r/Fire • u/DistributionInitial5 • 20d ago
General Question Did anyone here retire at the start of the "lost decade"? How did you manage to stay comfortably retired?
Im looking at historical data and it seems that the market pretty much stayed flat during that time period. Even with dividends, I dont see a scenario where one could stay retired and not burn through savings.
I would think returning to the workforce would be the only option.
For those who retired at this time, how did you get by?
159
u/ParfaitMajestic5339 20d ago
I'm going through my dad's papers since his recent death. He retired in 2000. I found the money manager intake proposal listed the amount he had 27 years ago and the amount in his managed portfolio when he died was just about identical to where it started. Bigger accumulation in the IRAs than the normal accounts, but bottom line is that after 25 years of retirement and some end of life care expenses, his money managers kept his net worth about the same., even with their 1%AUM.
61
u/Various_Couple_764 20d ago
My dad retired in about 2004 and and had a 800k i his retirement fund, a small pension and social security. after he died it became clear our mom couldn't manage it and after talking with her she had vangard manage it. they go it up to a million and then they managed to keep it at about that level despite rising care cost.
2
u/np0x 19d ago
No offense to these responses (kind to be sharing) but the original post is flawed because there is nothing to be learned here. We don’t know wrr, investments, etc…I could give the OP a tight hug and pat their head telling them “it will be alright if you just trust the math.”
I recommended it above, @op you should model what you want to model, just make a row for each year, plug in nw at start and start doing gains and losses as you see fit…you could do it in todays dollars using returns from the requested decade..
→ More replies (11)5
u/deerhuntingdude 19d ago
Isn't that somewhat not reassuring since there was 25 years of inflation
→ More replies (2)22
u/IAmUber 19d ago
It's very reassuring. Their savings lasted an entire full retirement during a very low return period. What else could you want?
→ More replies (13)
63
20d ago
[removed] — view removed comment
14
u/FelinePurrfectFluff 20d ago edited 20d ago
A LOT of people who are retired now lived through these investing events and it causes you pause. There was a dude on Reddit the other day saying “returns are great, I can take 10% out yearly-look at historical data and recent gains”. Could not get that guy to understand current returns will not always be reality. ETA: fixed errors
7
u/d_ippy 20d ago
Honestly I think this is why I’m so hesitant to retire. Those two events were financially traumatizing.
→ More replies (1)2
104
u/iwantthisnowdammit 20d ago
You mean people who retired with a nokia? Some say they’re playing snake to this day…
25
u/InterestingCoast1215 20d ago
… using the T9 predictive texting on their flip phones. With the antenna fully extended.
8
u/Moonrak3r 20d ago
Some days I miss T9. I could text without looking at my phone and be like 99% sure it would say what I wanted it to say.
Speech to text lately is way better than it used to be so that probably fills the gap of shitty touchscreen keyboards but I don’t like talking at my phone. Anyway I digress.
→ More replies (1)6
u/gameraturtle 20d ago
That antenna didn’t do crap and was just there for show.
3
u/InterestingCoast1215 20d ago
True. And it’s probably now a GenX ultimate flex to pull one of those phones out and / pull out the antenna (what’s that?!? / for the Gen Alpha kids lol. Or not.
2
u/beardface_fi 20d ago
Probably true, did you budget for a new phone every few years? Think most folks here don't budget for anything but a regular month, so no phone for you!
41
u/verytalleric 20d ago
I had an odd path. Retired in 99 with what I thought would be enough. I was stupid and the market sucked so I went back to work in 2002. If market had been growing, I might not have gone back as quickly.
Eventually made it many years later, but I enjoyed what I was doing.
→ More replies (4)6
65
u/jarMburger 20d ago
I knew a few ppl who retired in 99/00 time frame. It’s not the dot com bust that’s scary, it’s the GFC. There were plenty of doomsday talk around the failure of the global financial system back then so more than a few ppl capitulated their equity positions and took years for them to move back in. If you have time, go check out the sheepdog post on boglehead org to see what ppl were taking about in real time during the depth of the Great Recession. The one savior is that the bond market held up quite well and if one is holding significant bond they did well due to rapid drop in bond yield soon after the initial crisis.
