiresim to track a $1MM portfolio of 100% equities with 0.08% fund fees and a 4% WR

P.S.  - I do find it humorous that so much time is spent arguing over the definition of something that will not be used in the practice of one's life.

This is absolutely terrific work MrGreen.

Can I ask if the annualized returns and ending values are adjusted for inflation?  3 decades of inflation at the prevailing rate makes a difference to that $200k end level..

I think one of the interest things, which has perhaps been lost in the discussion of this thread, is that in 2021, perhaps uniquely, the retiree started from a point of expensive stocks AND expensive bonds.  It's possible that after 10 years all portfolio combinations of stocks/bonds will have fared poorly. I believe that was one of the unique problems for this era that I highlighted early on in the discussion.

Anyway, we have 2 years of data now. Still not enough to be sure of anything, but another year or so and we'll have have started moving out of discussing the "short term" which basically doesn't correlate with any of the longer time periods, towards the medium 3-5yr timeframe where correlations do being to become more meaningful... if you have sucky performance over any 3 yr stretch, what is the probability it will turn around by 5yrs, and then if you have sucky performance over 5yrs, what is the probability that it turned around by the end of 10yrs.. are question that may have to be asked more earnestly.

Au contrair to whoever said this thread died.. it didn't die, it just went into hibernation until it became more interesting... and the more data continues to roll in the more interesting it has the potential to be (to me, at least).

[wageslave23]

I think the more interesting question at this point is whether Bob would go back to work if he couldn't or wouldn't cut expenses. Whether his portfolio will fail or not won't be determined 100% for sure for another couple decades because even if it drops to 30% of starting value, their will still be people saying "you never know, it could still rally".  But if you refused to cut expenses, at what point would you start looking for work?  I think I already would have been.  But then again I never would have retired in 2021 unless my withdrawal rate was 3% or less.

[Fru-Gal]

Curveball: Bob’s incipient heart disease in 2019 has calcified into a loss of 15 years of life expectancy due to Bob’s failure to FIRE from his stressful job in 2021.

[mistymoney]

Curveball: Bob’s incipient heart disease in 2019 has calcified into a loss of 15 years of life expectancy due to Bob’s failure to FIRE from his stressful job in 2021.

sobering thoughts indeed!

but - this makes me think that bob is mid 50's to older, rather than 40. Although that can happened to the younger crowd too.....but I think less probable? Less likely for permanently shortened life expectancy?

When will bob be eligible for soc sec? And/or how could that save his retirement? Or maybe bob could get a fun PT gig until taking soc security?

Was bob's house paid off?

I want to know!

[maizefolk]

I figured this would be a good time to rerun the plot see how the 21-22 retiree is doing relative to both previous 30 year periods where the 4% rule succeeded (blue), or failed (red) as well as other scary times to retire in the 21st century.



As you can see a retiree who retired at the recent peak of the market at the end of 2021 is is still at a value what overlaps with some historical scenarios which have seen the 4% rule fail (and also overlaps with a lot of historical scenarios which have succeeded). But our hypothetical 2021/2022 retiree is now quite clearly doing better than hypothetical retirees who retired at the peak of the 2000 and 2007 markers.

Realistically we are are still probably 5 years away from our 21-22 retiree knowing for sure they're outside the range of any previous failure. But even with the recent decline in prices, our hypothetical retiree's situation is looking substantially better relative to historical comparators than they did eight months ago (the last time I ran this model).

[EscapeVelocity2020]

Curveball: Bob’s incipient heart disease in 2019 has calcified into a loss of 15 years of life expectancy due to Bob’s failure to FIRE from his stressful job in 2021.

Luckily Bob found this while he still had his corporate health insurance and short term disability so he could use the benefits he contributed to earlier in his career while he took a paid sabbatical to get treatment and recover.  Even if the markets continue to flounder, he’s not taking withdrawals in order to cover his health care insurance rate increases and suffer the sub par bronze coverage….  Bob also now has a few less years until Medicare, so he is quite thankful not to have financial stress on top of this already stressful health scare. 

