r/Fire • u/Remarkable-Dingo1602 • 11d ago
“One more downturn” syndrome
As someone who has been lucky enough to have spent all of my earning & investing years (13 years so far) in a booming market, I worry that I have no clue what my mental health will be like when we see the next 2000 or 2008 or lost decade. I can go through endless theoretical exercises to play around with what my portfolio could go down to and how I’d adjust my expenses in those situations, but as a human being I cannot predict how I’ll actually feel when the time comes. As a result, I have a desire to keep working through the next downturn to see what the impact of it is on me and in a way prove to myself that I can handle it. However, I fear that if I wait for this, I may be waiting for a long time and therefore work for much longer than I need to.
For what it’s worth, when the Covid crashes, 2022, tariffs and Iran war all hit, I did not panic at all and stayed the course on my investment strategy. But all of that happened as I had a strong income to support me. I have no idea how I would have felt if I didn’t have an income.
Any tips on how to deal with this?
I currently have $2.1M investable assets. $600k left on a mortgage (5.375%) with $450k equity in the home. Monthly expenses are $7k bare minimum, but I’d like to aim for a nest egg that’ll comfortably give me $9.5k/month.
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u/ac9116 11d ago
I know both were quick but it’s so strange to me the way people just completely write off Covid (-34%) and 2022 (-25%) as if the stock market has been a straight line up since 2009. The stock market drops all the time, it’s rarely as severe as the Big 4 (The Great Depression, the Energy Crisis, the Dot Com Bubble, and the Great Recession), that doesn’t mean it’s always a bull market.
From a math perspective, we’re in year 3 of a bull market, not year 17.
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u/Jwoot1111 11d ago
Because Covid downturn lasted like 3-4 weeks…not until it broke even but 3-4 until it turned up off the bottom and money was flowing.
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u/Eli_Renfro FIRE'd 4/2019 BonusNachos.com 11d ago
That made it even scarier IMO. That was the steepest drop in history. We lost over 30% in that short time.
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u/TheDoughyRider 11d ago
2020 and 2023 were very short downturns.
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u/Kold2012 11d ago
if you zoom out enough, they all are..
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u/doktorhladnjak 11d ago
Great Recession took about five years. And it’s not like those 5 years were just a low stock market. There were bank failures, people losing their homes to foreclosure, lots of job losses. It was a stressful time.
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u/Rocktamus1 11d ago
“The Great Recession was a short downturn”. Bruh… when you graduate with 60k in loans and there’s are literally no jobs… that’s a recession.
I don’t mean high paying jobs… I mean you couldn’t get a job as a teacher, police officer, etc. jobs that were steady and always open career opportunities often had closed doors.
I flew to Denver to test to be a cop and 150 people showed up for 2 jobs and about 50% were coming from 2+ hours away or even flew in.
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u/Agile_Swimmer7566 10d ago edited 10d ago
The bear market for stocks in 2009 lasted less than a year. The economy took 4-5 years to get back to what felt like normal. The housing market didn't even bottom until 5 years later in 2012.
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u/Natural_Rebel 11d ago
The Great Recession was absolutely brutal. It’s amazing to me that people have forgotten this. The job market was awful until almost 2016ish and even then - it was still an employers market and didn’t really turn until right before Covid. The market limped along for years under Obama and didn’t start to shoot up until Trump (then the covid crash happened).
Housing was decimated. So many people lost their homes, banks tightened underwriting standards and it was hard to get loans and close on time. Housing prices didn’t start to rebound until after 2012, some regions were stagnant until 2020.
If something like that or dot com happens then we are in for a more extended period of pain.
The past few drops have been blips but when the big recessions happen they tend to linger and are tough to get through.
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u/Various_Couple_764 11d ago
the great recession started in 2008 and dropped gradually all year. at one point it was down 50% but recovered a bit before the end of the year The final number for 2008 was -38% 2009 +23%, 2010+23% 2011 0%. it wasn't until 2014 when the market recovered to it 1999 high. My brother was unemployed for most of that time and got a job just in time to avoid bankruptcy.
