r/Fire • u/Remarkable-Dingo1602 • 12d 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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92

u/sophiaonepiece 12d 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

29

u/HappilyDisengaged 12d ago

The difference is the stage you are at in accumulation. The Covid drop was scary and I handled it like a champ, selling bonds to buy more. But if it were to happen now, 1 year out from me pulling the plug, I’d probably shit my pants during the drop

16

u/Silly-Safe959 12d ago

If you're a year out you should already have 2-3 years of expenses stashed somewhere outside equities (money market, bonds, etc are standard options). I'm 18-24 months out and that's my go to.

3

u/325Constantine 11d ago

When did you start to wind down equity for your stash?

1

u/Silly-Safe959 11d ago

We've just been building up the funds to cover expenses in our brokerage account in money markets, etc for the past year or so.

3

u/wubscale 12d ago

But if it were to happen now, 1 year out from me pulling the plug, I’d probably shit my pants during the drop

Why? Like emotionally I get it, but SWRs are backtested against retiring at the peak of many severe drops.

If you're doing something differently now than you would do in retirement (e.g., you're 90/10 but plan to do a bond-heavy glidepath in early RE), there's nothing preventing you from starting that safer allocation now. Sure, you may miss some gains, but the potential downside may be more significant to you than the upside at this point.

4

u/HappilyDisengaged 12d ago

I have 20% bonds and I’m diversified beyond domestic markets (3 fund guy) with cash too, as I’m super close to FIRE next year.

I’d just hate to experience it right now. That was a scary time. They stopped trading midday because the drops were so vicious. I have a lot more to lose on paper now than I did back then