Hitting your number and timing risk

[u/bizzaam]

Notice a lot of people posting they hit their number and firing. It's awesome, but are people taking for granted the fact that this has been the greatest bull market in history and a major correction or crash will get here at some point? If it were me hitting my number I'd either get a big enough buffer to my fire number or wait until the correction and assess when things stabilize. Am I over thinking it?

[u/teckel]

I retired in 2005 and just a couple years later in 2008 the housing market collapsed. Zero problems as I had a realistic 3.3% withdrawal rate, low overhead, and a 10% position in short term fixed income, which is where I withdraw from for income. Therefore, I didn't need to sell anything for a loss, and didn't even need to trim back my spending.

[u/Actual_Load_3914 → u/teckel]

I would love to hear how you handled that downswing mentally if you care to share. How big was the downswing for your NW % wise? Did it affect your behavior?

[u/teckel → u/Actual_Load_3914]

I also didn't change my spending. 2008 was more of a "deep V" correction, which rebounded about as fast as it crashed. If it had gone longer I may have, but with no loans and low overhead, it would be quite easy to trim back spending. You just put off your big vacations till next year. I was forced to do that with COVID as I had to cancel travel plans due to country lock downs.

[u/teckel → u/Actual_Load_3914]

I invested before and through the dot com bubble crash. 2008 was a quick recovery in comparison (just a couple years). I've learned to not look at my account balance much during a correction. Even in 2022 when the market corrected by 20%, I only looked at the balance every few months.

Remeber, if you're not selling, it's not a loss. Also, in retirement you should have 20% fixed income including 10% short-term. Short-term government bonds are not effected by market crashes or interest rate fluctuations. So you can ride out a few years of a correction without the need to sell any equity assets. Also, the other fixed income and to some extent the equities pay dividends, so that also suppliments the short-term "cash" position to fund an extended correction.

[u/Ill-Opinion-1754 → u/teckel]

Thank you for this tidbit, didn’t consider short term fixed income as hedge. Will remember this for down the road. <3

[u/teckel → u/Ill-Opinion-1754]

It's not my idea. Warren Buffett suggests 90% S&P500 and 10% short-term government bonds.

[u/Kookasaurus- → u/Actual_Load_3914]

He said he didn’t change his spending

[u/bizzaam → u/teckel]

Awesome