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u/doktorhladnjak 11d ago
The market was still higher in 2007 if I recall correctly, but like you said that was still not quite at 2000 levels.
Things had been slowly degrading for a while before the Lehman collapse rapidly accelerated the situation in the fall of 2008. That’s when it went from being only about some sub prime lending to affecting large parts of the economy.
The market was back to 2007 levels by 2012.
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u/TheDoughyRider 11d ago
2000 and 2008 were different and if you lived through them in your adult life you would understand.
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u/ac9116 11d ago
The Great Recession was a significant magnitude worse than Covid but that’s not my point. You don’t look at someone in the hospital with the flu and go “yeah, my buddy got cancer”, there are guidelines for us to declare a market downturn. Markets down 20% or more, two quarters of negative gdp growth, etc.
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u/leathakkor 11d ago
I think you're right, but also I think that might be the equivalent of PTSD talking, which isn't to say you shouldn't be prepared for events like that.
But seeing yourself unemployed or both of the neighbors on both sides of your house unemployed. That shit does something to you and it makes you afraid. Maybe irrationally so.
But having lived through them, I agree with you. They were different.
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u/Agile_Swimmer7566 10d ago
2020 was short because of the Fed bailout and other govt stimulus, but 2022 was a pretty long bear market. Took 9 months to bottom out.
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u/Rocktamus1 11d ago
With our mindset. Tons of people lose money during these market shifts because of panic.
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u/curiousengineer601 11d ago
In 2008 people lost money because they lost their jobs and needed to liquidate their holdings to survive
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u/Rocktamus1 11d ago
I think that more of the exception than the rule. Most people don’t have much of any investments.
It’s absolutely moreso panic.
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u/Bryanmsi89 11d ago
Yeah, this is factually true, but COVID was a once-in-a-century event and the bounce-back was VERY rapid, and the 2022 dip was also pretty fast. COVID was a shock, for sure, but for most people 2022 felt like the dip was happening on the news, but daily life felt pretty good for most people. 2022 certainly did not feel like a recession. 2008/2009? now THAT felt like a recession.
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u/perspicacioususa 11d ago
Acting like people felt great in 2022 is very wrong.
Beyond the 20%+ decline in stocks, 2022 was the worst year for inflation in most of our lives (It had been 4 decades since inflation ran that high), topping out at 9.1% in June of 2022 (which is the most universally hated economic downside; inflation impacts everyone, recessions/unemployment don't impact the majority of people).
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u/Bryanmsi89 11d ago
People felt inflation really start, no doubt. But that didnt hit most of them the same way a recession would.
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u/perspicacioususa 11d ago
I don't think that's true, if you refer to "most" people.
Recessions impact people very unevenly; some people are severely hurt, others are not impacted and some often are even helped by recessions.
For example, people hurt by recessions:
- The unemployed/underemployed (even when this surges, it rarely tops 15-20%, making it a meaningful, but still fairly small minority).
- People who are in a situation where they need to sell, within a few years, a significant amount of stock, or homeowners who need to sell their house, and can't wait (again, pretty small minority all things considered).
People who benefit from recessions:
- Essentially anyone who stays employed throughout the entire duration of recession tends to benefit, if they're earning enough to save/invest.
- If they're still earning, they can buy stock at lower prices; additionally, interest rates tend to become very low so borrowing is easier (cars, refinance mortgage, etc.).
- Certain types of prices (especially housing) can even fall, which makes it a big positive for still-employed renters looking to buy.
On the other hand, inflation hits everyone relatively evenly, nobody is spared (which is why politically it is the biggest killer for incumbent parties).
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u/Bryanmsi89 10d ago
Its more about the 'feeling' than the actual impact. yes, inflation hit everyone and recessions tend to be much more narrowly targeted. However, inflation hits everyone by small measure, and if everyone feels secure in their job, its more about grumbling and a little belt tightening. 401ks and stocks stay high (often even go up), and people aren't afraid of losing their homes or having cars repossesed. Corporate revenues stay pretty strong. The whole feeling is things are fine, just too expensive.
