The Money Mustache Community
General Discussion => Welcome and General Discussion => Topic started by: spokey doke on March 01, 2017, 08:40:22 AM
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The recent market run-up has the stache rocketing past our FI number, which has me feeling a bit giddy, even though I know it can all change dramatically any time, and even though the run-up appears to be due to things I don't otherwise support...so lots of mixed emotions right now.
Contrast this with last summer, looking at sweating out the first years of ER fearing sequence of returns risks amidst all the low growth predictions and recommendations for padding one's stache and lowering one's assumed SWR (I left my career just a bit shy of our number).
Others?
And just for the record...I plan to stay the course, of course, continue to rebalance to my AA, and keep to the mustachian lifestyle.
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Love run ups. The next correction/recession will be a loss of whatever percentage it turns out to be. In my mind, the higher we go the higher the starting point is for the loss, which means a higher low in the trough. The higher we go the more it pads older shares bought in at much lower prices. That's how I choose to look at it psychologically.
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The market might NEVER drop below today's price again. It's hard to say.
If you are worried, work a OMY and then get out but don't let your emotions get the best of you.
Also, CONGRATS ON FI. Jellies
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We are less than 2 years from our planned RE date and are rocketing towards our number.
Hopefully the spurt is a permanent one.
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Its nicer than a run down, but it doesn't much change my strategy.
If you want to dampen your outlook, use a 6mo (or more) running net worth average for your goal. ('dampen' in an engineering sense)
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If you want to dampen your outlook, use a 6mo (or more) running net worth average for your goal. ('dampen' in an engineering sense)
as an aside: I don't know why ^this^ (6; 12; 18 month...or more) running average isn't recommended more often, in terms of gauging when you 'hit your number'
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If you want to dampen your outlook, use a 6mo (or more) running net worth average for your goal. ('dampen' in an engineering sense)
as an aside: I don't know why ^this^ (6; 12; 18 month...or more) running average isn't recommended more often, in terms of gauging when you 'hit your number'
Right... it is ultimately a little safer to do this. Though, assuming you coasted into FI rather than blasted into it via a super fast run up you should be ok.
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We are less than 2 years from our planned RE date and are rocketing towards our number.
Hopefully the spurt is a permanent one.
I'm FIRE'ing in June 2018, and am using this market run-up as a means of selling some winners, and putting the cash into "Basket 1" (3 years of cash spending needs, need to fill that sucker up within the next year).
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We are less than 2 years from our planned RE date and are rocketing towards our number.
Hopefully the spurt is a permanent one.
I'm FIRE'ing in June 2018, and am using this market run-up as a means of selling some winners, and putting the cash into "Basket 1" (3 years of cash spending needs, need to fill that sucker up within the next year).
We will save up the cash part of our stash in the last 6 months of working. I will only be holding 6 months expenses in cash post FIRE. In a major market correction we could stretch that cash to last 12 months to delay selling anything.
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Call it a Trump bump or whatever you want. My NW has never been higher. Hit a significant milestone today. Drank glass of wine to mark the occasion.
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I think a lot of people use a running average for expenses too
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Last night I had a glass of scotch to celebrate! It's neat to see and I love looking at my numbers going up, up, up but it doesn't change how I operate now or how I'm going to operate a month, a year or six years from now. I'll just keep shoveling money in and making sure my investments are as balanced as I can make them.
I am rather glad that I finally kicked in money to start a Roth IRA on the 17th of last month. My baby IRA has grown so fast in the past 3 weeks! :)
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Ran the monthly numbers last night. Feb NW increased by more than 1 year's worth of expenses. Hard not to get excited about that!
I love that, but I hate it when my monthly losses are more than 1 year's worth of savings (it's happened to me)
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I don't even pay attention to this stuff.
I had a net worth of around $800k before the recession, lost $100k to a bad real estate venture.
Then had my investments go to about $500k. I wasn't worried at all. Now it's back and I'm at over $1 million total net worth. Won't change my plan.
I have $100k in cash, that I plan to live on should things go sour, and leave the investments to continue growing until I quality for social security and have to spend more.
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Love run ups. The next correction/recession will be a loss of whatever percentage it turns out to be. In my mind, the higher we go the higher the starting point is for the loss, which means a higher low in the trough. The higher we go the more it pads older shares bought in at much lower prices. That's how I choose to look at it psychologically.
This is how i always look at it.
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Love run ups. The next correction/recession will be a loss of whatever percentage it turns out to be. In my mind, the higher we go the higher the starting point is for the loss, which means a higher low in the trough. The higher we go the more it pads older shares bought in at much lower prices. That's how I choose to look at it psychologically.
This is how i always look at it.
Meh, I have a very boring look. I just don't really care what the value is. I feel more anxiety with it rising than falling for some reason.
Maybe I feel like it's all unearned and fake in some way? Who knows!
I'll keep buying, but now a few less shares a month! Boo (Though, being 50k richer than November is pretty nice)
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Based on the predictions I made back in 2011/12, the market could crash 37% today and I'd still be ahead of schedule.
We've had a fantastic run over the past 8 years, I have no complaints about today's valuations. We're living in the golden age of early retirements.
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Based on the predictions I made back in 2011/12, the market could crash 37% today and I'd still be ahead of schedule.
We've had a fantastic run over the past 8 years, I have no complaints about today's valuations. We're living in the golden age of early retirements.
This last part makes me nervous. When so many of us are able to retire, doesn't it start to feel like a massive bubble?
I also find myself way more tempted to spend money. We are newly and tentatively FIREd, so I'm really trying to subdue this urge. But... Our house (Toronto) has increased in value by about 30% this past year to an absolutely ridiculous amount. Our financial assets have been going up about $20k/ month the past few months. Everything is feeling very frothy, so I don't want to get used to this. But mentally I'm really fighting the urge to SPENDspendspend. Every day browsing websites for nice clothes, makeup, handbags, etc. Argh!!
Anyone else going through this? How do you deal with this urge to shop? It's very confusing because I've spent so many years deprogramming myself against consumerism. I typically hate shopping. With this kind of run-up, it feels like my old defence mechanisms are slipping away. Yet we really can't afford to loosen the reins, since we have such a long retirement ahead, and aren't through the period where sequence of returns risk matters. A crash (housing or financial markets) could be devastating, and is certain to happen at some point. I'm basically trying not to feel rich, or start acting like a rich person, because it could fall away at any moment.
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During the 300pt gain the other day, I happened to be watching a busines network (I never watch TV during the day but this I had to see market giddiness) and one of the commentators was saying the most recent consumer optimism report was out and the last time it was this high was Summer 1996 (maybe we had summer euphoria of Atlanta games that summer). That summer. I remember we bought a personal PC and I started using AOL around that time, for what its worth. Anyway, in 1996, Greenspan made infamous comment of 'irrational exuberance' and the market went on to have 3 more yrs of a bull run. Also, consumer optimism is on uptick (which I also heard about last month). I need more research on this
Either way, while Personal Capital reflects increase in NW, my lonely spreadsheet is just hoping and praying for a 7% annual increase over Dec 31, 2016 balances. It does not know about this year yet.....not until Jan 1, 2018.
Did buy a bottle of wine last night, but no other unusual spending.
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I also find myself way more tempted to spend money
Anyone else going through this?
My family needs a new car, we were planning on waiting a while longer but given the recent run-up in value I'm thinking we might pull some money out of a taxable savings account and put it towards the car. My car has needed over $4,000 in repairs over the past year and I don't think it's going to last much longer and I really don't want to wait because the way things go, when the market crashes and it's a really bad time to sell is when my car will finally just die. So I don't know if that qualifies as being tempted to spend way more money than I normally would, but I figure if there's a big ticket item we need, now might be a good time to make the purchase.
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It's 10% rise in the SP500 since the election. It does feel good. When you look at your balances why wouldn't it?
Just remember the whole investing thing (at least the one I play now) is essentially junior high math with an absolute need to have your emotions well in control. You can't control the market, you only can control how you react to it.
10% math/90% emotion.
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Any time I start to feel giddy about the run-up in the stock market, I just think about how much more health insurance is going to cost than I had originally planned. That brings me down to earth real quick.
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i feel excited that I only fairly recently got in on this investing stuff, and opened IRAs for hubs and I, and upped my contributions, just in time to take part in this ride upwards :)
I don't know how many years to my FI though.
What is the easiest calculator out there to use? Maybe there is no point trying to figure it all out though as what will be will be.
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Looking at the historical slope, I see this more of a "catchup" to where we should be than a "runup" into a bubble. Time will tell of course, but to me it's more of a correction for the underperformance of the last few years. Still, I'm cautious and won't be rushing into any hasty decisions! Run the plan!
As others have mentioned, the health care thing is the scary part. No increase this year on my plan, but the prior 3-4 years all saw tremendous increases. Just 10 years ago when I was out of work my insurance was $62/mo for really good coverage. Looking at $600/mo now if I retired for coverage that's nowhere near as good. This is not sustainable. Sigh. Well, somehow people mostly got along without much healthcare in the past. A lot of dying younger, but maybe that's the future, we just can't afford to provide top notch health care to *everyone* as there just are not enough resources to go around.
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Seems like a bunch of humble bragging in here!
OK me to, my vanguard acount is up $63K from Jan 1st to Mar 1st.
On the other hand, I watched the 9 months from 5-31-08 to 2-28-09,
when my Vanguard balance fell by $181,800. That was about a 40% loss.
Maybe that will temper your giddy. :-)
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For those of us still accumulating, its sobering to think that in the entire history of the market, nobody has ever paid more for a share of VTSAX than us.
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For those of us still accumulating, its sobering to think that in the entire history of the market, nobody has ever paid more for a share of VTSAX than us.
Everybody has that experience. It's nothing new or unusual.
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Dampening the number can work the other way too. If you coasted into FI with a slow and steady market then the market takes a dive a few months before your planned RE date, I wouldn't think of using the more optimistic, larger, 'dampened' number.
Just use the min of the last 6 months instead of the average. I.e. your stash needs to exceed your target for 6 months straight.
See this thread about how it affects your SWR:
forum.mrmoneymustache.com/welcome-to-the-forum/cfiresim-severely-overestimates-success-rates-for-mustachians/
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For those of us still accumulating, its sobering to think that in the entire history of the market, nobody has ever paid more for a share of VTSAX than us.
Everybody has that experience. It's nothing new or unusual.
Right? The market spends the majority of its time at or near its all-time high.
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Instead of some crazy 4% rule, why not just put two year's of living expenses into a corporate bond fund, and when the market crashes withdraw from there instead. When it recovers, sell some stocks off to replenish this fund. I always thought the 4% rule is foolish and completely unnecessary. It's like a number picked out of a magic rabbit hat.
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Don't let the run up change your saving or spending habits. Even though stocks are expensive now, keep buying if you are still working. Keep the money out of your hands and going to work. When the bubble pops keep investing just as before, you'll be buying at a discount. Slow and steady will smooth out the rough spots. We eventually return to an average. Sure it feels euphoric to watch 1000 point gains on the Dow. It's also discouraging when it drops 5,000 in a week. Stay the course. Boring? Yes. Effective? Yes. Realize that we'll be buying the discounted shares of the panic sellers next drop. Some of them are just buying VTSAX and paying the premium for us.
