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October 17, 2008

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Philip Brewer

I was telling some friends just last week, "I'm sure glad I'm not just about to retire!" (These friends know that I semi-retired last year, when the site where I worked got closed down.)

Yep, it'd be hard to make the decision to retire at this point. Like you, I'm glad I've already crossed that bridge.

Super Saver

Syd,

Darn, you pre-empted me:-) I was just starting the write a post with the same theme.

Good thing, the conditions last year were much more favorable. I agree, this year would have been harder to make an early retirement move.

Retired Syd

Super Saver:

Write that post! I would love to hear another perspective on it.

I think a lot of us bloggers are thinking about the same stuff these days, I'm reading a bunch of posts on topics I've been thinking about lately. At least you know there will be others interested to read it!

RetiredAt47

Oh my gosh, I've been thinking and talking to friends about the very same thing. If the economy/stock market had taken this turn before I left my job, I know I wouldn't have had the guts to retire. But now that it is what it is, I will just make it work. So, if it had to happen, I'm actually glad it waited until after I left the job (I can't believe I'm saying this...).

claire

You have 2 years living expenses in cash. Thats nothing. The problem is that the longer you spend out of the workforce when your a professional or a former professional the more difficult it is to get back in. Thats the real problem. Some people think that if they have to they can supplement their income with a mac job - really? How easy do you think it is for a former accountant/lawyer to get a Mac job?

Retired Syd

Retired at 47: I know exactly what you are saying--and I feel exactly the same!

Ray

2 years of living expenses in cash--I'm working towards that. The question is whether the money in matches or exceeds the money out? Because I'm assuming this 2 years of living expenses is meant for emergency and you're not supposed to touch that?

Retired Syd

@Ray and @ Claire: So the deal is, when I retired I had 35 times my annual expenses in my retirement nest egg (which, with earnings after inflation and taxes, should last me 50 years--see earlier post "How Much Money Do You Need to Retire).

I put 3 years of it into cash before I retired so that in the unfortunate (and, it turns out ACTUAL) situation that the stock market drops when I retire, I would not be forced to sell stocks at very low prices to live on. I figured, over the first 3 years, I could look for opportunities to liquidate selected appreciated assets, as needed, so that I could always have about 1-3 years' living expenses very liquid.

Whether I will look back and wish it were 4-5 years of cash stashed, only time will tell. But since I have a very diversified portfolio, I'm hoping that there will be at least one asset class that might make sense to liquidate over the coming years to replenish the cash to live on.

The problem with having too much cash stashed is that I cannot make the returns necessary to last 50 years if too much of it is in an asset that doesn't pay that well. (Of course the stock market hasn't been "paying well" at all!) But hopefully over the course of 50 years, we will actually see some gains!

You can probably guess, the money "coming in" is not matching the money "going out". Having 35 times your expenses means a 3% "withdrawal rate." With the market having gone down about 26%, you can see the problem!

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