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August 02, 2017


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Mr. Freaky Frugal

I retired in 2012 and have been riding the bull market every since. If you told me then that we still be in a bull market now, I would have said you're dreaming.

But now I realize this time is different! Wait, where have I heard that phrase before? :)


I retired in 2013 and am happy with the decision. We lived within our means, saved intelligently and it has literally and figuratively paid off.


Like you, we retired early in mid-2008. And like you, we had some sleepless nights.

A couple of points I'd like to make. Your point 1 is valid as long as the portfolio has at least 40-70% in equities (according to William Bengen's study). These studies were done using indexes (like the S&P500 and the Bond Index) so no portfolio expenses were taken into account. If you have expensive Mutual Funds or pay a financial advisor, those expenses have to be added to your annual expense. I think these finer, but no less important, points are often missed when talking about having 25x your annual expenses.

Secondly, these studies assume that you re-balance back to your original allocation (stocks / bonds) each year. If you do this, you will rarely have to sell stock if the market goes down a lot. Your stock will be much lower than your allocation, so you'll have to sell bonds to fund your expenses and BUY stock to re-balance your portfolio.

Good to see you back in the blogosphere.


Welcome back Sydney! Glad to see you here again!
I went back tomorrow post about knowing when you've found the right asset allocation. You wrote... "As some of you that have been with me since the beginning of my retirement know, I retired in March of 2008, right as the market was melting down and we were entering the worst recession in my lifetime. I wrote several posts about my declining nest egg over that first year of my retirement. But I never panicked. I just hung on and kept rebalancing my portfolio to it’s 70/30 stock to fixed income ratio over the next five years.
And it took almost that long to get back to where I started when I retired."
I took that to mean you only had to wait about four years to get your money back. Was it really seven, according to your newest post?
I want to make sure I get this right!

Tom Sightings

I got 28 for #1, so I squeak by; but only 5.5 for #2, so maybe I'd better get a little more conservative. My answer for #3 is 20 -- dunno how that measures up. But I'm prepared to cut back some if the economy crashes. I don't need quite so many vacations or restaurant dinners. Anyway, that graph seems kinda scary -- doesn't it? -- and yet it looked scary a year or two ago, too, and still the market goes up. So go figure.


I meant to write... "I went back to your old post... " Not, "I went back tomorrow post..." Grr...


For anyone interested we find an IPS (investment policy statement) valuable. Ours is quite simple. Five sentences, including our investment allocation (generally speaking, 50/50). Significantly, we can't change the IPS (or the allocations) unless we commit to do so and then have a three month waiting period --- this keeps the two main gremlins of good investing at bay -- greed and fear.

Funny thing .... I watched our investments quite carefully when targeting for "early retirement." Then, when I transitioned at age 53 (five years ago), the numbers barely registered on my mental radar screen. Sure, it's much easier to ignore the portfolio and just dig into life when you know the numbers are heading north, but our allocation is such that we should sleep easy when they head south (altough I know from investing since college in the late 70s that heading south -- and sometime heading that way rather rapidly -- isn't much fun.

Anyway, just wanted to offer that up to the group in case anyone might also find an IPS valuable.

Best regards.

p.s. to Syd and Doug ..... our "family" allocation used to be 5 in Nebraska .... now, with and expanding family and another one heading to SF we have a two way tie for second place as we are at 2 Nebraska -- 3 Texas -- 2 California, haha ...

Retired Syd

Sorry for the delay in responding to all your great comments. Wednesday is piano lesson and jazz singing class, so between cramming for lessons and going to lessons, Wednesdays are kind of like a full-time job.

Rick: That is a great suggestion. And the truth is, I have an IPS but never realized it. So now I will have to write a blog post about that too! (Maybe those California kids can convert the rest of you at some point . . .)

Angela: You are right, while it took the stock market seven years to get back to it's 2007 levels, it took me four years of retirement (which really was 5 years from the 2007 highs to get back to those levels). I attribute that to two factors. One is that to keep my portfolio in its 60/40 balance I had to BUY stock funds over those four years, which means as the market was going up, I was getting gains on shares I purchased at large discounts (one of the inherent benefits of rebalancing). The second, and it shouldn't go unmentioned, is that I had a part-time job for two of those years. While the job didn't really add to the nest egg, it did prevent us from drawing down on that nest egg over those years of my working. So that's probably why I personally experienced a quicker climb out of the hole.

Tom: Yes, that's why I posted that graph--worth 1,00 words huh? As a point of comparison, my number went from 30 to 25 that first year but is now at 35 after this run-up. So while it will fluctuate over the years, I encourage looking at it just as a means of figuring out your own tolerance for risk before you actually live through such a thing. Interestingly, my tolerance for risk is actually going DOWN as my number goes up. I figure at higher levels, I don't have to chase high returns, I will do ok with a more conservative allocation going forward. More about that in a future post . . .

Cedy: Excellent points (although if memory serves me correctly, I think the lowest stock allocation that worked was a 50% under Bengen's research). There are a few different schools of thought on when to re-balance, I do it more frequently than annually when the market runs up or down so quickly. Basically any time my allocation exceeds a percentage point off kilter. But many people don't find this exercise fun, annually is probably enough. Remember I was an accountant, so some of us have a warped sense of fun!

Mr. Freaky and mwr: Congratulations on your retirements. This is an especially good exercise for you both because you haven't been retired during a recession yet. It's been steady UP since 2012 and 13. Your timing was better than mine!


When I early retired in 1999, rather unexpectedly, my nest egg was pretty much all in stocks, save for some emergency cash and the equity in my house. I put together a retirement budget and spreadsheet that showed me having enough money to last until age 65 using very conservative projections. Since I could live comfortably on Social Security alone, that was good enough to take the gamble. I then sold a chunk of my stocks and bought TIPS, which were little understood in those days and paid 3.7% plus inflation. That, plus long experience with stock market fluctuations, allowed me to weather the 2000 and 2008 bear markets without difficulty. My frustration with the 2008 bear market was that I didn't have enough cash to be able to buy in a big way when stocks were "on sale" and everyone else was panicking, but I did buy some shares of GE at $12-$13 in Feb 2009 just so I could feel as if I was taking SOME advantage of the bear market. It is a different sort of mindset than having sleepless nights!

I do try to sell into stock market rallies to keep several years of cash on hand in case the market goes down. I also have Series I Savings Bonds, now worth more than two years of living expenses, to serve as my emergency reserve, although they are at such high interest rates I'd really not like to sell them before they mature.

Now, eighteen years later, my rather small portfolio is worth more than it was back when I started, despite all those years of living on it, so my projections back in 1999 really did turn out to be conservative. I'm holding out on taking Social Security until age 70, at which point I would get more than I live on now, by a lot — it helps to be thrifty. So far so good.

The hope is that I can keep my nest egg growing after age 70 and, perhaps, have enough to fund assisted living should it be necessary. But that sort of thing is crazy expensive, as I've found out from the recent experience of my parents, so I don't know if I can pull it off. Perhaps I will be lucky and croak suddenly, as opposed to needing a care community for many years. That remains to be seen. Having always been single, I don't have a spouse or children to help out (or hinder, as the case may be).

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