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Instead of some crazy 4% rule, why not just put two year's of living expenses into a corporate bond fund, and when the market crashes withdraw from there instead.
That's not mutually exclusive. You can hold bonds while using a 4% WR.
When it recovers, sell some stocks off to replenish this fund.
Rebalancing is a regular part of investing. This should happen whether it's a bull or bear market.
I always thought the 4% rule is foolish and completely unnecessary. It's like a number picked out of a magic rabbit hat.
Well then it's pretty obvious you don't know much about it. It was chosen using historical data, not arbitrarily. Maybe you want to read about the origins (https://www.onefpa.org/journal/Pages/Portfolio%20Success%20Rates%20Where%20to%20Draw%20the%20Line.aspx) to learn a bit more?
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We are less than 2 years from our planned RE date and are rocketing towards our number.
Hopefully the spurt is a permanent one.
Me too now, but I've made a slight change to my "hit number then retire" plan. Basically, at the start of the year, I calculated that with zero market returns over the next 2 years, that I'd hit my number based on savings alone. So I decided that I was going to work those two years no matter market performance. That way, if this big run up continues, I will have extra padding for the next drop. If not, then I'm prepared as well. Of course if there's a big drop between now and then, the 2 years might get extended a bit, but then I won't feel anxious about retiring at the top.
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We are less than 2 years from our planned RE date and are rocketing towards our number.
Hopefully the spurt is a permanent one.
Me too now, but I've made a slight change to my "hit number then retire" plan. Basically, at the start of the year, I calculated that with zero market returns over the next 2 years, that I'd hit my number based on savings alone. So I decided that I was going to work those two years no matter market performance. That way, if this big run up continues, I will have extra padding for the next drop. If not, then I'm prepared as well. Of course if there's a big drop between now and then, the 2 years might get extended a bit, but then I won't feel anxious about retiring at the top.
It's the sensible thing to do. I had a crap day at work, so was again thinking.... maybe I could roll the dice on a 5% WR, or cut some costs and just finish in July..... but for many reasons, including the current valuations, I came to the same damn conclusion I always do. December 2018 is the absolute earliest I can walk. December 2019 is the absolute longest I will work.
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We are less than 2 years from our planned RE date and are rocketing towards our number.
Hopefully the spurt is a permanent one.
Me too now, but I've made a slight change to my "hit number then retire" plan. Basically, at the start of the year, I calculated that with zero market returns over the next 2 years, that I'd hit my number based on savings alone. So I decided that I was going to work those two years no matter market performance. That way, if this big run up continues, I will have extra padding for the next drop. If not, then I'm prepared as well. Of course if there's a big drop between now and then, the 2 years might get extended a bit, but then I won't feel anxious about retiring at the top.
It's the sensible thing to do. I had a crap day at work, so was again thinking.... maybe I could roll the dice on a 5% WR, or cut some costs and just finish in July..... but for many reasons, including the current valuations, I came to the same damn conclusion I always do. December 2018 is the absolute earliest I can walk. December 2019 is the absolute longest I will work.
Sucks being so reasonable sometimes. LOL
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Nice convo, lots of great comments, especially Mr.Green and goateeman. Plus Sol. Never forget about still-waters-run-deep Sol. Good stuff!
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I've been thinking about my 'stache and thinking I have so much, it's totally time to retire. But then I look at the history and realize from age 30-36 my stache stayed totally flat (combination of taking 2 years off work, buying a condo at the worst possible time, and fund holdings go down during the recession despite making over 100K a year). So from age 36 to 43, the stache as quintupled. Just makes me weary of "easy come, easy go".
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I've been thinking about my 'stache and thinking I have so much, it's totally time to retire. But then I look at the history and realize from age 30-36 my stache stayed totally flat (combination of taking 2 years off work, buying a condo at the worst possible time, and fund holdings go down during the recession despite making over 100K a year). So from age 36 to 43, the stache as quintupled. Just makes me weary of "easy come, easy go".
The way I look at this: worst case scenario your stache stays flat. Not so bad if one can live off of it without drawing it down in real terms.
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We've passed the minimum FIRE amount. Working on safety, keeping employers health care, more elaborate spending if desired in FIRE and what we can pass on now. Our wealth is building at $500 or more per day. It's hard to turn it off.
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We've passed the minimum FIRE amount. Working on safety, keeping employers health care, more elaborate spending if desired in FIRE and what we can pass on now. Our wealth is building at $500 or more per day. It's hard to turn it off.
Holy smokes ! Awesome!
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Based on the posts in this thread I'll assume most of you are under 40 and have been investing less than 10-15 years? Come back and visit this thread when markets tank 40 percent or so. ;)
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I alway get a little concerned when the market becomes too optimistic. I prefer it when people are out there talking about a correction coming in the near future or valuations are too high. Lets see how long the Trump rally will last and if it will outlast Trump. To bad no one can predict the future.
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Based on the posts in this thread I'll assume most of you are under 40 and have been investing less than 10-15 years? Come back and visit this thread when markets tank 40 percent or so. ;)
Not me. Wish I was that young I'm 48. My estimated $500 daily NW gains are based upon a 7% return plus new dollars added in. Hopefully I'll make more than 7% return.
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For those of us still accumulating, its sobering to think that in the entire history of the market, nobody has ever paid more for a share of VTSAX than us.
Everybody has that experience. It's nothing new or unusual.
Right? The market spends the majority of its time at or near its all-time high.
The problem with youth is that it is wasted on the young! For the record, it took the NASDAQ 15 years to to break the 5,000 point mark it had originally set on March 9th, 2000.
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Based on the predictions I made back in 2011/12, the market could crash 37% today and I'd still be ahead of schedule.
We've had a fantastic run over the past 8 years, I have no complaints about today's valuations. We're living in the golden age of early retirements.
This last part makes me nervous. When so many of us are able to retire, doesn't it start to feel like a massive bubble?
I also find myself way more tempted to spend money. We are newly and tentatively FIREd, so I'm really trying to subdue this urge. But... Our house (Toronto) has increased in value by about 30% this past year to an absolutely ridiculous amount. Our financial assets have been going up about $20k/ month the past few months. Everything is feeling very frothy, so I don't want to get used to this. But mentally I'm really fighting the urge to SPENDspendspend. Every day browsing websites for nice clothes, makeup, handbags, etc. Argh!!
Anyone else going through this? How do you deal with this urge to shop? It's very confusing because I've spent so many years deprogramming myself against consumerism. I typically hate shopping. With this kind of run-up, it feels like my old defence mechanisms are slipping away. Yet we really can't afford to loosen the reins, since we have such a long retirement ahead, and aren't through the period where sequence of returns risk matters. A crash (housing or financial markets) could be devastating, and is certain to happen at some point. I'm basically trying not to feel rich, or start acting like a rich person, because it could fall away at any moment.
I tend to spend that time browsing the forums here, instead of Amazon or Zappos or whatever. :-) Trying to be Mustachian requires you to swim upstream out in the real world, fighting a tide of commercialism. I find the voices here -- all these people who are living happy lives on way less than everyone around me "needs" -- to be very helpful in realigning my perspective. Plus, you know, the easiest temptation to avoid is the one that I don't even know exists.
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This is going to sound an awful lot like market timing, but I had really been hoping for a recession in the last year+ or so, based on the ~7 year cycle.
We want to retire around 2024, but I don't want to go at a market peak. My thinking was that if we'd had a recession in 2015 or 2016, that means the next peak would be around a year or two prior to FIRE. The longer this goes, the more likely our FIRE date gets close to the 2nd recession in the cycle.
Then again, the longer this run up continues, it might push our FIRE date up. And maybe the next recession isn't until 2018 or 2019, and we have even less to worry about.
An actual legitimate reason for hoping for a recession sooner than later though, is that it just means more time in the market for our contributions (which I don't project increasing much year to year). The later the stock sale comes, the less time in market for those cheap shares.
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Any time I start to feel giddy about the run-up in the stock market, I just think about how much more health insurance is going to cost than I had originally planned. That brings me down to earth real quick.
Why would health insurance costs go up just because the stock markets go up?
Health insurance depends on inflation and utilization.
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Don't let the run up change your saving or spending habits. Even though stocks are expensive now, keep buying if you are still working.
If stocks are truly expensive perhaps you should probably sell them. Or maybe they aren't expensive enough.
And I'm not sure why your decision to purchase stocks depends on whether you are working.
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An actual legitimate reason for hoping for a recession sooner than later though, is that it just means more time in the market for our contributions (which I don't project increasing much year to year). The later the stock sale comes, the less time in market for those cheap shares.
Wouldn't the amount of time your contributions spend in the market (if you are buying them periodically as your paychecks arrive) have nothing to do with the timing of a recession?
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An actual legitimate reason for hoping for a recession sooner than later though, is that it just means more time in the market for our contributions (which I don't project increasing much year to year). The later the stock sale comes, the less time in market for those cheap shares.
Wouldn't the amount of time your contributions spend in the market (if you are buying them periodically as your paychecks arrive) have nothing to do with the timing of a recession?
I meant that we'd have the sale prices in the market for a longer time, not necessarily contributions in general.
Index fund at a 20% discount in 2017 > 20% discount in 2019
If we can buy extra in an earlier recession, that's extra time it gets dividends and compounding time.
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Instead of some crazy 4% rule, why not just put two year's of living expenses into a corporate bond fund, and when the market crashes withdraw from there instead.
Corporate bonds don't do so hot when the stock market crashes.
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Based on the posts in this thread I'll assume most of you are under 40 and have been investing less than 10-15 years? Come back and visit this thread when markets tank 40 percent or so. ;)
I also wish I was that young... It was entertaining watching the market tank exactly while I was out of work... I also lived through a big flat spot before that too. I had money saved up, invested, ended up needing it 5 years later. Took out slightly less than I'd put in 5 years before. Sigh. Bad things happen in the market, but really that's also why you need be in ALL the time, so you don't miss the good events that make up for it.
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really that's also why you need be in ALL the time, so you don't miss the good events that make up for it.
You mean like the last eight years?
Yea, somebody who sat out the last eight years is probably kicking themselves for not being in the market for those rare "good events" that make up for the bad crashes.
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I lived through the Tech Bubble and 2008. Not fun at all, but if I hit my 4%WR $$ target in this rally I would FIRE without a second thought. I would ensure my asset allocation/plans could withstand a significant crash early on, but I wouldn't wait extra years to pad the stash more. The opportunity costs would be too high.
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The problem with youth is that it is wasted on the young! For the record, it took the NASDAQ 15 years to to break the 5,000 point mark it had originally set on March 9th, 2000.
I don't follow your point. Neither about "youth", nor about the NASDAQ.
The NASDAQ isn't "the market". The S&P500 (not "the market" either, but perhaps a better bellweather) took ~7 years to recover from that drop.
Last time I looked at it (https://forum.mrmoneymustache.com/investor-alley/%27but-right-now-the-market-is-at-an-all-time-high-%27/), the market really does spend most of its time near its all-time high.
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Instead of some crazy 4% rule, why not just put two year's of living expenses into a corporate bond fund, and when the market crashes withdraw from there instead.
That's not mutually exclusive. You can hold bonds while using a 4% WR.
When it recovers, sell some stocks off to replenish this fund.
