Retirement into a Down Market

Retirement date:  six weeks from today.  State of retirement nest egg:  down by one year's retirement living expenses in just the first TWELVE trading days of this year.  Conclusion:  OUCH!

Well thank goodness I lost a fortune in the stock market during the 2000-2001 dot-com bubble burst.  I try not to think of this too often, because I truly would like to forget it even happened.   But to make a long story short, while patiently waiting for a few of my tech stocks to get back up to their 1999 highs, I watched them drop until 2003 when I finally gave up all hope and locked in my nearly half-million dollars of losses.  (By the way, had I continued holding them through today, I wouldn't be any better off--they never recovered).  Even though the magnitude of her losses was much smaller, it is comforting to read Silicon Valley Blogger's reminiscing of similar blunders.

But thank goodness that happened to me while I still had a job and could recover from that lesson while still collecting paychecks.  Thank goodness I am NOT, just now, six weeks before retirement, learning that lesson.  Having experienced such market losses, we not only have spent the last five years building a solidly diversified portfolio, we have stockpiled three years of living expenses for retirement in CASH.  We will not be forced to liquidate at depressed values to purchase such mundane items as food and shelter.  Or worse yet, to postpone retirement!

At least there was a silver lining (a stroke of accidental diversification) during those dot-com years.  After agonizing and actually thinking it was a very foolish decision at the time, we did sell some of those high-fliers on their way down to purchase a vacation home.  Even with the recent fall in local real estate values, that chunk of change did a whole lot better than had we continued to hang on to those stocks until the bitter end.

I suppose if this market doesn't change its direction in the next three years, I'll have to start worrying about the "F" word (frugality), but that's a topic for a future post.

Comments

[Minerva]

Add to it a retirement in a down dollar. I was originally planning to spend more of my retirement time in Europe, but Bushiites and their insane (not to mention illegal) Iraq war stole about 40% of purchasing power (vis a vis euro) of those retirees that have their pensions, etc. in dollars.

[Cheryl]

Yeah, Europe is pretty much out of the question these days even to visit, never mind living there. Although, Europeans (those not dependent on US $$) are loving their buying power right now.

On Tuesday when the market was so low, I purchased a couple of stocks that pay dividends. I don't have much in a taxable stock account, it's more fun and games, and even though I had some losses, my gains have exceeded them.

My retirement money is in the federal government's TSP program where I have the max amount I can invested every pay period split between 3 index funds (S&P, Wilshire 5000 and Barclays EAFE). I've watched it go up and down, but mostly up. During times like this, I know that I am purchasing shares at a lower cost. I also contribute every pay period to a mutual fund in my Roth IRA.

It really is a crap shoot, though. Syd, you are very fortunate (and wise) to have 3 years living expenses saved up! And only 6 weeks to go, you must be very excited.

[Retired Syd]

Minerva:

And can you imagine the size of the economic stimulus plan that would have been available right now to our legislators if they simply had all the money from that war available to divide up among each American as a rebate? Talk about stimulating the economy!!!!!!!

Cheryl:

You're doing the right thing not panicking and taking advantage of buying on the dips--in the long run, you will be happy you did.

A commenter on Canadian Dream's blog suggested 5 years cash reserves and I began to get a little nervous. Tim (at same blog) put me at ease though with the brilliant idea that I could always pick up a little part-time job to help that cash last longer. So, no need to be nervous, just keep in mind ALL the options!

Retired Syd

P.S. (And yes, 5 weeks now and VERY excited!)

[The Digerati Life]

Fascinating. We're completely in the same boat. I'm planning to call it quits at my job in a few months. I also lost a ton during the dot com bust. :) Now your background has fascinated me!

[Retired Syd]

Aah, losing money during the dot-com era: misery loves company, huh?

As a Digerati Life subscriber, I have also been fascinated to read about your journey to retirement. Keep 'em coming!

RetiredSyd

[Trading Forex]

Perhaps this is not the perfect time to retire but you all seem like smart people who dared to think way ahead so for you there will always be a place under the sun- best of luck! And lets hope ti will brighten up very soon.