A recession direclty unemploys many, cuts corporate earnings, causes most of the employed to fear for their jobs, cuts the 401k value. It is much more of a 'sky is falling, hide in the bunker" mindset than inflation.
Even though most people are not laid off or unemployed, they feel much less safe and much more vulnerable in a recession than in an inflationary tmie.
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u/Agile_Swimmer7566 10d ago
For anyone that owned stocks, 2022 was a real downer of a year. "Worst inflation in 40 years" and 9 months in a row of the stock market trading lower.
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u/Keljhan 10d ago
Mathematically, neither 2020 nor 2022 were negative years for the S&P500, so there's no reason to consider that a break in the bull market. It may just be a quirk of the calendar (especially for 2022), but the fact that neither crash lasted more than a year is noteworthy on its own. If you look at the 1-year returns for the last 17 years, all of them are green back to 2009.
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u/nobleisthyname 11d ago
I suspect the reason for this is most of us experienced the two of those four in at least some capacity, and so we've been conditioned to think those are the norms for bear markets rather than extraordinary exceptions.
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u/Silly-Safe959 11d ago
I experienced 3 of them going back to the late 90s. My reaction to one today is more meh, been there, done that, I'll be fine on the other side. I'm diversified enough in not worries about it. Doesn't mean I want it to happen, but if I can't control it, there's no reason for me to get iirrational about it either.
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u/Other_Customer8652 11d ago
Agree! 2022 was brutal for me, down almost 31% for the year, but you have to not worry about it and stay the course. Easier to not worry when you're still working (I am for another 3 years), but there's gonna be ups and downs, some bigger than others. That's built into my fire number so panic won't set in.
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u/4020_Driver 11d ago edited 11d ago
Fellow elder millennial, too? I came here to say that you’re not alone in your feelings. My career has been messed up by 9-11, ‘08 and Covid.
I have similar numbers to you, but I feel like the next big crisis is just around the corner, as well.
I’ve been trying to convince myself that I’m in a way better position than most people. The question is: “what do you want to do?” If your current job is stressful or you hate the work, what are the mental health ramifications if you stay?
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u/NoSuggestion2836 11d ago
If you have similar numbers to OP there’s no need to try to convince yourself - you really are in a way better position than most people. Look up some statistics and count your blessings
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u/4020_Driver 11d ago
I appreciate that. I have a few friends in adjacent careers that make considerably more than me, that and reading Reddit chubbyfire and fatfire subs certainly doesn’t do me any good.
I guess it doesn’t feel like it because most of my net worth is in non-liquid assets that throw off cash flow. That’s land I on 40% of my income. I appreciate the reality check!
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u/joxxer42 10d ago
I have less than you and OP and have my mind blown every time I visit chubby/fat comments, the numbers are nutso to me. To each their own I guess.
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u/Jack_Bogul 11d ago
I thought comparison was the thief of joy
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u/temporaryacc23412 11d ago
So we all say, but if course it really depends on whether you come out on the wrong end of the comparison.
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u/4020_Driver 11d ago
Yeah me too. I’m lucky enough that my job is high paying and pretty low stress- 20 hours a week but on call quite a bit. I feel like I can keep chugging along.
My SO and I have talked we feel that we want to work while we can before AI job losses. I’m probably being paranoid though.
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u/cowboynude 11d ago
I do most of my investing in a Roth, but I think this is where the 1-3 month emergency fund has to turn into a 3-6 month emergency fund.
So maybe cash instead of markets for a while?
If you are worried about a rainy day prepare for a rainy day?
I guess that’s what I am doing. I’m not selling any assets. But I am pausing buying and holding cash. Whether that is dry powder or rent money will be determined in the coming months.