Rebalancing is a regular part of investing. This should happen whether it's a bull or bear market.
I always thought the 4% rule is foolish and completely unnecessary. It's like a number picked out of a magic rabbit hat.
Well then it's pretty obvious you don't know much about it. It was chosen using historical data, not arbitrarily. Maybe you want to read about the origins (https://www.onefpa.org/journal/Pages/Portfolio%20Success%20Rates%20Where%20to%20Draw%20the%20Line.aspx) to learn a bit more?
The people who made it up assumed there are no viable "work arounds," yet there are. You need not use 4% if you have work arounds. That's also assuming a 100% equities portfolio.
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Any time I start to feel giddy about the run-up in the stock market, I just think about how much more health insurance is going to cost than I had originally planned. That brings me down to earth real quick.
Why would health insurance costs go up just because the stock markets go up?
Health insurance depends on inflation and utilization.
He's not saying that health insurance is related to the stock market. He's saying health insurance is going to keep becoming more costly until a proper solution is found for the US health market. In the mean time, it's unsustainable and the premiums increase every year. Therefore, even a run up in the market might not be able to compensate for the unanticipated cost of health care. In other words, 25x your annual expenses may only be 20x in the future, for example.
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Any time I start to feel giddy about the run-up in the stock market, I just think about how much more health insurance is going to cost than I had originally planned. That brings me down to earth real quick.
Why would health insurance costs go up just because the stock markets go up?
Health insurance depends on inflation and utilization.
This, exacerbated by the loss of ACA subsidies/cost sharing for "low income" mustachians living off of $20-$30k/yr in capital gains and dividends.
He's not saying that health insurance is related to the stock market. He's saying health insurance is going to keep becoming more costly until a proper solution is found for the US health market. In the mean time, it's unsustainable and the premiums increase every year. Therefore, even a run up in the market might not be able to compensate for the unanticipated cost of health care. In other words, 25x your annual expenses may only be 20x in the future, for example.
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Instead of some crazy 4% rule, why not just put two year's of living expenses into a corporate bond fund, and when the market crashes withdraw from there instead. When it recovers, sell some stocks off to replenish this fund. I always thought the 4% rule is foolish and completely unnecessary. It's like a number picked out of a magic rabbit hat.
You are absolutely free to ignore the validated calculations and go your own way by your intuition. It's probably only a couple percent higher failure rate.
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He's not saying that health insurance is related to the stock market. He's saying health insurance is going to keep becoming more costly until a proper solution is found for the US health market. In the mean time, it's unsustainable and the premiums increase every year. Therefore, even a run up in the market might not be able to compensate for the unanticipated cost of health care. In other words, 25x your annual expenses may only be 20x in the future, for example.
But the 4% rule already factors in inflation. Are you saying health costs increase at a faster rate than inflation? That may be true temporarily but can't go on forever.
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The people who made it up assumed there are no viable "work arounds," yet there are. You need not use 4% if you have work arounds. That's also assuming a 100% equities portfolio.
Clearly, you have very little clue as to what you are talking about.
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yes, the recent run-up has made our stache balloon. As a result, our CFiresim success rate has risen to well past 95% and even 100% in some scenarios (I like to try different spending and income scenarios). I am planning to FIRE at the beginning of 2018, so depending on what the market does in that time, we'll may have an even greater safety margin. Plus during that time, we can also figure out what the heck will happen with healthcare before my wife also retires (still unknown but within 1-2 years).
I'm just old enough where I started investing in 1999 and was unlucky enough to start investing at just the wrong moment (a modest lump sum). 2007-2008 was also a big setback in our investments.
We don't need to follow the 4% rule (on current spending) because our housing and childcare costs are a high % of our overall spending (HCOL SF Bay Area). So childcare costs will go way down soon, and in 24 years when our mortgage is paid off, our spending would drop about about 55% of our current spending. We also have growing rental income (assuming normal inflation) and SS which should cover 100% of our spending in about 20-25 years.
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He's not saying that health insurance is related to the stock market. He's saying health insurance is going to keep becoming more costly until a proper solution is found for the US health market. In the mean time, it's unsustainable and the premiums increase every year. Therefore, even a run up in the market might not be able to compensate for the unanticipated cost of health care. In other words, 25x your annual expenses may only be 20x in the future, for example.
But the 4% rule already factors in inflation. Are you saying health costs increase at a faster rate than inflation? That may be true temporarily but can't go on forever.
Well, yes, that's exactly what I'm saying. ACA premiums increased 25% last year alone, obviously well beyond inflation. You're right, the market will level out at some point. But if your FIRE budget was designed around 2014 health care costs, 2020 health care costs are probably going to be much higher. Therefore, your budget will need to be higher.
The only reason why this is a problem is that healthcare is a relatively large percentage of most mustachian's basket of goods. Most of our budgets are so refined that a large bump in cost of a particular item disproportionally affects our perceived inflation versus total inflation.
For example, you start to notice that your grocery bill is ballooning due to the increasing cost of your nightly steak. Easy, change to having nightly chicken instead which has gone done in cost. While total inflation remained steady in the steak/chicken economy, the two sectors did not (but they balance out).
Unfortunately, there's no chicken healthcare that's an alternative to the ACA or whatever it becomes. There are limited options for health insurance out there. And with the insurance companies struggling to make ends meet with the new rules, they're charging more just to survive.
http://fortune.com/2016/10/25/obamacare-insurance-premiums-2017-healthcare/ (http://fortune.com/2016/10/25/obamacare-insurance-premiums-2017-healthcare/)
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He's not saying that health insurance is related to the stock market. He's saying health insurance is going to keep becoming more costly until a proper solution is found for the US health market. In the mean time, it's unsustainable and the premiums increase every year. Therefore, even a run up in the market might not be able to compensate for the unanticipated cost of health care. In other words, 25x your annual expenses may only be 20x in the future, for example.
But the 4% rule already factors in inflation. Are you saying health costs increase at a faster rate than inflation? That may be true temporarily but can't go on forever.
Well, yes, that's exactly what I'm saying. ACA premiums increased 25% last year alone, obviously well beyond inflation. You're right, the market will level out at some point. But if your FIRE budget was designed around 2014 health care costs, 2020 health care costs are probably going to be much higher. Therefore, your budget will need to be higher.
The only reason why this is a problem is that healthcare is a relatively large percentage of most mustachian's basket of goods. Most of our budgets are so refined that a large bump in cost of a particular item disproportionally affects our perceived inflation versus total inflation.
For example, you start to notice that your grocery bill is ballooning due to the increasing cost of your nightly steak. Easy, change to having nightly chicken instead which has gone done in cost. While total inflation remained steady in the steak/chicken economy, the two sectors did not (but they balance out).
Unfortunately, there's no chicken healthcare that's an alternative to the ACA or whatever it becomes. There are limited options for health insurance out there. And with the insurance companies struggling to make ends meet with the new rules, they're charging more just to survive.
http://fortune.com/2016/10/25/obamacare-insurance-premiums-2017-healthcare/ (http://fortune.com/2016/10/25/obamacare-insurance-premiums-2017-healthcare/)
And with loss of the ACA, we somewhat older mustachian couples likely will be paying in excess of $20k/year for health insurance. That's a 50% increase in our total projected spending.
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Also, people forget that health insurance prices were outpacing inflation for long before the ACA came about. We've been saying "it can't keep going up forever!" for ...... 15 years at least? So, lol that it's going to get fixed in the next few years if they couldn't figure it out in the last 15 years.
We are ~10 years out so hopefully things will have stabilised by then, but if I was retiring now, I'd budget at least 20k for current costs, plus inflation To a much higher rate than overall inflation.
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And with loss of the ACA, we somewhat older mustachian couples likely will be paying in excess of $20k/year for health insurance. That's a 50% increase in our total projected spending.
I believe the current CBO report concludes average premiums would be 10% lower by 2026 for most people,"8-10% lower for 40 year olds (Yeah FIREEs!!) but up to 20% higher for 65+ year olds. (When compared to current ACA projections).
https://drive.google.com/file/d/0B4rblq-fxqLaT0VjNGR2bVpFQ3M/view
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And with loss of the ACA, we somewhat older mustachian couples likely will be paying in excess of $20k/year for health insurance. That's a 50% increase in our total projected spending.
I believe the current CBO report concludes average premiums would be 10% lower by 2026 for most people,"8-10% lower for 40 year olds (Yeah FIREEs!!) but up to 20% higher for 65+ year olds. (When compared to current ACA projections).
https://drive.google.com/file/d/0B4rblq-fxqLaT0VjNGR2bVpFQ3M/view
It depends greatly on income. See table in the linked article below. A low income 40 year old would see a net increase in premium paid (along with a decrease in the actuarial value of the policy being purchased), and the net cost would go way up as a person gets older. High income people would see their net premiums decline.
http://www.vox.com/policy-and-politics/2017/3/13/14914596/ahca-cbo-premiums-age (http://www.vox.com/policy-and-politics/2017/3/13/14914596/ahca-cbo-premiums-age)
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Not too giddy this morning. Mint says I've lost $14,000 the last two days. Nothing like a correction to bring back reality.
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A correction would be a drop of 10%. That wasn't even a speed bump.
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Heh, well after 3 months of the market going just straight up, this tiny pullback sure must feel like a correction to anyone who has a lot invested in the markets ;)
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Heh, well after 3 months of the market going just straight up, this tiny pullback sure must feel like a correction to anyone who has a lot invested in the markets ;)
If it does you are in for some bad times when we actually get a correction.
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Heh, well after 3 months of the market going just straight up, this tiny pullback sure must feel like a correction to anyone who has a lot invested in the markets ;)
If it does you are in for some bad times when we actually get a correction.
Well, it would be about 10 times worse!
Sent from my SM-G935T using Tapatalk
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I just opened my new Roth IRA in February. Managed to get about $3600 into it. I find this graphic of my returns kinda funny (attached).
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A correction would be a drop of 10%. That wasn't even a speed bump.
Hold on to your britches. I'm mentally preparing for a 15% downturn. For me that's hundreds of thousands.
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(https://c1.staticflickr.com/3/2945/33208141020_e839e90dda_c.jpg)
I am checking the supplies in my bunker.
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Not too giddy this morning. Mint says I've lost $14,000 the last two days. Nothing like a correction to bring back reality.
Well I'm jealous of your portfolio now.
If a 1% market dip causes you to lose 5 figures, you're in a pretty good position.
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Not too giddy this morning. Mint says I've lost $14,000 the last two days. Nothing like a correction to bring back reality.
Well I'm jealous of your portfolio now.
If a 1% market dip causes you to lose 5 figures, you're in a pretty good position.
Actually waiting out the next recession before FIRE. I'm just throwing out that 15% drop from thin air. We could push higher for a while or see a 30% or 40% drop in the next year or so. I have no crystal ball. One thing for certain, even with a nice stash I'm not trusting enough to FIRE till the next correction is bottomed.
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Actually waiting out the next recession before FIRE. I'm just throwing out that 15% drop from thin air. We could push higher for a while or see a 30% or 40% drop in the next year or so. I have no crystal ball. One thing for certain, even with a nice stash I'm not trusting enough to FIRE till the next correction is bottomed.