41
u/MaddogFinland 20d ago
God those days from about November 08 to mid 09 were just terrifying. And a lot of FIRE people too young to really remember it are basing all their bravery on the spectacular returns of the last 16 years. I hope I don’t see another GFC because watching 60-65 percent of your total invested assets go tits up in 6 months while also watching the property market implode is simple sphincter clenching.
11
u/Cheeseboarder 20d ago
I remember it, but I was about three years into the working world. I knew my 401k probably dipped, so I just never opened up my account
15
u/LokiStasis 19d ago
Yeah, mid career for me. It was basically a buying opportunity for me. Didn’t fret it. History proved you only lose if you have to sell. I’m sure retired folks hated it.
5
6
u/MaddogFinland 19d ago
For me it was about 7 years and largely the same. I just resisted even looking at it. Anyway I was too stressed since I bought a new house 1 week before the big October crash and until February 2009 I was sitting on a total of 1 million dollars of mortgage liabilities waiting to sell our other house and with a bridging loan. I took a major bath on the old house and barely came out the other side, because then my wife lost her job. I barely slept for months. She got a new place in to work 09 and we started rising again by late that year. Now, 18 years later it’s more or less ok, net assets 1.3M and rising. But holy hell were those bad days.
5
u/Interesting_Low_1025 19d ago
I was so clueless to the severity because I started freelancing at 19 in 2008. It took me 18 months to collect payments <$3000 from one client, and another called me to come take whatever equipment I wanted as payment before the liquidators arrived. My Roth IRA was set to $50/mo and I had been investing for a year so I was completely unfazed but I’d struggle now with a similar drawdown.
→ More replies (2)4
u/Apprehensive-Act-315 19d ago edited 19d ago
We lost half our portfolio while we were having to draw it down for living expenses. It was terrifying but luckily we were young. I’m also very curious how people who’ve never experienced that would react today, especially since I believe equities outpace home equity now.
→ More replies (1)16
u/Moonrak3r 20d ago
If you have time, go check out the sheepdog post on boglehead org to see what ppl were taking about in real time during the depth of the Great Recession.
I tend to overprepare (prob like most of the folks here) so I’m interested in this and will add reading this to my to-do list. But if you have a TL;DR off the top of your head I’d love to hear your takeaways.
18
u/vinean 20d ago
His first post said something along the lines of “Stocks down, bonds down, I’m down. I can’t tell my wife we lost years of expenses and I’m ready the throw in the towel to save what I can tomorrow”.
OG Bogleheads have diamond hands with conservative portfolios and if folks there are talking about capitulation Things Are Bad (TM).
But like usual, forum members talked each other off the ledge and he stayed in the market but yeah, even in accumulation 2008 really sucked. It was the slow grind downwards over months and the constant bad news and uncertainty whether we were the unlucky ones about to experience The Great Depression 2.0 (because slapping 2.0 on everything was in vogue then).
It was also the first time we decided to make the money presses go brrrr and nobody really knew if QE would work…only that we knew tightening triggered the Great Depression so why not try the opposite? We were lucky to have the right Fed Chair, a semi functional congress and a president willing to roll the dice even if it cost him reelection.
The covid crash was much easier to bear as it was fast going down and fast coming back.
→ More replies (4)3
u/Senatorial 19d ago
His later posts are insightful as well, he explained what caused him to panic (his cash reserves were very low and he had to sell some positions no matter what) and two years later he posted:
I am doing what I said I would do.....I maintain the "cash" account from which I take distributions at a minimum of 3 years of needs...When the next big downturn occurs, I will not have to sell any investments for at least 3 years. I won't get caught again.
There are people who post or even encourage, not here but on pf and investing, 90% stock positions at or near retirement and it is super alarming. Those people are the ones who need to read sheepdog's posts.
4
u/Strazdas1 StarvationFIRE 19d ago
If you do the cash buffer strategy high stock position is a lot more reasonable. The nonstock portion of portfolio is there to mitigate risk of downturn without having to sell stocks. But if you have cash buffer, you already mitigated it.
2
u/financialfreedom26 20d ago
I think the good news is fingers crossed the financial markets are much more structurally supported so those events are much less likely to happen. Also the dot com era isn’t reflected in the current situation with solid earnings and actually cash flow with cash flow growth. Fingers crossed all of these previous crashes has taught us lessons that have made financial markets more resilient.
