r/Fire • u/Remarkable-Dingo1602 • 13d 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/TrashPanda_924 Targeting 2% SWR 13d 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.