So if we get 5yrs out from now without a correction and your 'stach has doubled you're going to keep plugging away?
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Even though stocks are expensive now, keep buying if you are still working.
...I'm not sure why your decision to purchase stocks depends on whether you are working.
I'm pretty sure they just meant "if you're pre-FIRE, keep buying stocks."
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Down ~$40k yesterday. Yeah, it kinda hurt, knowing I could buy a nice car for what I left on the table for the market Gods.
The only thing keeping me going is knowing that past history shows these things are typically blips on the RADAR. I don't think we'll see another 2008-2009 in our lifetime.
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I completely agree. I'm hoping to FIRE by 2019 but if the recession doesn't hit and recovery start by then I may extend my date. I feel it's coming 2017/2018 but who knows. I'm just going to keep buying. May readjust a bit but, I'm pretty solid on current position to ride it out and holding cash to buy dip.
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Based on the predictions I made back in 2011/12, the market could crash 37% today and I'd still be ahead of schedule.
We've had a fantastic run over the past 8 years, I have no complaints about today's valuations. We're living in the golden age of early retirements.
This last part makes me nervous. When so many of us are able to retire, doesn't it start to feel like a massive bubble?
I also find myself way more tempted to spend money. We are newly and tentatively FIREd, so I'm really trying to subdue this urge. But... Our house (Toronto) has increased in value by about 30% this past year to an absolutely ridiculous amount. Our financial assets have been going up about $20k/ month the past few months. Everything is feeling very frothy, so I don't want to get used to this. But mentally I'm really fighting the urge to SPENDspendspend. Every day browsing websites for nice clothes, makeup, handbags, etc. Argh!!
Anyone else going through this? How do you deal with this urge to shop? It's very confusing because I've spent so many years deprogramming myself against consumerism. I typically hate shopping. With this kind of run-up, it feels like my old defence mechanisms are slipping away. Yet we really can't afford to loosen the reins, since we have such a long retirement ahead, and aren't through the period where sequence of returns risk matters. A crash (housing or financial markets) could be devastating, and is certain to happen at some point. I'm basically trying not to feel rich, or start acting like a rich person, because it could fall away at any moment.
I tend to spend that time browsing the forums here, instead of Amazon or Zappos or whatever. :-) Trying to be Mustachian requires you to swim upstream out in the real world, fighting a tide of commercialism. I find the voices here -- all these people who are living happy lives on way less than everyone around me "needs" -- to be very helpful in realigning my perspective. Plus, you know, the easiest temptation to avoid is the one that I don't even know exists.
Luckily my urge to shop really doesn't depend on my net worth. I think you have to separate those things before you FIRE, since (as mentioned by others) severe drops are likely at some point in the future. I guess if I had a few hundred million I would start shopping more to furnish my a new house
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Down ~$40k yesterday. Yeah, it kinda hurt, knowing I could buy a nice car for what I left on the table for the market Gods.
The only thing keeping me going is knowing that past history shows these things are typically blips on the RADAR. I don't think we'll see another 2008-2009 in our lifetime.
You didn't buy a new car when the market went up, did you? What you "left on the table" is nothing. The number of stocks/shares you own has not changed. Focus on that, not dollars.
Best practice is to adopt a low information diet, as MMM recommends and just IGNORE the ups and downs on a daily basis. Try looking at your account balances once a month and no more. Dare you.
Oh, and this part: "I don't think we'll see another 2008-2009 in our lifetime." I wouldn't bet on it. If and when it does, and I believe it's even probable that it will, maybe more than once, I'll be throwing every extra dollar I can find into the market.
The reason I'm FIRE now is because 2008-2009 happened to coincide with the time I was saving and investing like a fiend. I sold nothing, and kept plowing money in. When the markets recovered, I found myself sitting on a giant ball o' money. FIRE followed in 2012. YMMV.
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Down ~$40k yesterday. Yeah, it kinda hurt, knowing I could buy a nice car for what I left on the table for the market Gods.
The only thing keeping me going is knowing that past history shows these things are typically blips on the RADAR. I don't think we'll see another 2008-2009 in our lifetime.
You didn't buy a new car when the market went up, did you? What you "left on the table" is nothing. The number of stocks/shares you own has not changed. Focus on that, not dollars.
Best practice is to adopt a low information diet, as MMM recommends and just IGNORE the ups and downs on a daily basis. Try looking at your account balances once a month and no more. Dare you.
Oh, and this part: "I don't think we'll see another 2008-2009 in our lifetime." I wouldn't bet on it. If and when it does, and I believe it's even probable that it will, maybe more than once, I'll be throwing every extra dollar I can find into the market.
The reason I'm FIRE now is because 2008-2009 happened to coincide with the time I was saving and investing like a fiend. I sold nothing, and kept plowing money in. When the markets recovered, I found myself sitting on a giant ball o' money. FIRE followed in 2012. YMMV.
I only have a vague idea of what the stock market has done because of this thread. Did it go down 5% or something?
As mentioned, I am 100% stocks, mostly VTSAX (some VIIIX at current job)
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I only have a vague idea of what the stock market has done because of this thread. Did it go down 5% or something?
It was down by over 1% yesterday. Everyone is freaking out.
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Oh, and this part: "I don't think we'll see another 2008-2009 in our lifetime." I wouldn't bet on it. If and when it does, and I believe it's even probable that it will, maybe more than once, I'll be throwing every extra dollar I can find into the market.
What's your rationale? It seems likely to me that recessions will be lighter in the future, because buying low and selling high is becoming more and more common knowledge. Index funds are super popular, Vanguard keeps bombarding their page with "Hold your positions" messages when stocks go down, and people are generally aware of how much you lose by selling in a recession. I'm betting future lows won't be as bad because massive influx of internet investors now know that is a great time to buy.
It almost seems like mainstream fearmongering articles are made by Wall Street so that the suckers get worried and sell low in a recession, which they'll then buy and profit from.
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I only have a vague idea of what the stock market has done because of this thread. Did it go down 5% or something?
It was down by over 1% yesterday. Everyone is freaking out.
Everyone being the financial media?
Wake me up if it drops 35+%, I might get that HELOC set up in case it drops enough.
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I'm still above the amount I actually put in, so this little dip isn't much of a stress test. When it dips below the amount I would have had had I just put the money in a CD, that will be the real test. I think I'll be fine, though. I basically lost everything I'd saved in 2008, and all I did was move my 403(b) to a better company with lower fees and take advantage of the fact that the smaller amount in there meant a miniscule penalty for closing the account with the first evil company I got sucked into before I knew any better.
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I'm just stirring chit. Mint this morning is down about $8K. Less than 0.50% down now. Can't wait to see the first big drop and watch Trump along with the GOP squirm.
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The recent market run-up has the stache rocketing past our FI number, which has me feeling a bit giddy, even though I know it can all change dramatically any time, and even though the run-up appears to be due to things I don't otherwise support...so lots of mixed emotions right now.
It certainly has been good times for the average investor lately. Unfortunately, the jubilation that I'm hearing literally everywhere lately ( Dow 50,000!, etc... ) were exactly the same sort of things I heard before the 'great recession'.
The point is that if things do go bad, try to stay the course....Psychologically that can be hard to do for many.
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I only have a vague idea of what the stock market has done because of this thread. Did it go down 5% or something?
It was down by over 1% yesterday. Everyone is freaking out.
I don't know anything either.. this thread is my only link.
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I like to mentally prepare myself for a possible 30 to 40 percent downturn (hate to use the phrase "correction"). But then also do my best to continue with "the plan" either way, because I can't see the future.
Funny note, for me it's easier psychologically to buy VTSAX via Vanguard than purchase VTI. This is because when purchasing VTSAX, you denote only how much you want in exact dollars and you don't need to think about the (rising) share price. Vanguard deals with the share price for you and can give you fractions of shares. I find it harder to buy VTI when prices feel "expensive" but when buying VTSAX, I don't even notice.
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Heh, well after 3 months of the market going just straight up, this tiny pullback sure must feel like a correction to anyone who has a lot invested in the markets ;)
If it does you are in for some bad times when we actually get a correction.
This is the point I was trying to make above. I have the bad feeling that some folks have not 'lived through' a real correction/crash when they have a large sum of money on the line. Frankly, everyone likes to talk big in the 'good times'. However, I guarantee you that some will freak out and pull money out in the bad times...which is the very worst time to do that.
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Yep. Though experts say to stay the course, all of the sudden they ask people to re-check their risk tolerance when they are panicking. Risk tolerance I believe is something that moves with the markets...and will inevitably cause one to sell low and buy high if examined at those times. When markets are at a high is when I ask myself if I'm being too risky, and when they are falling fast is when I ask myself if I'm not being risky enough, and this always seems to leave me right where I started allocation-wise.
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Yep. Though experts say to stay the course, all of the sudden they ask people to re-check their risk tolerance when they are panicking. Risk tolerance I believe is something that moves with the markets...and will inevitably cause one to sell low and buy high if examined at those times. When markets are at a high is when I ask myself if I'm being too risky, and when they are falling fast is when I ask myself if I'm not being risky enough, and this always seems to leave me right where I started allocation-wise.
Yeah..and then there are the extreme 'crash' scenarios. People lose jobs...and then houses, etc...and obviously can't 'stay the course'. People are already forgetting that this happened extensively during the '08-'09 crash. In fact, I still remember a few families just in our subdivision that had to walk away from mortgages, etc...and obviously could not afford to 'stay the course' at the low point...
Edit: Not trying to be a debbie downer here but we all need to be very careful when 'irrational exuberance' takes hold. I'm seeing signs of that more and more lately.
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In fact, I still remember a few families just in our subdivision that had to walk away from mortgages, etc...and obviously could not afford to 'stay the course' at the low point...
I doubt they were MMMers with black belt financial kung fu skills.
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Based on the predictions I made back in 2011/12, the market could crash 37% today and I'd still be ahead of schedule.
We've had a fantastic run over the past 8 years, I have no complaints about today's valuations. We're living in the golden age of early retirements.
This last part makes me nervous. When so many of us are able to retire, doesn't it start to feel like a massive bubble?
I also find myself way more tempted to spend money. We are newly and tentatively FIREd, so I'm really trying to subdue this urge. But... Our house (Toronto) has increased in value by about 30% this past year to an absolutely ridiculous amount. Our financial assets have been going up about $20k/ month the past few months. Everything is feeling very frothy, so I don't want to get used to this. But mentally I'm really fighting the urge to SPENDspendspend. Every day browsing websites for nice clothes, makeup, handbags, etc. Argh!!
Anyone else going through this? How do you deal with this urge to shop? It's very confusing because I've spent so many years deprogramming myself against consumerism. I typically hate shopping. With this kind of run-up, it feels like my old defence mechanisms are slipping away. Yet we really can't afford to loosen the reins, since we have such a long retirement ahead, and aren't through the period where sequence of returns risk matters. A crash (housing or financial markets) could be devastating, and is certain to happen at some point. I'm basically trying not to feel rich, or start acting like a rich person, because it could fall away at any moment.
I tend to spend that time browsing the forums here, instead of Amazon or Zappos or whatever. :-) Trying to be Mustachian requires you to swim upstream out in the real world, fighting a tide of commercialism. I find the voices here -- all these people who are living happy lives on way less than everyone around me "needs" -- to be very helpful in realigning my perspective. Plus, you know, the easiest temptation to avoid is the one that I don't even know exists.
