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Jonathan’s thought of the day is, If the stock market’s performance over the next five years was miserable, would you be? I thought it might be fun to kick this one around a bit.
Though I am positioned just fine to survive five or even ten years of misery from the market, I still wouldn’t like it. I guess I’m just too used to seeing things go up. So while the nuts and bolts of our life would be fine, I may still have to tamp down a few stubborn emotions.
I suspect most of us would say we wouldn’t like five years of poor market returns, even if our finances could withstand them. There’s a difference between financial security and emotional comfort. One lesson retirement has taught me is that the market and my happiness don’t have to move in lockstep. If my basic needs are covered and the people I care about are healthy, a miserable market would be an annoyance, not a crisis.
Easier said than done, of course, when we’ve spent decades being conditioned to cheer every green number. But one lesson Jonathan has taught me, stop checking your account balances every day!
We can always live in the camper van.
…down by the river😂
I would like to think not but I really don’t know. During the GFC, the last prolonged downturn, I was entering my peak earning years, had a fairly solid position at my company, and was aggressively invested but with a much smaller portfolio. I didn’t panic then but my I’m sure my concern back then was keeping my current income/job.
Now I have been retired for 18 months with no earned income and a much larger portfolio. I believe our investments are positioned to weather a downturn and still provide the needed income, but I just don’t know how I will feel when that downturn comes.
Enjoying seeing everyone’s thoughts on this. Ken
Interesting timing for this post. Even though I don’t use a financial advisor I went yesterday to receive the Portfolio Risk Analysis that one ran for me.
His software runs 1000 scenarios and gives a percentage chance of having our portfolio run out over the next 20 years.
Best case scenario and average scenario returns going forward it indicated we have a 0% chance of going to zero. Worst case scenario which includes another downturn similar to 2008 puts us at a 1% chance is running our portfolio to zero.
Lookin’ good, Larry. You sure did something right!
It’s mixed blessing of guaranteed income from pensions (33 years at Hostess Cake/Wonder Bread , 15 years from school for myself, 30 years from school for my wife) and my social security, her spousal social security, and a few decades of investing in low cost Vanguard etf’s
FYI (from my youth): I LOVE Twinkies!!
Fun Fact , Twinkles we’re originally banana . But when the war started all bananas were sent to the soldiers so Hostess started using vanilla filling instead
Now-a-days we’d just invent some sort of chemically flavored fruit goo to inject into the cake.
That sounds like what Hostess is made of nowadays. When I started we had a three days freshness code. Now their product is drop shipment and has a”freshness” code of two to three months. Back in 1978 Twinkies sold for 24¢ and everything else sold for 27¢
I’ll go with vanilla. I used to see ads for Twinkies, Hostess Cupcakes, etc in American comic books when I was a kid. When I came to the US, one of the first things I did was buy a selection of treats from the grocery store so I could try them out.
To minimize financial worries, I opted for a TIPS-based liability matching portfolio, even though it meant sacrificing potential returns.
I’m intrigued. Write a post about it.
I’ll consider it. Thanks!
Here’s a good discussion, Ben.
https://www.bogleheads.org/forum/viewtopic.php?t=455956
The more money you have the more up/down would affect your mode. 2% of 500K is not the same as 5MM. Back in the day we still want to eat out, we have a rule, going out for diner if the index is moving more than 2% in either direction. One to celebrate and the other one to tell yourself it is just money.
Yesterday my portfolio declined by $35,000 and for no logical reason I was miserable. Anytime there is a decline or my slipping away from my next goal I am miserable. On the other hand, I quickly recover when the reverse happens.
As Connie says, why do you only tell me about investments when they go down?
Maybe I’m too old to keep setting investment goals. 🤑
That’s quite a portfolio…
I understand the natural guttural reaction to a drop, but: 1) You have written that you are not withdrawing from your portfolio for expenses, so really why does it matter, as it’s not affecting your lifestyle, 2) I look at the percentage, not the dollar amount, and due to our portfolio allocation our loss is usually < 50% of that of the market.
The goal of our portfolio is to leave as much as possible to our children.
Then the time horizon is even longer.
Not really. Our four children are 51 to 56
Sure it is. Compare theirs to yours. Which is hopefully not short per se, but relatively speaking.
I hear you, Dick. We’re supposed to be in the SPEND DOWN season of our lives, still, the old habit of setting investment goals is a hard one to break.
that’s funny bc I only tell my wife about how the market did when it goes up.
The truth is I don’t know. I think miserable might be too strong, but I, too, would not be happy. This 17-year bull market has really spoiled me.
One can only be miserable for so long until that becomes who you are
..Just a miserable curmudgeon. You will be miserable even when it recovers claiming it didn’t do sa fast enough blah, blah. The more normal folks may even panic at first but will adjust as they realize the worse case scenario is still manageable. I’d like to think I’m not a perpetual curmudgeon and after some hand ringing I’d go on with life.
Mike, reading your reply I couldn’t help thinking about a few such people I have known over the years. What a terrible way to exist.
If the market took a very large plunge, I’d not be happy. First thing I’d do is a major Roth conversion. We’d be fine for 8-10 years so I guess not miserable.
When life gives us lemons…..
If the stock market was miserable for the next 5 years, we would be just fine.
We each have state-guaranteed pensions with annual COLA’s of up to 2.5% and which are nearly fully-funded according to the actuaries. The pension benefits more than cover our monthly spending and also allow us to automatically save to our vacation savings account.
In addition, my wife started receiving Social Security 4 months ago, all of which goes into savings. (I would like it in a higher-earning account, but get nowhere when trying to discuss that issue.) I will claim SS at age 70 in August, 2028 and will figure out how best to utilize those funds.
In reserve, we have 1 traditional IRA and 3 Roth IRA’s between us, the Roths will likely remain unused until passing on to our children and grandchildren. With the traditional IRA, we plan to use the RMD amounts as QCD’s when that time comes.
We feel fortunate to have this financial security ahead of us!
I’ve run all the simulators, and they say our plan has a 99% success rate even with markets heading down for ten years straight.
My fallback is Social Security. Even taking it at 62/63 would cover our monthly expenses, and if we wait until age 70, it would give us a comfortable lifestyle.
There’s also the house, which will be paid off in less than five years after we retire. Worst case scenario, we sell it all and move to Europe 🙂
Dan, like you, I could go a minimum of ten years without it touching me financially, possibly longer if I keep my spending as exciting as it currently is. Emotionally, it wouldn’t break me either. I’ve weathered enough genuine, prolonged hardship to know the difference between real suffering and an inconvenience wearing a dramatic coat.
That said, I’d hardly be throwing a party about it.
Call it naïve if you like, and you probably will, but at the end of the day it’s money. Important, yes. Useful, certainly. But in the grand hierarchy of things that can go wrong in a human life, losing money sits somewhere well below the truly serious stuff. It’s not nothing, but it’s also not everything.
I think your last paragraph is spot on!
We would all love to say that our financial plan recognises that markets can be flat or down over five year periods. And that we are emotionally ready for that situation.
But, yeah, it would still be a downer. As someone still working, I wonder if I might end up working a little longer, even if the maths shows that I should, just because of the worry caused by down markets.