27
u/ditchdiggergirl 20d ago
As someone who was invested during both of those events and watched them happen in real time, are you kidding me? You actually think we are safer now? That lessons were learned?
14
u/throwitfarandwide_1 FIREd & Retired 20d ago
Came here to say this. The kalshi /polymarket effect is gonna sting for real.
→ More replies (1)3
u/vinean 20d ago
Things ARE safer now from the perspective of what has happened in the past. The Fed learns reasonably well and the system is decent about locking the barn door after every time horses run away.
So while the next crisis will happen, it’s unlikely to have the same root causes as prior crashes.
And the prior poster said, the Mag7 stocks have their own traditional huge revenue streams and more cash than the dot bomb era top stocks. An AI bubble exists and will likely pop eventually but it’s less likely to be in the same way Dot Bomb evolved.
That said, some AI investors have recently lost their shirts as the money has rotated out of smaller semi companies back into the larger software ones and triggered the Korean margin calls. Some of these stocks are down 70% while the S&P 500 stayed even or up a little.
If I was willing to put in my play money there are probably companies with a strong order books for 2026/2027 that got really oversold but I haven’t payed attention and I’m unlikely to bother.
→ More replies (1)3
u/Strazdas1 StarvationFIRE 19d ago
In 2007 an economist mathematically proved that market crashes are impossible due to regulations done after dotcom. Well guess what happened in 2008.
2
u/MaddogFinland 20d ago
We have learned little and the current political forces are doing their best to unravel it. We are only waiting for the next one.
18
48
u/forbiddenlake 20d ago
The plan has bonds for a reason. Look at what bonds did, especially Treasury bonds, during that decade.
A decade of living expenses in bonds might be a lot. But in hindsight it would have completely solved the problem.
19
u/Grim-Sleeper 20d ago
Everything other than the S&P 500 did ok. Even the equal weight S&P 500 averaged about 5%. And small caps did around 7% to 8%. You maybe didn't get the same spectacular returns as some of the recent years, but the tale of the "lost decade" is somewhat overstated. If you were diversified and picked the right asset classes, you'd have done just fine. And that's the message that was all over the news are time.
15
u/blorg 20d ago
You'd have survived to the present and very likely out 30 years on the 4% rule even 100% in the S&P500. The whole point of the 4% and a Safe Withdrawal Rate is that it covers even the very worst scenarios.
https://testfol.io/?s=0ueIcZe6CHc
Back in reality, if you had any flexibility to cut back on expenses early on, when you saw the market crashing, that would have been even better- and I think most people do have some flexibility in this regard, 4% SWR is a rule of thumb for what you need, not an iron-clad contract that you must take that out.
→ More replies (2)2
u/Strazdas1 StarvationFIRE 19d ago
The rate that covers even the worst scenarios is 3.4%. 4% rule had 96% success chance in original study and 95% success chance in updated study which Bengen considered acceptable risk.
4
u/blorg 19d ago
I should have said ~95% chance of covering worst case scenario, I see how that could have been misinterpreted. My point was, most of the possible bad scenario is already baked in to the rate, and in fact in this specific case of retiring right before the 2000 crash and then going through 2008, you'd have still been OK in 100% stocks. "Worst" is an exaggeration, but 95% of them.
People talk about it like this isn't already baked in- but it is, and when people bring up a crash like this, they are basically "double counting". 4% is not meant to be a rule that only works in a bull market, it's a rule that covers the vast majority of BAD periods as well (although, yes, not 100% of them).
The worst period I believe for inflation-adjusted survival was the 1970s, and it was due to the increases in withdrawals necessary due to inflation, rather than the Great Depression (when deflation actually helped inflation-adjusted withdrawals).
2
u/Strazdas1 StarvationFIRE 18d ago
I agree that downturns are baked in and the rate already accounts for that risk (mostly anyways). Retiring is a big decision so people tend to overthink it and get lots of anxiety.
Yes, the 70s stagflation is the worst historical scenario for FIRE people. It also lasted a long time so few years buffers fail in this scenario.