Luckily my urge to shop really doesn't depend on my net worth. I think you have to separate those things before you FIRE, since (as mentioned by others) severe drops are likely at some point in the future. I guess if I had a few hundred million I would start shopping more to furnish my a new house
Dragoncar - good point. I think the problem is that I've based my FIRE thinking on a variable spending plan, which has a fairly wide spread. When times are good, I think ooh, I can spend more! Though we are in early stages of FIRE and trying to spend closer to the bottom of the range, regardless of what the market's doing.
I have it in my mind that in a recession we can dial the spending way back. That part will be easy to do, because there will be some urgency to it. But it's harder to dial spending back when times are good. Early stages of FIRE for me are trying to figure out what the baseline should be, and stick to that. For the spending urges I mentioned above, we would be nowhere near the top of our variable spending range.
Laura33 - yes, thank you. Spending more time on this forum really helps reset my mindset and solidify my priorities. It definitely feels like swimming upstream most of the time, otherwise.
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Oh, and this part: "I don't think we'll see another 2008-2009 in our lifetime." I wouldn't bet on it. If and when it does, and I believe it's even probable that it will, maybe more than once, I'll be throwing every extra dollar I can find into the market.
What's your rationale? It seems likely to me that recessions will be lighter in the future, because buying low and selling high is becoming more and more common knowledge. Index funds are super popular, Vanguard keeps bombarding their page with "Hold your positions" messages when stocks go down, and people are generally aware of how much you lose by selling in a recession. I'm betting future lows won't be as bad because massive influx of internet investors now know that is a great time to buy.
It almost seems like mainstream fearmongering articles are made by Wall Street so that the suckers get worried and sell low in a recession, which they'll then buy and profit from.
I don't know how old you are, but everyone can see how old I am. I don't need no stinkin' rationale, I've lived it enough times. Hey, we could try comparing notes every decade or so. Yeah, I'm up for that meetup.
BTW, the concept of buying low and selling high has been common knowledge since ancient times. It predates the stock market, in fact. Knowing it and doing it are two vastly different things. And the total percentage of humans who see those Vanguard warnings is miniscule. Plus, all of your points were probably just as true prior to 2008. Dunno about the Vanguard warnings, tho, mebbe those are new.
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BTW, the concept of buying low and selling high has been common knowledge since ancient times. It predates the stock market, in fact. Knowing it and doing it are two vastly different things. And the total percentage of humans who see those Vanguard warnings is miniscule. Plus, all of your points were probably just as true prior to 2008. Dunno about the Vanguard warnings, tho, mebbe those are new.
I don't think you can argue that those fundamental things didn't change since 2008:
1. A LOT more people are using index funds now
2. People have greater access to financial information via the internet (in contrast to maintstream media that tends to play on fear)
The index funds boom was probably caused by better information, and since indexing and "holding" advices usually come together, I bet we'll see better holding in the future.
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Knowing when to buy is easy. It's knowing when to sell that is the hard part.
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Knowing when to buy is easy. It's knowing when to sell that is the hard part.
When I retire, at a rate of 4% per year, adjusted up per CPI annually. Haven't decided on quarterly or monthly.
If the market is down >20%, look at alternatives to reduce draw.
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When I retire, at a rate of 4% per year, adjusted up per CPI annually. Haven't decided on quarterly or monthly.
If the market is down >20%, look at alternatives to reduce draw.
Yup. Seems pretty simple on both ends of the buy and sell equation.
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I'm early into putting money into the market. Emotionally, it's fun to see the numbers go up more quickly. Intellectually, it would be nice to have my accumulation phase be during a period when the market isn't going up so quickly.
No matter my thoughts or emotional reactions: 60% US Equity/30% Foreign Equity/10% Bonds, all in low-cost index funds, across all of my accounts, rebalanced by contributions, with a 'real' rebalancing at the beginning of each quarter if required.
....I still check my balances weekly.
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I'm early into putting money into the market. Emotionally, it's fun to see the numbers go up more quickly. Intellectually, it would be nice to have my accumulation phase be during a period when the market isn't going up so quickly.
I just focus on the upside of whatever is going on and ignore the downside. Markets up?....awesome I'm getting rich! Markets down?...awesome I'm getting a good price for my regular monthly additions. Markets flat?...awesome while I am accumulating the price is staying steady.
Unless your accumulation phase is super short you'll get to "enjoy" all the flavours the market has to offer at one point or another.
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....I still check my balances weekly.
You'll get over it.
It doesn't actually help during accumulation, yaknow.
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Instead of being tempted to spend more money on myself, I've been contributing more to causes and political races I care about. I surpassed my FI amount for my current expenses, but I'm not quitting until later this year. Even then, I'm planning to switch into a new field and keep working, at least PT. Gonna have a lot of excess to get rid of, especially if health insurance isn't cratered.
Then again, I grew up uncomfortable with the conspicuous consumption of my parents, so the existence of money doesn't make me want to spend. It's being tempted by email alerts, and enticing blogs, and other crap. I turned off marketing emails, stopped reading certain blogs, and the desire disappeared.
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....I still check my balances weekly.
You'll get over it.
It doesn't actually help during accumulation, yaknow.
I'm early into putting money into the market. Emotionally, it's fun to see the numbers go up more quickly. Intellectually, it would be nice to have my accumulation phase be during a period when the market isn't going up so quickly.
I just focus on the upside of whatever is going on and ignore the downside. Markets up?....awesome I'm getting rich! Markets down?...awesome I'm getting a good price for my regular monthly additions. Markets flat?...awesome while I am accumulating the price is staying steady.
Unless your accumulation phase is super short you'll get to "enjoy" all the flavours the market has to offer at one point or another.
Good points. I'm working on getting to the zen point of investing, where it just happens and it is what it is, and I just follow the plan. Developing that is going to take riding out the first major market downturn that happens. And I'm more focused it on now as I'm trying to get to NW0 - which is just a feel good point with no more practical significance than any other point along the accumulation spectrum.
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Instead of being tempted to spend more money on myself, I've been contributing more to causes and political races I care about. I surpassed my FI amount for my current expenses, but I'm not quitting until later this year. Even then, I'm planning to switch into a new field and keep working, at least PT. Gonna have a lot of excess to get rid of, especially if health insurance isn't cratered.
Then again, I grew up uncomfortable with the conspicuous consumption of my parents, so the existence of money doesn't make me want to spend. It's being tempted by email alerts, and enticing blogs, and other crap. I turned off marketing emails, stopped reading certain blogs, and the desire disappeared.
Interesting. I have been doing so good with spending this year but have started to lose it some. I think I need to detox from YouTube, bloggers, etc in order to get it under control. I am usually okay until I see something then I think I want or need it. It is stupid. I end buying stuff I don't need and really don't want after the fact. Then it just becomes clutter. time to turn this stuff off. Although, I am having a hard time turning it all off.
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Instead of being tempted to spend more money on myself, I've been contributing more to causes and political races I care about. I surpassed my FI amount for my current expenses, but I'm not quitting until later this year. Even then, I'm planning to switch into a new field and keep working, at least PT. Gonna have a lot of excess to get rid of, especially if health insurance isn't cratered.
Then again, I grew up uncomfortable with the conspicuous consumption of my parents, so the existence of money doesn't make me want to spend. It's being tempted by email alerts, and enticing blogs, and other crap. I turned off marketing emails, stopped reading certain blogs, and the desire disappeared.
Interesting. I have been doing so good with spending this year but have started to lose it some. I think I need to detox from YouTube, bloggers, etc in order to get it under control. I am usually okay until I see something then I think I want or need it. It is stupid. I end buying stuff I don't need and really don't want after the fact. Then it just becomes clutter. time to turn this stuff off. Although, I am having a hard time turning it all off.
Why is it hard for you to turn it off?
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BTW, the concept of buying low and selling high has been common knowledge since ancient times. It predates the stock market, in fact. Knowing it and doing it are two vastly different things. And the total percentage of humans who see those Vanguard warnings is miniscule. Plus, all of your points were probably just as true prior to 2008. Dunno about the Vanguard warnings, tho, mebbe those are new.
I don't think you can argue that those fundamental things didn't change since 2008:
1. A LOT more people are using index funds now Any stats to back this up?
2. People have greater access to financial information via the internet (in contrast to maintstream media that tends to play on fear) Significantly more than in 2008-2009? Stats, please.
The index funds boom was probably caused by better information, and since indexing and "holding" advices usually come together, I bet we'll see better holding in the future.
I think you're kinda missing my original point. Hell yes, it could happen again in our lifetimes!
However, I completely agree with your last phrase [my bold], but not by everyone. Sheep are always gonna panic, given the right circumstances. Understanding that is a wealth-creating opportunity.
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Instead of being tempted to spend more money on myself, I've been contributing more to causes and political races I care about. I surpassed my FI amount for my current expenses, but I'm not quitting until later this year. Even then, I'm planning to switch into a new field and keep working, at least PT. Gonna have a lot of excess to get rid of, especially if health insurance isn't cratered.
Then again, I grew up uncomfortable with the conspicuous consumption of my parents, so the existence of money doesn't make me want to spend. It's being tempted by email alerts, and enticing blogs, and other crap. I turned off marketing emails, stopped reading certain blogs, and the desire disappeared.
Interesting. I have been doing so good with spending this year but have started to lose it some. I think I need to detox from YouTube, bloggers, etc in order to get it under control. I am usually okay until I see something then I think I want or need it. It is stupid. I end buying stuff I don't need and really don't want after the fact. Then it just becomes clutter. time to turn this stuff off. Although, I am having a hard time turning it all off.
Why is it hard for you to turn it off?
Dopamine fix: https://www.ama.org/publications/MarketingNews/Pages/feeding-the-addiction.aspx
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Instead of being tempted to spend more money on myself, I've been contributing more to causes and political races I care about. I surpassed my FI amount for my current expenses, but I'm not quitting until later this year. Even then, I'm planning to switch into a new field and keep working, at least PT. Gonna have a lot of excess to get rid of, especially if health insurance isn't cratered.
Then again, I grew up uncomfortable with the conspicuous consumption of my parents, so the existence of money doesn't make me want to spend. It's being tempted by email alerts, and enticing blogs, and other crap. I turned off marketing emails, stopped reading certain blogs, and the desire disappeared.
Interesting. I have been doing so good with spending this year but have started to lose it some. I think I need to detox from YouTube, bloggers, etc in order to get it under control. I am usually okay until I see something then I think I want or need it. It is stupid. I end buying stuff I don't need and really don't want after the fact. Then it just becomes clutter. time to turn this stuff off. Although, I am having a hard time turning it all off.
Why is it hard for you to turn it off?
Because it has become my mindless entertainment when I can't sleep at night. It is easy to grab the iPad and just dive in. It starts to make me tired and I don't have to turn on lights or "get up" and read a book. I need to start keeping the iPad in the kitchen so it is not within reach.
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^^ if I have trouble sleeping, I use my iPad to browse this forum :)
I have a meditation app with guided meditations designed to help ppl fall asleep. Listening to those usually helps, too.
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Hey - remember this thread??? Are we there yet???