Also, not to be morbid but since you went there, his family is much happier with the accidental death and disability settlement than if he had retired and not been covered…

[nereo]

Curveball: Bob’s incipient heart disease in 2019 has calcified into a loss of 15 years of life expectancy due to Bob’s failure to FIRE from his stressful job in 2021.

Luckily Bob found this while he still had his corporate health insurance and short term disability so he could use the benefits he contributed to earlier in his career while he took a paid sabbatical to get treatment and recover.  Even if the markets continue to flounder, he’s not taking withdrawals in order to cover his health care insurance rate increases and suffer the sub par bronze coverage….  Bob also now has a few less years until Medicare, so he is quite thankful not to have financial stress on top of this already stressful health scare. 

Also, not to be morbid but since you went there, his family is much happier with the accidental death and disability settlement than if he had retired and not been covered…

Wait… I thought Bob was British. Shouldn’t he be covered by the NHS?

[Villanelle]

I know many would consider it a "failure", but Bob also retired into a job market where anyone who wants a job can find one.  That means he should easily be able to pick up part-time work at at florist, which ties into his gardening hobby.  Or temp work doing taxes in Feb.-April which uses is accounting background.  Or if he was an [insert skilled labor description here], he might even be able to consult, go back part-time with his employer, or something similar.  Or substitute teaching, where he has an entirely flexible schedule and can maintain his Tuesday pickleball game (good for his heart!) and the month he spends living with his son, Bob II, and daughter-in-law and playing grandpa.  Or several of these.  Bob should be able to quite easily $10k+ per year, reducing Bob's necessary withdraw amounts by perhaps 25%.  And while doing work that doesn't tax his questionable cardiac health any more than chasing around Bob III and his sister Susie.  (Also, this year Bob can scale back somewhat on his gift budget for Bob II, Bob III, and Susie, giving them a family museum membership instead of a pile of toys.)

If I were Bob, I'd likely be pursing something like this, and wouldn't consider it a failure at all because some version of chill, not-unpleasant, part-time work during the early years if the market is shit is just one layer of my plan. 

Unlike many retirees who have faced scary markets, Bob's is one where jobs are plentiful.  And that's certainly more than nothing. 

[maizefolk]

Unlike many retirees who have faced scary markets, Bob's is one where jobs are plentiful.  And that's certainly more than nothing.

This is a very good point and one I've never thought of/considered before. We (or at least I) am so used to thinking of major stock market declines and recessions/high unemployment as synonymous the different implications of a decline in portfolio value during an extremely tight labor market hadn't occurred to me.

Thanks!

[Fru-Gal]

sub par bronze coverage

Do your homework before you FIRE, know if private insurance REALLY is better than public. Some have better coverage that’s easier to manage than corporate benefit plans, and at a fraction of the employee cost.

The point is, all this market doom is sure to discourage some people from realizing the most important thing which is to maximize your experience as a “time billionaire.” Because most of us are not gonna be the other kind of money-hoarder, and will sadly waste precious life energy chasing a lie.

[vand]

I figured this would be a good time to rerun the plot see how the 21-22 retiree is doing relative to both previous 30 year periods where the 4% rule succeeded (blue), or failed (red) as well as other scary times to retire in the 21st century.



As you can see a retiree who retired at the recent peak of the market at the end of 2021 is is still at a value what overlaps with some historical scenarios which have seen the 4% rule fail (and also overlaps with a lot of historical scenarios which have succeeded). But our hypothetical 2021/2022 retiree is now quite clearly doing better than hypothetical retirees who retired at the peak of the 2000 and 2007 markers.

Realistically we are are still probably 5 years away from our 21-22 retiree knowing for sure they're outside the range of any previous failure. But even with the recent decline in prices, our hypothetical retiree's situation is looking substantially better relative to historical comparators than they did eight months ago (the last time I ran this model).