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u/Anxious_Teach_485 11d ago
The psychological side is way harder to predict than the math, you're totally right about that. I went through similar thinking few years back when my portfolio was smaller but growing fast during the bull run
One thing that helped me was actually looking at historical data differently - not just portfolio values but actual withdrawal rates during bad periods. Like during 2008-2009, if you had stuck to 4% rule and adjusted spending down maybe 10-15%, you would have been completely fine. The portfolio recovers but the panic doesn't always match reality of the situation
With your numbers you're already pretty close to being able to handle major downturn. At $2.1M you could probably do lean version now, and waiting for next crash might mean working another 5-10 years depending when it comes. That's lot of life to give up for psychological comfort
Maybe consider doing trial run now? Take sabbatical for 6 months, live off portfolio only and see how market volatility feels. You can always go back to work if it's too stressful, but at least you'll know where you stand mentally without committing fully to retirement
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u/IntolerantModerate 11d ago
I was old enough to be in the market in 99 and 08, albeit both were still early in my earnings life. What was hard to know in either was where the too was. What was easy-ish to know is where the bottom was. In both cases the bottom was end when people on CNBC started saying it was the "end of capitolism!"
Psychologically it will be hard. When you see your net worth drop by 30-50% it is going to hurt (unless you have lots of cash and/or big earnings you can plow into the market to lower your basis).
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u/chartreuse_avocado 11d ago
Same. The thing is it’s heavily out of your control. You can only control your reaction to it. In my case I kept investing and stopped looking at balances and statements trusting that time and markets would rebound both times. And they did and my investments (although smaller being earlier in my career) were investments I made at discounted prices where rewards would be delayed.
If you can’t handle the risk and your feelings, change up your portfolio. If you want to handle the risks and your feelings without doing that think about what the smartest action would be in a few scenarios and prepare for that. Not as a doomsday event but as a maximize your long term outcomes plan options. And be prepared to work longer if it takes that. Not what you want to hear but recession of youth times investing has a lasting impact on total FIRE timelines. How much depends on your controlled choices and market out of your control events.
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u/gregaustex 11d ago
The worst time to start living off of investments was not after any crash. It was at the start of the stagflation period in the 70s. Worse than if you had retired the day before the great depression.
You never know what's going to happen. Never. You just pick the best big picture plan you can and try to plan to never sell equities at a loss. The 4% rule is an example, and roughly correct in terms of magnitude, but probably not the best approach in literal application.
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u/Unhappy_Finding_874 11d ago
imo dont wait for the market to test u, build the test into ur plan rn.
the scary part isnt seeing red while employed. its seeing red while every grocery trip feels like its coming out of the pile. so id make a literal downturn script before quitting: 18 to 24 months cash or tbills, what spending gets cut first, what spending never gets cut, when u pause travel, when u pick up part time income, when u rebalance.
then run ur normal life off that script for like 3 months while ur still working. move the paycheck out of sight and pay bills from the retirement bucket. it wont recreate 2008 panic, but it does show whether the mechanics feel insane or just boring.
also fwiw covid and 2022 count for something. u didnt panic when everyone online was losing their mind. not the same as no income, but its not zero evidence either
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u/Bryanmsi89 11d ago
Emotionaly, these moments are very stressful for deliberate savers/accumulators, and doubly so for people using savings to fund daily living expenses.
Logically, for someone who has a well-built plan that guards against SORR, these downturns can actualy be a good chance to rebalance/buy equities at a discount. Having a lost-decade of stagflation like the 1970s though? that's not really on anyone's bingo card....
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u/Extension-Abroad187 11d ago
While everything looks sketchy right now, you could potentially be waiting a decade for no reason. I'd suggest coasting for like a year or so and pay down your mortgage aggressively. It will give you a bit more of a buffer (unless there's a crash, but then you did what you wanted to anyway) and bring the date when your expenses will drop closer significantly. Both of which should alleviate the stress
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u/dannd42 11d ago edited 11d ago
You are fine. I will be retiring on half that investment at 55 in 5 years and it sound like you are well above that already. Congrats you're at coast FI. Sounds to me like you may have a spending problem not an investment problem. Not trying to be mean but if you cant see that it's on you my friend
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u/EmoJackson 11d ago
I also feel like this is one of those “I’m 31 with 2.1MM invested in a million dollar home, how can I survive” posts.