Likely a form of hedonic adaptation, as last March was nothing compared to the run-up/melt-up since then, and I now just blithely watch the DOW pass 23K, 24K, 25K, closing in on 26K.
Similarly, our FI number, which we technically passed (following mustachian pricinples) some time ago, has been creeping up, in terms of hypothetical/potential annual spend, and/or building in more and more conservative numbers in cfiresim projections.
Of course it also feels increasingly like a house of cards, but fun to watch...
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Of course it also feels increasingly like a house of cards, but fun to watch...
Yes it does feel that way..especially if you are one that has been thru big downturns ( we went thru the 80-09 crash ). However, the tax plan certainly should give the equities market some legs for a bit more...which is what we are probably witnessing now. It is not going to last forever though regardless of what folks say around here. :-)
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It is not going to last forever though regardless of what folks say around here. :-)
The nice thing is my FIRE plans don't need it to last forever, but a little bit longer would be helpful. ;)
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It is not going to last forever though regardless of what folks say around here. :-)
The nice thing is my FIRE plans don't need it to last forever, but a little bit longer would be helpful. ;)
I hear ya..a 'little longer' would be great! Is the 'top in' yet? :-)
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I hear ya..a 'little longer' would be great! Is the 'top in' yet? :-)
Almost. Just a bit more melt up. ;)
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The market is growing 5% per week. What could possibly go wrong?
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The market is growing 5% per week. What could possibly go wrong?
Aliens could attack and use us for food or The Orange one could nuke Wisconsin for criticizing him?
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yes, the recent run-up has made our stache balloon. As a result, our CFiresim success rate has risen to well past 95% and even 100% in some scenarios (I like to try different spending and income scenarios). I am planning to FIRE at the beginning of 2018, so depending on what the market does in that time, we'll may have an even greater safety margin. Plus during that time, we can also figure out what the heck will happen with healthcare before my wife also retires (still unknown but within 1-2 years).
I'm just old enough where I started investing in 1999 and was unlucky enough to start investing at just the wrong moment (a modest lump sum). 2007-2008 was also a big setback in our investments.
We don't need to follow the 4% rule (on current spending) because our housing and childcare costs are a high % of our overall spending (HCOL SF Bay Area). So childcare costs will go way down soon, and in 24 years when our mortgage is paid off, our spending would drop about about 55% of our current spending. We also have growing rental income (assuming normal inflation) and SS which should cover 100% of our spending in about 20-25 years.
Holy crap, I just checked and our NW has increased over 25% since I last posted this in March. But yes, aliens or some crazy trump thing, or some combination (i.e. finding out that our president is an alien) seems likely at this point.
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Instead of being tempted to spend more money on myself, I've been contributing more to causes and political races I care about. I surpassed my FI amount for my current expenses, but I'm not quitting until later this year. Even then, I'm planning to switch into a new field and keep working, at least PT. Gonna have a lot of excess to get rid of, especially if health insurance isn't cratered.
Then again, I grew up uncomfortable with the conspicuous consumption of my parents, so the existence of money doesn't make me want to spend. It's being tempted by email alerts, and enticing blogs, and other crap. I turned off marketing emails, stopped reading certain blogs, and the desire disappeared.
Interesting. I have been doing so good with spending this year but have started to lose it some. I think I need to detox from YouTube, bloggers, etc in order to get it under control. I am usually okay until I see something then I think I want or need it. It is stupid. I end buying stuff I don't need and really don't want after the fact. Then it just becomes clutter. time to turn this stuff off. Although, I am having a hard time turning it all off.
Why is it hard for you to turn it off?
Because it has become my mindless entertainment when I can't sleep at night. It is easy to grab the iPad and just dive in. It starts to make me tired and I don't have to turn on lights or "get up" and read a book. I need to start keeping the iPad in the kitchen so it is not within reach.
I try to listen to podcasts when I can't sleep. There are a couple that I have where the voice is soothing enough to put me to sleep if I'm close. This is especially true when I go from 2x (where I usually listen) to 1x (what I do when I can't sleep).
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Similarly, our FI number, which we technically passed (following mustachian pricinples) some time ago, has been creeping up, in terms of hypothetical/potential annual spend, and/or building in more and more conservative numbers in cfiresim projections.
Imagined lifestyle inflation? Still better than actual lifestyle inflation :D
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yep, this certainly feels similar to the dot-com bubble pop but hey, i'm going to keep surfing the wave!
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Similarly, our FI number, which we technically passed (following mustachian pricinples) some time ago, has been creeping up, in terms of hypothetical/potential annual spend, and/or building in more and more conservative numbers in cfiresim projections.
Imagined lifestyle inflation? Still better than actual lifestyle inflation :D
Yes...and I get plenty of satisfaction just imagining, then going back to business as usual, as if I had actually indulged
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Similarly, our FI number, which we technically passed (following mustachian pricinples) some time ago, has been creeping up, in terms of hypothetical/potential annual spend, and/or building in more and more conservative numbers in cfiresim projections.
Imagined lifestyle inflation? Still better than actual lifestyle inflation :D
Yes...and I get plenty of satisfaction just imagining, then going back to business as usual, as if I had actually indulged
Yup. All of our gains since about the end of 2016 are going in the safety buffer bin. At this point we've got about a 15% buffer above even our high-end spending amount.
Although I know better than to make a "top is in" type comment, this latest leg up has a very late 90's feel to it. Current CAPE is at 33.8; the only other time in history it has reached that level was the late '90s. I don't think CAPE is a precise predictor, but when we're approaching unprecedented levels, it's hard to think that the party will go on forever.
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Tha party won’t go on forever.
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Tha party won’t go on forever.
It never does, but getting out now could well be worse than riding out the melt up and meltdown. So I don't see much choice. If I get close to my FIRE number I'll shift some of my gains to the bonds I want to hold when I stop working and start living from my investment income. Beyond that I'm just going to ride the wave.
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Tha party won’t go on forever.
It never does, but getting out now could well be worse than riding out the melt up and meltdown. So I don't see much choice. If I get close to my FIRE number I'll shift some of my gains to the bonds I want to hold when I stop working and start living from my investment income. Beyond that I'm just going to ride the wave.
Yeah, that comment certainly wasn’t meant to be doom and gloom, it was more tongue in cheek. I’m still socking everything I can into reasonable equity-heavy funds. And when the correction comes I pray to God I’ll have the balls to hold.
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And when the correction comes I pray to God I’ll have the balls to hold.
If you are feeling weak and might do something crazy come here. There will be more than a few calm rationale voices telling people not to panic. A little support from people in the same boat could be all the difference in the world.
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Tha party won’t go on forever.
It never does, but getting out now could well be worse than riding out the melt up and meltdown. So I don't see much choice. If I get close to my FIRE number I'll shift some of my gains to the bonds I want to hold when I stop working and start living from my investment income. Beyond that I'm just going to ride the wave.
Yeah, that comment certainly wasn’t meant to be doom and gloom, it was more tongue in cheek. I’m still socking everything I can into reasonable equity-heavy funds. And when the correction comes I pray to God I’ll have the balls to hold.
We've already seen a number of posters declare that they are poised to exit when the correction finally comes, as if they will correctly identify the sell signal. I'm skeptical.
The whole point of being an indexer is that the only way to guarantee you get the long term market average is to never be out of the market. You can't get out. Every time the market dips a little, some portion of people will cry that the sky is falling and will bail. If the market continues down and they promptly get back in again this can be fine, but in most cases they identify the dip incorrectly and get out too early.
And I think that's been happening a LOT to people on this forum. How many people are willing to admit they got spooked at ANY point in the past nine years, and moved some of their money out of the stock market? Every single one of those decisions was wrong, and those people now have less money in the market than they would have if they had just stayed the course.
So when the next dip does finally come, and those folks are all over this board crowing about how smart they are for sitting out the downturn, try to remember that they also missed a big part of the runup. They will be losing less money, but from a lower starting point than I am. My market assets graph looks like a rocket ship since 2009, so taking a bit of a haircut in the next recession will be an absolutely worthwhile price to pay for having been able to secure those incredible gains. Not everyone was so willing to stay in the market every single day on the way up.
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I've thought we were at the top and about to drop for at least the last year. However, I stick to my plan and keep getting surprised as it goes higher and higher. Safety margin for an expected "typical" correction is looking really solid now. Some indicators make me think it's about to drop, but some now point towards a couple more years of continued growth at this rate being at least possible. Will continue to stick to my plan and try not to get too emotional about it.
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I was 100% stocks for a very long time and it has paid nicely in this bull. I've started movement into VBTLX, I'm over 15% now and with new funds will be near 20% eventually. I'm not nearly smart enough to time this crazy market. It will drop eventually and it's going to hurt like hell to see that money flow out of my portfolio. It's a major reason why even though we're within 4% of our FIRE number, it's OMY for me. I'd like to have that buying opportunity and then FIRE on the rebound.
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And I think that's been happening a LOT to people on this forum. How many people are willing to admit they got spooked at ANY point in the past nine years, and moved some of their money out of the stock market? Every single one of those decisions was wrong, and those people now have less money in the market than they would have if they had just stayed the course.
Ugh, you just described me. About 6 months ago, I felt that stocks were overpriced and I saw that we were up 11% YTD in a year in which we were poised for a correction. Surely any moment Trump would do something that would provoke the markets to drop. I mean the guy is a mess, and that's the sort of thing markets do when important, consequential people make messes. Also, MMM wrote a post that said, Hey, don't do anything silly like rebalance, but looking at history, we're due for a correction. For all those reasons, I asked myself: what's more likely to happen first? The market dropping 10%, or the market gaining 10%? So, anyway, I changed my portfolio from 100% Equities (75% US equities/25% Foreign), to 66% Equities, 33% Cash. Well in the last 6 months, the money I put in cash has missed out on thousands and thousands of dollars of gains. And the really $hit part is -- now I don't know when to get back in.
I know I should probably just admit my mistake and put all that money back in, but I am hoping now for a correction that will make me feel better about my decision. I hate how I got here; my decision seemed pretty sensible at the time. I've been rationalizing my behavior a hundred different ways like, "Well, maybe this is just the asset allocation that is right for me. I wasn't market timing; I was optimizing my asset allocation." But gottdamn, of course I was market timing.
Drop your ego and get back in now. If you were invested in 100% stocks now, would you sell part of it? If no, then you should buy back.
You can see each day as a different decision of whether you should be invested or not, and to what allocation. Everyday you stay out, you're basically repeating the same mistake you've been doing everyday for the past 6 months. You can stop the damage now.
It never does, but getting out now could well be worse than riding out the melt up and meltdown. So I don't see much choice. If I get close to my FIRE number I'll shift some of my gains to the bonds I want to hold when I stop working and start living from my investment income. Beyond that I'm just going to ride the wave.
If there's a meltdown before you FIRE, will you still shift some of your gains to bonds? If not, it'd be market timing.
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The recent market run-up has the stache rocketing past our FI number, which has me feeling a bit giddy, even though I know it can all change dramatically any time, and even though the run-up appears to be due to things I don't otherwise support...so lots of mixed emotions right now.
Contrast this with last summer, looking at sweating out the first years of ER fearing sequence of returns risks amidst all the low growth predictions and recommendations for padding one's stache and lowering one's assumed SWR (I left my career just a bit shy of our number).