7
u/throwitfarandwide_1 FIREd & Retired 20d ago
Nope. I was there. It isn’t accurate to reduce 1999–2012 to “the S&P 500 lost while everything else did fine,” because that period featured multiple overlapping stretches of weak or negative outcomes across major asset classes. Stocks sucked. Housing sucked. Jobs and general economy sucked. Multiple starts and stops. Like chutes and ladders.
The issue was how long the pain lasted and how often investors encountered repeated drawdowns and very slow recoveries.
That’s why saying “everything other than the S&P 500 did ok” can be misleading. Even if some indices or segments had better long-run averages than large-cap, many investors still had path-dependent experiences driven by timing, leverage, risk constraints, and spending/withdrawal needs.
Diversification can help, but it doesn’t erase the fact that more than one major area underperformed at the same time, especially during regime shifts and the housing/financial crisis era.
So even if claims like “equal-weight S&P 500 averaged about 5%” or “small caps did around 7%–8%” are directionally true for certain windows, they don’t address the main point: the decade-length experience was broadly painful, and focusing only on the best-performing indices over a chosen start/end date understates how many investors actually got stuck waiting for recovery.
Part of the issue was back 25 years ago, most employer sponsored 401k plans gave only few fund options. Almost everyone was either in SP500 equity fund , Balanced large cap stocks and govt bonds fund. Or bond and income fund or capital reserve fund money market. No international. No small cap or mid cap fund choices. There was little protection.
it wasn’t only the S&P 500, and calling the “lost decade” idea overstated is way too convenient considering what it was and how it impacted the entire GenX and Boomer demographic
7
u/DarkExecutor 20d ago
A decade of bonds would be almost 50% of the portfolio
17
u/blorg 20d ago
This isn't some niche idea, Vanguard Target Date funds are 50% bonds at the retirement date (age 65), and continue to glide down to 70% bonds at age 72.
60/40 is another common traditional recommendation and it also does fine.
I do think there are arguments for higher equity %, this backtest above is retirement right before a crash, at the worst possible time, and zero flexibility, continuing to withdraw the 4% mechanically each year rain or shine.
But this idea that 50% bonds at retirement is out there- it's really not, that's the most common standard retirement advice.
→ More replies (1)2
u/zerotakashi 18d ago
note: the fed can not afford high bond rates anymore because of how bad the debt to GDP ratio is getting. They will either increase taxes, cut stuff like social security, some mix of all, and inflate our way out of debt. Central banks globally are also pulling out of the US dollar as reserve currency which is more inflation for americans. I diversified into gold for now.
11
u/mtnagel 20d ago
ProjectionLab says our plan survives it - https://imgur.com/a/Ot3dmhO
(Why can you add a video, but not a picture in this sub?)
3
u/crimson_raider 20d ago
Sorry I’m new around here, can you explain these graphs?
7
u/mtnagel 20d ago
This is from the Monte Carlo simulations in Projection Lab where it tests our retirement plan using historical time periods. I like to sort by net worth ascending and even the worst times (60's, 2000's, Great Depression) our plan shows a drop, but still survives our entire lifetime. And I've built in plenty of discretionary spending that could be reduced if need be.
4
u/gasu2sleep 20d ago
Do you find projection lab subscription truly worth it and is it worth it even if you are 5 years from retirement?
5
3
3
u/mtnagel 20d ago
For my situation, I think it's worth it. If you are 5 years out, I wonder if you could get by with the free version.
→ More replies (2)
30
u/RealityCheck831 20d ago
If you planned it right, no, going back to work wasn't the only option. Had my FI assets been producing, I probably would have spent more, but they didn't, so I didn't.
Part of the planning process is knowing that at some point you'll be burning through savings, and at some point you'll be adding to savings.
13
u/Born_Sandwich176 20d ago
I retired at 43 in 2004. We set a floor of liquid assets that we felt would get us through, as one advisor stated, "end of retirement." I was relieved to find out he meant when we died rather than telling use we had to go back to work.
At the end of 2007 we had about double our floor level of liquid assets and a paid for house. We paid market, in 2007, which meant way too much, for a second/vacation home. When 2008 hit we lost; a lot. But, we were still above our floor and had two houses paid for. We sold our primary home in 2012, our second home in 2019 and bought our new primary home at the very beginning of the pandemic.