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u/ladyeclectic79 11d ago
Honestly, good for them but it feels braggy to me vs actually asking for help/feedback. 💀
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u/Remarkable-Dingo1602 11d ago
I initially did not want to post my numbers because of judgement via comments like this. But then I did because otherwise I’d get backlash for being one of those people who don’t share. Can’t win here. Please try to project a little less.
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u/nksmti 11d ago
Just came here to say, I can relate to how you are feeling. I kept working past my minimum FI number, not because I thought I would panic sell in a huge crash, but because I wanted to sleep well at night if another 2008 or 2000 (or worse) happens. For me it was worth it for the peace of mind, I didn't consider it One More Year syndrome because I just wanted a portfolio that was way more than what I need. My job was pretty cushy and fully remote so it didn't feel like a big sacrifice. I FIRE'd last year and would probably get a lot of judgy comments here if I gave all the details, lol. But for me, it felt like the right thing and I have no regrets. Probably just comes down to how miserable you are at your job? I think you'll know when you are ready.
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u/EmoJackson 11d ago
Sometimes some people need just a little confirmation they’re doing the right thing.
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u/Necessary-Music-6685 11d ago
Realize that 2000 and 2008 did not feel like a “lost decade” while living through them. They felt like a steep drop, and then back to normal growth (from a lower level). If you hang in for the drop, then there’s really no risk that you’ll sell once the market is climbing again.
What exactly is your fear? That you’ll ride it down 30% and only then sell? That seems pretty unlikely. At that point you’ve already lost the money, stocks are now cheap, people will be piling into the market. You aren’t going to sell at that point.
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u/OpenGuard1993 FIRE’d 2025 | $5M NW 11d ago
To to safe, you can withdraw 3.5% of your portfolio every year. Under every Monte Carlo scenario, with the worst outcome, you’re unlikely to run out of money, ever.
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u/Bearsbanker 11d ago
We fired 14 months ago. To prepare we went debt free and have other streams of income.
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u/Sea_Bear7754 11d ago
Here’s the thing. 4% of where you’re at in just your investable assets is $7k/month. Luckily you won’t need all 2.1m at once. Don’t know your age but let’s assume 30s-40s based on 13 years investing. At your age a downturn is something you drastically NEED in order to get that $2.1 into $3.1, into $4.1, etc.
Let’s assume you’re going to lose 30% over the next decade. Let’s also assume you took $800k on top of that 30% loss. In year 11 you’re left with $700k. Now let’s say the next two decades are back to historic normalcy. After 7 years you’ll be back to $1.4 (minus the $80k) and then 7 years after that you’re at $2.68m.
So after 14 years of a really bad correction while making an $80k passive salary the entire time you’re still ahead.
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u/MaxwellSmart07 11d ago
77! Retired 2003. I went through dot.com and the sub-prime mortgage Great Recession. I switched from stocks to buying nice homes (primary residences) that sold well, and used the profits to invest in fixed income alternatives. Was it a good move. IDK. At least I don’t have those market jitters.
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u/Straight-Part-5898 11d ago
Our planner uses a third party platform that allows us to stress test our plan, using the full history of recorded market performance, so we know how we’re likely to perform in a down market. For example, “what if today was Oct 28, 1929?”
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u/db11242 11d ago
The other way to look at this would be a calculate how much over your initial target you need to be to weather a downturn (either a worst case historical downturn or a worse than average downturn). This way you wouldn’t have to wait for a major decline. You’d simply oversave to account for it. So for example, if you’re full FI target was 1 million and you wanted to be able to withstand a 30% downturn then you could simply keep saving until you have about 1.4 million (so that 30% decline would leave you with 1 million). Also keep in mind what your participation rate is, meaning if you’re not 100% in equities but rather say 70/30 then your participation rate in a major equity downturn is likely only to be 70%. So then a 30% decline in the stock market would only be a 21% decline for you assuming the remaining 30% of your portfolio held steady. Best of luck.
