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Hi !!!
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Fishes, Anyone aware of the relocation assistance provided by Wells Fargo . Is that provided as as whole or only after submitting the required bills and docs.
Asking because Deloitte credited 40k relocation assistance without any bills even though it was mentioned in the offer that bills were necessary.
Can anyone please help? Wells Fargo
Your firms most underutilized/unknown benefit?
Chief
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Coach
Go check how many times the stock market has lost 50% in a single day, and then see how long it took to rebound.
Once you do fire, you should start moving some short term money into more reliable investments. But on the whole, a broad index fund is highly unlikely to lose a significant amount in a very short period of time, and when it does, it often rebounds fairly quickly. That’s why most money experts will tell you that any money invested in the market should be money that you can leave alone for 2 to 5 years in case there’s some short term volatility.
Mentor
Fire number by necessity is conservative.
At 4% withdrawal rate you are going to succeed 90% of the time. That includes cases where the market drops 20% the month after you retire.
If you want 95% success rate, then you use 3.25% withdrawal rate.
It’s also why most people recommend 20-40% in bonds. A 60/40 portfolio very rarely falls more than 20% in a year.
Also what’s the alternative?
You could buy inflation adjusted annuities, but they only pay around 4% anyway, and you end up with zero.
Tips ladder might not last your life, and you also end with zero.
So you have to do something.
Working too long is also a mistake for many people. You are missing family time, vacation time, time for more rewarding activities.
Why stop at 67? You could work until you are physically unable. Ideally dropping dead at your desk. That might be the only truly guaranteed way you won’t run out of money?
As was said above, enough of your FIRE money needs to be in investments that won't have wild market swings, like CDs, bonds, and guaranteed investments (I put my pension in this category, along with annuities and other fixed income investments). Anyone who moves into retirement without diversifying their investment portfolio partially into stable but likely lower performing assets is making a huge mistake.
Subject Expert
That's a great question. There are, basically, three answers.
1) Withdrawal analyses such as people use to calculate WRs and their FIRE numbers account for this possibility, and try to ensure people will be OK even if a crash happens shortly after retirement.
2) People closer to retirement with WRs closer to the frontier of safety are generally advised to hold at least a little bit of fixed income; just 20% has rescued people (in historical data) from some of the worst historical crashes when 100% equity would have failed.
3) We still live and plan in the face of significant uncertainty and it is a live psychological issue for almost all of us.
Broad indexes don’t lose 50% overnight and don’t stay low for too long, the economy rebounds. There’s also different types of indexes that perform better during upswings or downturns, give more dividends, or are more stable regardless of the macro picture. Sometimes rebalancing those can help mitigate the drawdown effect and even keep you in the green. You can also limit the withdrawal rate or withdraw only from the better performers, or just live on dividends alone without pulling from the principal itself, if possible. There’s ways to mitigate the damages of a drawdown. It’s also important to create a lifestyle where it’s easy to switch from splurging when the market is up to minimized spending during downturns. That means no super loans being due at the end of the month, otherwise it will force you to pull from impacted investments at a time when it’s best to leave them untouched until they recover. Lastly, it’s good to remember that even if a specific year may have a heavy minus associated with it, like let’s say -20%, that’s a minus 20 after years of pluses, so in reality it may not even be a minus from your hard earned capital, it’s just a correction on your compounded growth. So when compared to what you originally earned through hard work, you may still be up in value by a lot. For people who have millions invested, that’s still hundreds of thousands up, more than enough to weather a downturn.
If you look at the DJIA from 2007 to 2012, the index lost 53% of its value from October 2007 to March 2008. It did not recover to its pre-crash level until late 2010.
This is why modeling 2-3 years of easily liquidated cash reserves is important for those intending to retire. In an extended financial crash like the 2008 GFC, selling off during the downslope and too early during the upslope would have reduced your assets permanently.
The Great Depression is a more black swan event that is hard to even fathom. From the peak in October 1929 to the low in June 1932, stocks lost 83% of their value. Stocks did not reach their October 1929 value again until 9 years after WWII.
This is why it’s important to keep 2- 3 yrs of living expense in a cash or cash equivalent product . Also a good time to rebalance or do Roth conversions etc . During periods of down markets . These can be a good time to take advantage of a bad market .
I know! I set what I was sure was a good number I needed to save in order to retire but that was almost 10 years ago. I've hit that number and know I couldn't possibly retire on this amount. How are we supposed to plan for the long haul?
So what everyone is keep 2-3 years in relatively stable accounts (HYSA, bonds) to access during stock downturns. Is this the consensus?
Mentor
15 years out I would have a low bond allocation. 5-10% max. Start thinking about increasing maybe 10 years out.
VTI and VOO are 100% equity. You should consider adding some international & emerging market allocation. Maybe 15-35%. For diversification.
HYSA so good for emergency fund. But only 6 months expenses here is good for most people.
The function of the bond allocation is to increase safety and certainty when you are close, and then in particular after retirement. Bond will underperform equities over long periods of time (20 years+)
If stocks drop 50% in one day, there will be much bigger problems as a country than only myself. Events in these past few years have taught me that all the presidents will want to print more money to prevent a crash.
In addition to what everyone is mentioning about the market's ability to bounce back, it's important to keep the "Sequence of Returns Risk" in mind. In a nutshell, experiencing a market drop in the early years of retirement can create problems that go beyond the immediate hit to your portfolio. So you'll want to move funds for the first several years out of the market before you retire.