Others?
And just for the record...I plan to stay the course, of course, continue to rebalance to my AA, and keep to the mustachian lifestyle.
Yeah, I feel that giddiness, but also on the flip side I feel "stupid" for 2 years ago moving from 100% Total Market to the 80/20 VASGX because I was about to hit FI and thats what I had always planned to do, but therefore I've lost percentage points on return. I tell myself both feelings are ridiculous and in the moment and i maintain my plan....
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Some indicators make me think it's about to drop, but some now point towards a couple more years of continued growth at this rate being at least possible.
My primary concern about the stock market is that it is vulnerable to downturns in the economy, and I think our economy is made significantly more fragile by the current Congress's plan of increased deficit spending (new debt-backed tax cuts) while interest rates are already at historic lows. This situation severely limits our ability to respond to economic downturns with fiscal stimulus, which potentially means the next downturn could grow unchecked for much longer than normal.
Normally, we slowly raise interest rates and taxes when the economy is prosperous, then cut them and start deficit spending when the business cycle busts. This is the heart of Keynesian economics, that the government moderates the ups and downs to keep us growing steadily overall. That plan has seemingly gone right out the window these days, because we're instead trying to pump up the business cycle with depressed interest rates and deficit spending to fund tax cuts for people who don't contribute to the economy, but DO contribute to inflated stock prices. This has the net impact of pushing up stock prices while not increasing wage growth, which is exactly the kind of situation that leads to massive bubbles which then burst catastrophically.
Not to be a doomsayer, but it certainly looks like a recipe for a prolonged recession and a more severe stock market downturn than average.
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It's a major reason why even though we're within 4% of our FIRE number, it's OMY for me. I'd like to have that buying opportunity and then FIRE on the rebound.
As long as you are okay with it being several more OMYs. There may not be a crash for a while still and instead of a crash there could be a long period of low/mild negative returns.
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It's a major reason why even though we're within 4% of our FIRE number, it's OMY for me. I'd like to have that buying opportunity and then FIRE on the rebound.
As long as you are okay with it being several more OMYs. There may not be a crash for a while still and instead of a crash there could be a long period of low/mild negative returns.
I'm not saying that we may not slip into a period of slightly negative or sideways movement. I think it would be following a crash however. We're in a bubble, we've seen it before. I'm still 80+ percent exposure to market flux because it is unknown when it will happen. Building the stash and cash is what I'm doing for now. I'd actually be relieved with a 10 to 20 percentage drop. This market needs a speed bump.
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I've been kicking the heck out of myself for paying off my law school loans within 3 years of graduating (payoff ca. 2014, graduated in 2011, had about $160k of loans) rather than investing everything I had in the market. Sofi and its progeny didn't exist yet when I graduated--they didn't really get going until I was pretty close to fully paid off--so I was looking at 6.8-8.1% loans, but man, the amount of money that decision has cost me.
I've been kicking the heck out of myself for putting a $120k downpayment on a house in 2016 (pre-election) (20% downpayment). It was a bit more than I intended to spend on a house, but not by a ton and it has everything I want in a house for the medium-long term. But man, the amount of money that decision has cost me.
What's the common thread between those two things? Doing both (other than going about $20k higher on downpayment than I had planned on) was "in the plan." So it hurts in hindsight, but so does the fact that I didn't put $20k into Bitcoin back in 2012. I had my mouse pointer over "buy." I couldn't go through with it... it wasn't anywhere in my plan and it felt totally speculative (because it would have been). Talk about hurting in hindsight.
But you know what decisions tick me off the most?
-In 2016, post-election, although I fortunately did not sell what I had in the market, I was slow to invest in the market with new funds. I figured, Trump is a maniac, there's no way we don't have a near-immediate crash. Thank goodness I didn't have the full courage of my convictions on that and didn't liquidate all of my holdings. I had my mouse pointer over "sell."
-In 2017, I took a chunk of my 2016 bonus and made a $26k extra payment on my mortgage (I invested most of the rest, and held $25k in cash to buy a car for the first time in 10 years). Again, I just couldn't swallow what the market had done post-election. So, that lost me a fair amount of money. (Of course the car is also a catastrophically expensive thing once I factor in foregone investment returns on that money, but I made the decision not to think in those terms and to allow myself that lifestyle creep.)
Common thread? They were decisions outside of my plan.
But good thing about them? Further reinforced the fact that my "gut" doesn't know jack-all. So. I'm highly confident the market is going to crash at some point in the next couple of years. I believe that my party of choice will probably help a market correction along when they come back into power by increasing taxes, Trump is still nuts, and we're overdue. And I still sent 100% of my 2017 bonus into the market (after taking out taxes, funding anticipated medical expenses for the year, etc). I wasn't in the workforce or the market for the dot com bust or 2007-2009--wasn't in the workforce until 2011 and was minimally invested until 2014 because of my focus on student loans--but I'm hoping that these two frustrating occurrences of market timing gone wrong will stay in my mind and keep me from selling when the correction does come.
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And I think that's been happening a LOT to people on this forum. How many people are willing to admit they got spooked at ANY point in the past nine years, and moved some of their money out of the stock market? Every single one of those decisions was wrong, and those people now have less money in the market than they would have if they had just stayed the course.
Ugh, you just described me. About 6 months ago, I felt that stocks were overpriced and I saw that we were up 11% YTD in a year in which we were poised for a correction. Surely any moment Trump would do something that would provoke the markets to drop. I mean the guy is a mess, and that's the sort of thing markets do when important, consequential people make messes. Also, MMM wrote a post that said, Hey, don't do anything silly like rebalance, but looking at history, we're due for a correction. For all those reasons, I asked myself: what's more likely to happen first? The market dropping 10%, or the market gaining 10%? So, anyway, I changed my portfolio from 100% Equities (75% US equities/25% Foreign), to 66% Equities, 33% Cash. Well in the last 6 months, the money I put in cash has missed out on thousands and thousands of dollars of gains. And the really $hit part is -- now I don't know when to get back in.
I know I should probably just admit my mistake and put all that money back in, but I am hoping now for a correction that will make me feel better about my decision. I hate how I got here; my decision seemed pretty sensible at the time. I've been rationalizing my behavior a hundred different ways like, "Well, maybe this is just the asset allocation that is right for me. I wasn't market timing; I was optimizing my asset allocation." But gottdamn, of course I was market timing.
Sound like 66-33 might be closer to your proper target AA...so take the time you were 100% stocks as a bonus.
I have done some minor rebalancing out of stocks of the past year, and yes, I made less money because of it. I don't think that makes those moves bad or stupid...I'm still raking it on on the (fairly aggressive for my age) 70% or so I have in the market, AND (it makes a difference what you focus on) I have some ballast in the portfolio that also provides more secure funds for a number of years whenever the shit hits the fan.
This is one of the benefits of having a plan you believe in...follow it, knowing it is sound over the long run, and will not predict and take advantage of all that is happening in the short term, and you shouldn't really have regrets.
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Not to be a doomsayer, but it certainly looks like a receipt for a prolonged recession and a more severe stock market downturn than average.
I agree that the next downturn is likely to be for an extended period of time. That's a very large part of the reason I'm OMYing it right now (also, I hit my numbers a couple years before I expected and that also makes me nervous)... I don't want to get caught out in what (with the financial games being played) could be a record breaking poor sequence of returns when it does happen. I've expected it to happen already, but right now I can see it potentially being a couple more years out. I don't change my investment strategy, but if I'm feeling nervous I'll keep hanging onto work. :-)
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Not to be a doomsayer, but it certainly looks like a receipt for a prolonged recession and a more severe stock market downturn than average.
I agree that the next downturn is likely to be for an extended period of time. That's a very large part of the reason I'm OMYing it right now (also, I hit my numbers a couple years before I expected and that also makes me nervous)... I don't want to get caught out in what (with the financial games being played) could be a record breaking poor sequence of returns when it does happen. I've expected it to happen already, but right now I can see it potentially being a couple more years out. I don't change my investment strategy, but if I'm feeling nervous I'll keep hanging onto work. :-)
It's a shame we have to do this. The tax cut will further increase the bubble and take away from the ability to recover from the crash. Tax cuts and easy money are for when things are down. We're pumping in more hot air to an overheated market.
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Feeling the same way. Taking one of my accounts as an example, my goal for last year was to get to 300k in my 401k. I hit it and now not even 4.5 months later, I'm at 350k. I'm thinking it's too much too soon -- even given my full 18k contribution for last year and a generous match. But I just keep telling myself that all I'm doing now is building up that "cushion" above 300k for the correction whether it happens now or 6 months from now. As of right now, I'm 50k or 16.66% above the 300k level. If we hit a 2008 style crash (god forbid), 16.6% obviously means nothing. But if we hit a more "routine" 10% correction, the run up still keeps me above 300k. If this melt up continues even for another few weeks, that cushion % just grows. Fingers crossed.
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Personally I think you need a 3-5 year buffer just in case market returns are not good or negative. You can either do this by ring fencing some cash out of the markets or you can FIRE later.
I prefer the cash idea and I am going with 3 years basic living costs in a non market account when I FIRE. I wont touch that money unless the markets do something bad. Then when they do I can sit back reduce WR to 0 and wait for it to recover. Its always a lot easier to make decisions when you can look at performance over 12 months or longer rather than trying to guess what will happen next.
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Personally I think you need a 3-5 year buffer just in case market returns are not good or negative. You can either do this by ring fencing some cash out of the markets or you can FIRE later.
I prefer the cash idea and I am going with 3 years basic living costs in a non market account when I FIRE. I wont touch that money unless the markets do something bad. Then when they do I can sit back reduce WR to 0 and wait for it to recover. Its always a lot easier to make decisions when you can look at performance over 12 months or longer rather than trying to guess what will happen next.
This is pretty much what the rising equity glide path is and it seems to be a very solid way to go if you stick to your plan.
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Personally I think you need a 3-5 year buffer just in case market returns are not good or negative. You can either do this by ring fencing some cash out of the markets or you can FIRE later.
I prefer the cash idea and I am going with 3 years basic living costs in a non market account when I FIRE. I wont touch that money unless the markets do something bad. Then when they do I can sit back reduce WR to 0 and wait for it to recover. Its always a lot easier to make decisions when you can look at performance over 12 months or longer rather than trying to guess what will happen next.
This is pretty much what the rising equity glide path is and it seems to be a very solid way to go if you stick to your plan.
Sounds good in theory but in practice the increased success rate with rising equity glide path is very small, maybe not even statistically significant. You lose out a lot by having a large amount sitting in cash.
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Personally I think you need a 3-5 year buffer just in case market returns are not good or negative. You can either do this by ring fencing some cash out of the markets or you can FIRE later.
I prefer the cash idea and I am going with 3 years basic living costs in a non market account when I FIRE. I wont touch that money unless the markets do something bad. Then when they do I can sit back reduce WR to 0 and wait for it to recover. Its always a lot easier to make decisions when you can look at performance over 12 months or longer rather than trying to guess what will happen next.
This is pretty much what the rising equity glide path is and it seems to be a very solid way to go if you stick to your plan.
Sounds good in theory but in practice the increased success rate with rising equity glide path is very small, maybe not even statistically significant. You lose out a lot by having a large amount sitting in cash.