Thanks maize, another great visual.

From that its clearly that there have been much worse early portfolio drawdowns that have gone on to survive the test, but also some that failed still too early to tell. 

Interesting to see how fortunes can still easily swing around. The GFC retiree was in significantly worse shape that then dotcom retiree for a while in the early stages but that swung around with the new bull market arriving before too much damage had been done, and the GFC retiree's portfolio has probably achieved lift off velocity now and can be sustained indefinitely.

[PhilB]

I figured this would be a good time to rerun the plot see how the 21-22 retiree is doing relative to both previous 30 year periods where the 4% rule succeeded (blue), or failed (red) as well as other scary times to retire in the 21st century.



As you can see a retiree who retired at the recent peak of the market at the end of 2021 is is still at a value what overlaps with some historical scenarios which have seen the 4% rule fail (and also overlaps with a lot of historical scenarios which have succeeded). But our hypothetical 2021/2022 retiree is now quite clearly doing better than hypothetical retirees who retired at the peak of the 2000 and 2007 markers.

Realistically we are are still probably 5 years away from our 21-22 retiree knowing for sure they're outside the range of any previous failure. But even with the recent decline in prices, our hypothetical retiree's situation is looking substantially better relative to historical comparators than they did eight months ago (the last time I ran this model).

Thanks maize, another great visual.

From that its clearly that there have been much worse early portfolio drawdowns that have gone on to survive the test, but also some that failed still too early to tell. 

Interesting to see how fortunes can still easily swing around. The GFC retiree was in significantly worse shape that then dotcom retiree for a while in the early stages but that swung around with the new bull market arriving before too much damage had been done, and the GFC retiree's portfolio has probably achieved lift off velocity now and can be sustained indefinitely.

Any GFC retiree who did keep the faith and stick to the orange line, would have to have had balls of steel not to have joined Bob in the cardiac ward :)  Fantastic visual.

[EscapeVelocity2020]

Although Mr. Green and Maizefolk have shared some powerful clues as to where 2021 ER's are in the universe of historical success and failure, it's awfully unimpressive that the best we can do is wait 5-10 years to be better informed.  I guess this is why many people with 'OK' jobs add in a few belts and suspenders (like OMY) to prevent the unappealing 'return to work because my portfolio is failing' scenario.

For example, the 2000 tech bubble ER would've been scrambling back to work about 9 years after ER having less than 10 years of retirement remaining funded...  On the other hand, the 2007 ER would've been having sleepless nights by year two, ignorant to the fact that it was all going to be fine by year 10.

So basically all the conversations we are having right now are because it's not 2031 yet :)

[GuitarStv]

Although Mr. Green and Maizefolk have shared some powerful clues as to where 2021 ER's are in the universe of historical success and failure, it's awfully unimpressive that the best we can do is wait 5-10 years to be better informed.  I guess this is why many people with 'OK' jobs add in a few belts and suspenders (like OMY) to prevent the unappealing 'return to work because my portfolio is failing' scenario.

For example, the 2000 tech bubble ER would've been scrambling back to work about 9 years after ER having less than 10 years of retirement remaining funded...  On the other hand, the 2007 ER would've been having sleepless nights by year two, ignorant to the fact that it was all going to be fine by year 10.

So basically all the conversations we are having right now are because it's not 2031 yet :)

It's the beauty of OMY.

You can track where your retirement would have been while still adding to net worth.  If stuff isn't going the right direction then you made the right choice.  If stuff is going the right direction, then you have more flexibility.

[2Birds1Stone]

Although Mr. Green and Maizefolk have shared some powerful clues as to where 2021 ER's are in the universe of historical success and failure, it's awfully unimpressive that the best we can do is wait 5-10 years to be better informed.  I guess this is why many people with 'OK' jobs add in a few belts and suspenders (like OMY) to prevent the unappealing 'return to work because my portfolio is failing' scenario.