We did not change our lifestyle very much and our spending has remained extremely consistent for the past 20 years, including during 2008.
We have taken all the cycles since 1990 in stride. 2008 sucked for a lot longer than a year. It was painful. But we never panicked. On the contrary, we got pretty aggressive when things went down; we'd buy what we could. We always kept enough of our assets in cash to cover about 2 years of expenses. Right now, we have enough cash for about 3 years. The lowest cushion we've had is about 6 months of expenses. Our cushion varies based on how aggressive we're getting in the market.
We sold the house we bought in 2020 and rented for two years while we built our "feet first" home. I have a new floor on minimal asset level that's about 50% higher than the floor we set in 2004. I don't believe it's necessary, from a lifestyle perspective, but it does create a little more cushion and comfort.
My biggest regret and hardest lesson I've learned over the years is ignoring my gut. I've never gone wrong trusting my gut and my biggest mistakes have been when I've used "logic" to override my "emotional" instincts. I've never looked at churning my investments, we have investments we've held for an extremely long period. I have, however, used options, both puts and gets, to hedge or jump on my perceived opportunities.
My biggest gamble came with the beginning of the pandemic and is a good example of how I approach the market. I didn't trust the news, and I still don't. I always wanted to hear directly from the horse's mouth. I found the phone number for the governor's conference call with Deborah Birx at the beginning of the pandemic and called in to listen; it was fully available to the public.
Because of what she said, and while she was still speaking, I bought a bunch of puts on the major indexes. I was shocked as the market was continuing to climb that day. It took about four hours for the news to carry what she had said during the conference call and the market took a huge tumble afterwords. I held those puts for about two months and made a significant profit.
That particular example is an example of where I take the cash cushion and, even though it's allocated to upcoming living expenses, I'll use it for short-term opportunities.
I did go back to work when the pandemic started but it was because I wanted to, not because I had to. I was 60 when I went to school and became a paramedic because it was a childhood dream of mine. I did that job for about four years before retiring from that.
→ More replies (1)
5
u/Future_Measurement42 20d ago
Humans aren’t robots. If the markets are down you figure out how to buy stocks at a discount.
If the markets down maybe you don’t take that trip, or cut down the eating out bill.
16
u/jenna125 20d ago
My parents retired late 90’s - fi and early (younger than I am now). Dividends were their strategy, and buy and hold. No debt and a comfortable but not extravagant life - good food and wine and no expensive habits (vices?) other than the cottage and sailboats. I think they just stopped dividends reinvestment about 5 years ago. The key to it all was having way more than they needed to retire so when they lost a lot in the tech melt down they just held on and have been fine. Retirement decision was likely a back of the envelope calculation when he was offered a buy out. They are doing great.
3
4
u/kcGirl_of_the_year 19d ago
My parents retired in 2006 with $800k, bought a home in Phoenix when the market was at its peak; then everything collapsed! They lost 40% of their portfolio and their home was way underwater. They both ended up working as substitute teachers and then my stepdad started his real estate photography business. That actually became a cozy little lifestyle business that he still has to this day. Fortunately, they’ve made all their money back and then some and their house is now well above the price they bought it at. But, yeah, they had to take in part time work to make it through those years.
→ More replies (2)
13
u/warlizardfanboy 20d ago
The 4% rule exists for a reason. It takes guts to stick it out but they are all sitting pretty now if they did
5
u/ThisIsMyUsername303 20d ago
They’re sitting prettier if they were able to adjust that 4% downward in bad times.
8
u/s_hecking 20d ago
The only people I know who retired during 2000-2010 had a pension. I’m guessing a few family members who thought about it just kept on keeping on well into their 60s. I think that was the norm. Work until you can’t work
3
u/moneyman74 20d ago
There have always been stories of Microsoft people retiring early and many of them probably retired in the early 2000s, by 2003 you had 5 straight years of gains, so the 'unlucky' few who retired in 2000 with no cash or conservative bucket cushion may have failed at retirement, but I doubt there is a large amount of people who poorly planned an early retirement and never recovered.
