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I see this new Forum as akin to the Bogleheads forum. I have some problems with that site, and I (obviously) like this one better. But one very interesting post I saw related to retirees from 2000.
The idea is that, theoretically, 2000 was just about the “worst time” someone could retire because it was shortly before the 9/11/2001 drop in stocks, followed by the 2008-09 plunge.
As a mid-career investor, I’d be interested to hear how retirees from that time period fared.
I sold our family’s business in December 1999. My retirement party was held in the fall of 2001; I was 56. Nine months later, I was back at work.
I suffered through good and bad investments, and those were the ones where I was in control. Investing in real estate and the stock market was scarier than it should have been. Only a few years back, I realized my assets were enough to last us to any age.
The biggest surprises were health issues for both of us. They made us realize we had to plan and plan again as we faced new challenges.
Our major plan to age in place is moving to a new place where that can be true.
I retired in 2002 at age 55. My investments had declined by about a third in the post-2000 period, but I pulled the plug anyway. Since I planned to delay Social Security until age 70, I had to withdraw from my savings to supplement my pension. I made no percentage calculations (although looking back it was initially ~3%); I just took out what eliminated the shortfall. By the time I got to 70, my overall retirement savings had grown by a factor of ~2.6. My only regret is that it was all in IRAs; I had completely depleted my regular investment account over the years, withdrawing over $300K. Now I have large RMDs, which is not the worst problem to have, but I wish I had taken the money out of the IRAs.
Discussion of this risk always piques my interest. I did a search of research, and there is quite a bit on the aftermath of the Great Recession. A quick read reveals the consequences of that or similar event may not be as dire as we predict. I’ll be interested in comments from those who experienced it firsthand.
Great question. Obviously, the big concern here is sequence-of-return risk, something every newly minted retiree should be aware of. Still, I can’t recall hearing from any retirees who struggled after retiring at that time, and I think there’s a good reason. The story we tell ourselves about sequence-of-return risk — that retirees are going to blindly follow a 4% withdrawal rate, increasing their spending every year along with inflation, even as stocks and bonds tumble into the toilet — simply isn’t going to happen. Faced with frightening markets, folks do what’s sensible: They cut back spending, draw from the conservative side of their portfolio and perhaps look for part-time work.
It’s the less rational folks we need to worry about. For too many—often inexperienced investors unaware of the long-term upward slope of the market and/or too anxious to ever have invested in it in the first place— flight is from the “riskier” sectors of their portfolios. The high growth stocks that were more severely damaged are, of course, just the ones that will bounce back most strongly in the inevitable recovery. It has taken me many years and many disappointments to overcome this tendency.