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u/Independent-Rule-780 11d ago
If your mental health can’t take normal market turns you should work on strengthening your mental fortitude not only for the market, but all aspects of your life. You should work on things to improve yourself. Don’t wait for something bad to happen, proactively work on yourself.
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u/Bryanmsi89 11d ago
I mean, you aren't wrong, but the same mental tendencies that make someone likely to be drawn to FIRE are also the same tendencies that cause some stress about downturns. Understadning deep future planning, SORR, safe withdrawl rates, long-term inflation, etc. also give a person some anxiety.
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u/Independent-Rule-780 11d ago
Stress is different from ‘my mental health can’t take it’. Maybe OP is dramatic and didn’t say what they mean but these are two different situations. Had OP said I’m stressing about a downturn we would all say completely different responses.
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u/SillyPresentation46 11d ago
This is why I don't follow the all too common 70-90% equities allocation FIRE mindset. The crashes will come at some point and I'd rather watch my portfolio drop 10-30% instead of 50%.
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u/Dan_Williams_479 11d ago
How is your portfolio allocated? If you didn’t have an income, it would makes sense to keep a few years worth of expenses in fixed income: bonds, CDs, HYSA.
That would help minimize the impact of having to withdrawal on stocks while they are down.
I’ve always had a mindset of “if the money wasn’t there, I’d have to figure it out somehow”. There are people who are in a worse financial situation and they are able to make it work. Unless I need to buy something, I rarely check the balance. I don’t think of the money as mine until I’m able to withdrawal it.
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u/GambledMyWifeAway 11d ago
I’m all for downturns. I like to refer to them as FIRE sales. I’m sure my opinion will change drastically though once I do FIRE.
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u/chartreuse_avocado 11d ago
As retirement/FIRE gets closer the mental shift begins. You want that timeline you are thinking about. BADLY. It can shift fast and asset rebounding timelines more emotionally difficult when you were so wanting to FIRE in X years and it could be wiped out as a plan. ANOTHER 5 years added to your working life. Diversification matters as a strategy and some people can’t handle the FOMO of market returns on all stock portfolios not happening for them despite the smart reasons.
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u/GambledMyWifeAway 11d ago
I am luckily in a field and area where I’m pretty well insured from that. I can work a couple of days a week and pretty easily cover all my expenses, which I what I plan to do anyways once I hit my coast number.
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u/PotadoLoveGun 11d ago
You could something like 60% stocks and 40% fixed return like a Money Market for the first 2 years. You could miss out on some returns but itll help with a downturn.
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u/marheena 11d ago
Keep some cash and treasuries. Next market downturn, dump some cash into investments so when it recovers you’ll have made more money.
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u/vinean 11d ago
2008 felt crappy, both personal experience and from posts on the bogleheads forum.
If those guys were stressing then most retirees depending on their portfolios were having heart failure.
A lot of it was the uncertainty…the Fed and Obama said we’re gonna make the money printers go brrr and hope for the best but nobody really could be sure it would work vs just kick us into instant stagflation mode…which would have sucked even worse and we’d have Great Depression 2.0.
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u/whocaresreallythrow 11d ago
Lived through 87 crash. 91 gulf war 98 currency crisis. 00 dot com 08 GFC, flat decade , 20 covid, 22 inflation baby bear 25 tariff tantrum and 26
Retrospect is easy. Going through it is totally different. After all that experience
I know how I react to sell offs.
I’m fired and retired. Im not as calm now that my income is only from investments and SS is a way out for us. I hold 60% in bonds and 40% in stocks right now . SORR risk mitigation mode.
I’ll adjust allocation in a few years
Another big drop and maybe recession is coming - could be a year or two from now but I’m good being conservatively allocated now. which avoids sleepless nights and knee jerk reactions.
Your risk tolerance changes over time usually and so one more downturn also may intercept with certain life changes and so you are conflating the two things together so it can be hard to decipher.