For example, the 2000 tech bubble ER would've been scrambling back to work about 9 years after ER having less than 10 years of retirement remaining funded...  On the other hand, the 2007 ER would've been having sleepless nights by year two, ignorant to the fact that it was all going to be fine by year 10.

So basically all the conversations we are having right now are because it's not 2031 yet :)

This was DW and I! We could have been @vand's example "Bob" as our NW was ~$1M at the end of Sept 2021......we kept working through May of 2023 and FIRE'd with $1.5M instead. Our NW right now would have been ~$800k had we FIRE'd back in Sept of 2021.

[bacchi]

For example, the 2000 tech bubble ER would've been scrambling back to work about 9 years after ER having less than 10 years of retirement remaining funded... 

The 2000 ER is hanging in there. To your point, it wasn't pretty and it would've been very stressful, leading most people to work at least an hourly job to reduce their withdrawals. Even if they didn't or couldn't, they'll still almost certainly reach 2030 with >$0.00.

[Freedomin5]

It speaks to the importance of mitigating SORR, especially in the early years, so that you don’t have to draw on your stash when it’s down. If Bob retired but with a 2-3 year cash cushion or a Walmart greeter job that he could fall on instead of touching his investments, he would be in a much better position to weather the market downturn than if he had retired with just his equity index ETFs and nothing else.

[rantk81]

I'm such a 'fraidy-cat; I'm still working, despite having around two million in net worth plus my mortgage-free primary residence.
It just feels to me like a crap-storm like 2009 is coming again and feels like it could be even worse this time, as if we're going to pay-the-piper for having 15 years of ZIRP and high government deficit spending.

[Morning Glory]

Although Mr. Green and Maizefolk have shared some powerful clues as to where 2021 ER's are in the universe of historical success and failure, it's awfully unimpressive that the best we can do is wait 5-10 years to be better informed.  I guess this is why many people with 'OK' jobs add in a few belts and suspenders (like OMY) to prevent the unappealing 'return to work because my portfolio is failing' scenario.

I am not sure why the majority of folks rank "stay working now" as being superior to "possibly return to work later". "Work later" seems like the better option when one is severely burned out, paying for expensive childcare, or has many obligations outside of work, just to name a few examples. I suppose if you like your job and have a good work/life balance then "work now" is better because of compounding but if you are close to FI then "work later" might not even happen it's just a risk.

[dividendman]

I'm such a 'fraidy-cat; I'm still working, despite having around two million in net worth plus my mortgage-free primary residence.
It just feels to me like a crap-storm like 2009 is coming again and feels like it could be even worse this time, as if we're going to pay-the-piper for having 15 years of ZIRP and high government deficit spending.

If you have that much net worth and it easily covers the 4% rule, then you can always put 5 or so years of savings into a 1-5 year treasury ladder (which are yielding ~4.5% right now) and if shit is still going down just use that cash. Then you don't have to worry if shit hits the fan or not.

I retired right at peak market and had a similar plan, so far I haven't liquidated any stocks (only used bonds/treasuries and interest/dividends) for expenses.

[dividendman]

Although Mr. Green and Maizefolk have shared some powerful clues as to where 2021 ER's are in the universe of historical success and failure, it's awfully unimpressive that the best we can do is wait 5-10 years to be better informed.  I guess this is why many people with 'OK' jobs add in a few belts and suspenders (like OMY) to prevent the unappealing 'return to work because my portfolio is failing' scenario.

I am not sure why the majority of folks rank "stay working now" as being superior to "possibly return to work later". "Work later" seems like the better option when one is severely burned out, paying for expensive childcare, or has many obligations outside of work, just to name a few examples. I suppose if you like your job and have a good work/life balance then "work now" is better because of compounding but if you are close to FI then "work later" might not even happen it's just a risk.

I guess they feel like if they work one more year now it might save five (or some higher number) of years of work in the future, and they've weighed the odds that it's more than 20% likelihood or whatever.