There's nothing that says you need to hold cash. Most all studies I've seen using the glide path only use stocks and bonds. Increase the bonds, and then steadily decrease them during your first years of retirement.
I think even in practice this is a good thing. It depends on your goals, of course. If your goal is to not run out of money, then it's likely good. If you goal is to have the largest balance in 30 years, then it's likely bad.
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Personally I think you need a 3-5 year buffer just in case market returns are not good or negative. You can either do this by ring fencing some cash out of the markets or you can FIRE later.
I prefer the cash idea and I am going with 3 years basic living costs in a non market account when I FIRE. I wont touch that money unless the markets do something bad. Then when they do I can sit back reduce WR to 0 and wait for it to recover. Its always a lot easier to make decisions when you can look at performance over 12 months or longer rather than trying to guess what will happen next.
I'd give this a read before deciding to hold so much cash:
https://www.kitces.com/blog/research-reveals-cash-reserve-strategies-dont-work-unless-youre-a-good-market-timer/
It could still be worth it for your peace of mind, but you're paying for that peace of mind.
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Personally I think you need a 3-5 year buffer just in case market returns are not good or negative. You can either do this by ring fencing some cash out of the markets or you can FIRE later.
I prefer the cash idea and I am going with 3 years basic living costs in a non market account when I FIRE. I wont touch that money unless the markets do something bad. Then when they do I can sit back reduce WR to 0 and wait for it to recover. Its always a lot easier to make decisions when you can look at performance over 12 months or longer rather than trying to guess what will happen next.
This is pretty much what the rising equity glide path is and it seems to be a very solid way to go if you stick to your plan.
Sounds good in theory but in practice the increased success rate with rising equity glide path is very small, maybe not even statistically significant. You lose out a lot by having a large amount sitting in cash.
There's nothing that says you need to hold cash. Most all studies I've seen using the glide path only use stocks and bonds. Increase the bonds, and then steadily decrease them during your first years of retirement.
I think even in practice this is a good thing. It depends on your goals, of course. If your goal is to not run out of money, then it's likely good. If you goal is to have the largest balance in 30 years, then it's likely bad.
Replace "cash" with "bonds" in what I wrote and it still applies. Even for success rate the advantage of a rising equity glide path is very small. I'd bet it also has a small effect on balance at death.
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Personally I think you need a 3-5 year buffer just in case market returns are not good or negative. You can either do this by ring fencing some cash out of the markets or you can FIRE later.
I prefer the cash idea and I am going with 3 years basic living costs in a non market account when I FIRE. I wont touch that money unless the markets do something bad. Then when they do I can sit back reduce WR to 0 and wait for it to recover. Its always a lot easier to make decisions when you can look at performance over 12 months or longer rather than trying to guess what will happen next.
This is pretty much what the rising equity glide path is and it seems to be a very solid way to go if you stick to your plan.
Sounds good in theory but in practice the increased success rate with rising equity glide path is very small, maybe not even statistically significant. You lose out a lot by having a large amount sitting in cash.
There's nothing that says you need to hold cash. Most all studies I've seen using the glide path only use stocks and bonds. Increase the bonds, and then steadily decrease them during your first years of retirement.
I think even in practice this is a good thing. It depends on your goals, of course. If your goal is to not run out of money, then it's likely good. If you goal is to have the largest balance in 30 years, then it's likely bad.
Replace "cash" with "bonds" in what I wrote and it still applies. Even for success rate the advantage of a rising equity glide path is very small. I'd bet it also has a small effect on balance at death.
Depends on the market movements, right? The point is to mitigate against sequence of returns risk. Michael Kitces has written at least 3 posts about it. Here's the most recent one (https://www.kitces.com/blog/managing-portfolio-size-effect-with-bond-tent-in-retirement-red-zone/). I'm not sure if he's concluded what the actual ending effect is though, other than stating that it is beneficial.
Over at Early Retirement Now, they've concluded that doing this when CAPE is greater than 20 increases your success rate by 10%-ish. So while not a dramatic jump, it is definitely in the statistically significant range. Conversely, you could use it to retire earlier with a higher withdrawal rate.
From this post (https://earlyretirementnow.com/2017/09/13/the-ultimate-guide-to-safe-withdrawal-rates-part-19-equity-glidepaths/):
Likewise, if I’m OK with a 5% failure probability conditional on a CAPE>20, then the static stock allocation of 80% would give me an SWR of 3.47%. The glidepaths would have allowed between 3.57% and 3.63%. Only an additional 0.16%, but that’s about 5% more consumption every year!
Is that significant enough? I'm not sure. But I'm also not sure that looking at every result is all that meaningful (because good years to retire are going to work no matter what). It certainly seems to help stem the tide of poor returns when I have run simulations based on the 2000 retiree. It increased portfolio balances by 8% after 5 years compared to static AA. (Admittedly with some pretty perfect hindsight timing.)
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Depends on the market movements, right? The point is to mitigate against sequence of returns risk. Michael Kitces has written at least 3 posts about it. Here's the most recent one (https://www.kitces.com/blog/managing-portfolio-size-effect-with-bond-tent-in-retirement-red-zone/). I'm not sure if he's concluded what the actual ending effect is though, other than stating that it is beneficial.
Over at Early Retirement Now, they've concluded that doing this when CAPE is greater than 20 increases your success rate by 10%-ish. So while not a dramatic jump, it is definitely in the statistically significant range. Conversely, you could use it to retire earlier with a higher withdrawal rate.
From this post (https://earlyretirementnow.com/2017/09/13/the-ultimate-guide-to-safe-withdrawal-rates-part-19-equity-glidepaths/):
Likewise, if I’m OK with a 5% failure probability conditional on a CAPE>20, then the static stock allocation of 80% would give me an SWR of 3.47%. The glidepaths would have allowed between 3.57% and 3.63%. Only an additional 0.16%, but that’s about 5% more consumption every year!
Is that significant enough? I'm not sure. But I'm also not sure that looking at every result is all that meaningful (because good years to retire are going to work no matter what). It certainly seems to help stem the tide of poor returns when I have run simulations based on the 2000 retiree. It increased portfolio balances by 8% after 5 years compared to static AA. (Admittedly with some pretty perfect hindsight timing.)
Kitces simulations are limited because he only considers 4% WR, 30-year retirement and constant ramp-up time.
He finds best success rate goes from something like 94.6% to 95.1%, which is just 1-2 starting years (not sure of his methodology).
I made more extensive simulations here:
https://forum.mrmoneymustache.com/welcome-to-the-forum/cfiresim-severely-overestimates-success-rates-for-mustachians/msg1634628/#msg1634628
If you look at other WR (4.5%, 5%), you'll see that a glide path actually hurts success rates as often as it helps. Given that there is so little historical data, the effect is probably insignificant, i.e. the "advantage" he finds could have been a disadvantage just by adjusting slightly some parameters.
If you condition this on CAPE, significance is even lower. So, those simulations are interesting and can yield useful results if the magnitude of the effect is large, but they should be taken with a grain of salt if not.
Kitces says this in the article: "Notably, there’s still far more research to be done to optimize the exact shape and the slope of the V-shaped equity glidepath and the bond tent."
but actually with the data we currently have, there's not much more research we can squeeze out of this, I'm afraid.
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Personally I think you need a 3-5 year buffer just in case market returns are not good or negative. You can either do this by ring fencing some cash out of the markets or you can FIRE later.
I prefer the cash idea and I am going with 3 years basic living costs in a non market account when I FIRE. I wont touch that money unless the markets do something bad. Then when they do I can sit back reduce WR to 0 and wait for it to recover. Its always a lot easier to make decisions when you can look at performance over 12 months or longer rather than trying to guess what will happen next.
This is pretty much what the rising equity glide path is and it seems to be a very solid way to go if you stick to your plan.
Sounds good in theory but in practice the increased success rate with rising equity glide path is very small, maybe not even statistically significant. You lose out a lot by having a large amount sitting in cash.
Yes I'm not sure I'd have that much in cash..but some cash certainly seems like a good idea. I am sticking to a 'diversification' strategy that includes equities/bonds/cash/stock trading. Not without risk but much less than others here. I'm not sure how some of the 100% equity'ers can sleep at night.
BTW - any of you ever visit https://www.bogleheads.org/ ? Very cool community there too...but much different than here.
When a bunch of MMM'ers start debating that our money is growing too fast...we know something must be up. :-)
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If you condition this on CAPE, significance is even lower. So, those simulations are interesting and can yield useful results if the magnitude of the effect is large, but they should be taken with a grain of salt if not.
I would think that in times of high valuation, it's *more* important to guard against poor early returns than in times of low valuation, simply because it's a much more likely scenario. Why would the significance be lower in times of higher valuations?
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Some indicators make me think it's about to drop, but some now point towards a couple more years of continued growth at this rate being at least possible.
My primary concern about the stock market is that it is vulnerable to downturns in the economy, and I think our economy is made significantly more fragile by the current Congress's plan of increased deficit spending (new debt-backed tax cuts) while interest rates are already at historic lows. This situation severely limits our ability to respond to economic downturns with fiscal stimulus, which potentially means the next downturn could grow unchecked for much longer than normal.
Normally, we slowly raise interest rates and taxes when the economy is prosperous, then cut them and start deficit spending when the business cycle busts. This is the heart of Keynesian economics, that the government moderates the ups and downs to keep us growing steadily overall. That plan has seemingly gone right out the window these days, because we're instead trying to pump up the business cycle with depressed interest rates and deficit spending to fund tax cuts for people who don't contribute to the economy, but DO contribute to inflated stock prices. This has the net impact of pushing up stock prices while not increasing wage growth, which is exactly the kind of situation that leads to massive bubbles which then burst catastrophically.
Not to be a doomsayer, but it certainly looks like a recipe for a prolonged recession and a more severe stock market downturn than average.
While I agree with you entirely about the risk....you are completely wrong about current deficit spending. We haven't had a surplus since dotcom era when growth was high and there was a tax windfall from stock options/IPOs, and nevermind that the following years spending was based on artificially high revenue. Plus the prior administration had deficits that far exceeded any current and past levels...sure some is attributed to war (still spending on that now to a lesser extent) and some attributed to stimulus coming off great recession...but a lot was for entitlements which is just the inverse of tax cuts. Both sides love their deficits.
Anyway, interest rate risk is the 100% greatest risk to the markets. Good news is that our low rates are down right high compared to the rest of the world and our debt is so high (because of said deficits) that powers that be will have to keep rates low because we can't afford to pay the interest as it is let alone if it goes up - think about it interest on US Debt was $458million in 2017....just a 1% in avg rate would be another $200million in interest that would go right to the deficit.
We might have a tax problem, we might have spending problem but we definitely have a debt problem and probably an interest rate problem.
Its ok, because I just look at todays markets and assume my portfolio will be whacked by 25% at some time....I am still investing per my AA which is more conservative than a lot of others here and has cost me money during the run up but what can I say...its my AA that I chose and am comfortable with.
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So much for giddiness of this so-called 'melt-up'...I didn't even clear 10k on today's gains...sigh...
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So much for giddiness of this so-called 'melt-up'...I didn't even clear 10k on today's gains...sigh...
Yup. Worthless. What's the point? :(