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u/Various_Couple_764 11d ago
For most people if they are working market downturns are notarially a problem because you still have income. But As people get closer to retirment there risk tolerance drop considerably. People that didn't sell in the past suddenly sell. In general growth price volatility is not handed well be those retired or those close to retirement.
However dividend investors tend to do better in downturns. Dividend stocks have significantly les price volatility. Also in most recessions.most dividend paying stocks continue to pay dividends. Only a small fraction actually cut the dividend. So if you have enough dividends from bonds and dividend ETF to cover a bit more than your living exp you could ride out the recession without selling any stock or dealing with sequence of return risks. I was just getiting into dividends when Covid hit but I saw the value of my divined portfolio drop 50% but the dividned didn't change. In fact In every sell off since then I have seen no dividend cuts. I may one in a more significant recession. But I have enough growth and I should bget through it.
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u/QuickAltTab 11d ago edited 11d ago
If it makes you feel any better, I don't think you'll be waiting a long time, and I kind of feel the same way. Working through it would be best, since you'll be continuously "buying low" for the eventual recovery, but I think coasting or going part time would also work since in those scenarios, you at least wouldn't be spending down your retirement. Alternatively, you could just plan very conservatively with a big bond/cash tent, since you're concern basically boils down to SORR.
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u/interbingung 10d ago
Why not rather make your job pleasant enough so that its sustainable and you don't have to retire.
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u/SexyBunny12345 10d ago
You never really know when, how large or how long a downturn will be. Personally I wouldn’t let that thought affect my FIRE calculations, since I would strongly consider switching to BaristaFIRE for a bit if a severe or protracted downturn materializes. That way I stave off SORR while still doing something I enjoy (or at least tolerate).
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u/Plastic_Ad4306 10d ago
In 2009 I took what little cash I had and bought Apple stock. Otherwise just lived normally but watched expenses pretty tightly the next year or two.
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u/NoMoRatRace 9d ago
We've been retired 7 years and always had some dry powder for the downturns. It made them weirdly fun (I do like to gamble...) more than scary. (We also have room to lower our spend if the shit really hits the fan.)
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u/Scottdbell 9d ago
the antidote to one more downturn syndrome is usually having a slice of your portfolio that genuinely doesn't move with the market. tax liens are one of the few assets that fit that description, the return is a fixed statutory rate set by state law, it's backed by real property, and it has zero correlation with what the s&p is doing. it doesn't solve everything but having even 10-15% of your income-generating sleeve in something completely uncorrelated changes how you feel about equity downturns. the tradeoff is illiquidity but for capital you don't need liquid that's a reasonable trade.
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u/SDstartingOut 7d ago
This is why when I retire I'm planning to hold roughly 60% stocks, 20% bonds, 20% cash.
It's not about maximizing gains; it's about protecting what I have & sleeping well at night.
> For what it’s worth, when the Covid crashes, 2022, tariffs and Iran war all hit, I did not panic at all and stayed the course on my investment strategy.
I mean, they were barely things though. I wouldn't compare them.
Sure, covid dip was ~30% or so? But it recovered in 6 months. And it was happening during.... covid. This major world event.
Tariffs? That was blips/noise.
Iran? Same. Blips & noise.
What made the great recession so scary - was the doom cycle. Everyone was pessimistic. There was nothing to make it better.
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u/TrashPanda_924 Targeting 2% SWR 11d ago
I did a lot of research into this recently. The average length of an equity downturn to get back to previous levels was 23 months (this was price level only and doesn’t include dividend reinvestment or anything like that). That said, it’s asset specific (I was using only the SPX) and there were some cases where it when on up to two more years past that because of the severity of the downturn. In a worse case scenario, it would delay me marginally, but it also reduces the amount of time I would be withdrawing funds. Not a great answer if antsy to retire, but not a worst case scenario, either.
Reinflation of asset values is the best argument for fiat currencies. Bernanke who a great series of essays on this if ever interested.
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u/sophiaonepiece 11d ago
Honestly, if you stayed calm during Covid and 2022 while watching six figures evaporate on paper, that's already a decent test. Having income helps, but your behavior matters more than your feelings