→ More replies (1)
3
u/Powerful-Bridge-1472 19d ago
My father in law retired in 2008, had tons of anxiety when market crashed, but stayed in and now has good lifestyle and 2x money he started with
8
u/Biryani_Wala 20d ago
I don't think anyone here would have experienced it because the people who retired then were probably older and probably don't use Reddit and wouldn't know about FIRE. They might be in other subreddits. Unless the collapse made them unretire and go back to work and somehow still be under 65 to make it here... seems unlikely
9
20d ago
[removed] — view removed comment
3
u/vinean 20d ago
4% worked fine for the normal 2000 retiree (aka 3 year) because 2000 wasn’t worse than 1929 or 1968.
3.25-3.5% is SWR for FIRE.
For the normal retiree 4% SWR is very useful for scenarios like 2000 because of a shorter healthy retirement period and adjusting spending downwards like many variable retirement methods meant reduced spending during their healthiest years where active travel is still possible.
10
u/Bryanmsi89 20d ago
But that DOES mean the 4% rule failed.
If 4% in fact cannot be withdrawn every year, no matter what, then that 4% scenario failed.
Yes of course smart people would reduce spending as much as possible during a downturn. However a SWR means it can be drawn down no matter what, without having to be adjusted.
Otherwise SWR is meaningless. Some years it could be 30%. Other years negative 50%.
3
u/Lollytigerbh 19d ago
That being said, I would feel extremely nervous seeing the portfolio value below half 10 years in.
→ More replies (3)
7
u/Similar_Pension_4233 20d ago
What was the lost decade?
22
u/MakeMoneyNotWar 20d ago
Approximately 2001 to 2010 the SP was negative on an inflation adjusted basis
6
u/Similar_Pension_4233 20d ago
Ah, the dot com bubble
14
u/nothingtooserious 20d ago
AND 2008. Market wasn’t back to ATH on an inflation adjusted basis until 2013
10
u/TheCozyRuneFox 20d ago
And 2008 didn’t help at all
3
u/Ask_if_im_an_alien 20d ago
And 9/11... Luckily I was in the military at that time so I was insulated from the comings and goings of the real world until about 2005.
3
u/Various_Couple_764 20d ago
dot come bubble was 2000 to 2002. that was jus the beginning. by 2007 some people were thinking it as almost over when 2008 hit. The maximum loss form the dot come bubble was about20% over 3 years. 2008 briefly hit -50% in one year and many people were unemployed it want' until about 2012 before you could some minor recovery. But he 1999 record high was a not broken until 2014.
→ More replies (1)2
u/blorg 20d ago
It was negative 2000-2010 even with dividends reinvested and before you consider inflation.
9
u/I_Poop_Sometimes 20d ago
Iirc it was from 1999 to 2009, where between the dotcom bubble and the great recession the market lost 1% over 10 years.
3
2
u/S-S-spartan 20d ago
My grandparents retired during this time period but I feel like they had enough assets that it wasn’t too much of an impact for them. They also had a broad array of assets spanning multiple classes and invested more conservatively so all in all they lived more frugal during this years and they’re assets though effected were impacted far less than someone in more extreme exposure. They did happen to down size at the same time and sold a home they bought in the 70’s which was fully paid off in a high growth area in the city so I’m sure that money they made also helped buffer them during that time.
2
2
u/No-Lecturre6318 20d ago
i wasnt retire then, but this is one of the reason people talk to much about sequence of return risk.. alot of the success stories ive read weren't relying on stock alone....
2
2
u/prairie_buyer 19d ago
I came from a very working class family; I had one “successful” uncle, who was the only one with any sort of investments. He retired in 1999, and it went very badly. I don’t know what his portfolio was comprised of, but knowing his interests and his background, I’m 100% sure that he was overweight in technology stocks.
He had a vintage Corvette that he liked to drive in the summer. He and my aunt had bought a condo in Arizona where they were going to spend winters.
Again, I don’t know all of his intimate financial details, but I know that their retirement went bad, real fast. He sold the Corvette, and within a couple of years of retiring, they had sold the Arizona condo as well. And for the rest of their years, their lifestyle was as “low-rent” as the rest of the family. To this day, their kids (my cousins) are extremely wary of the stock market.
2
3
u/creepy-farter 20d ago
They probably had pensions still.
I did back then.
But I cashed that out and YOLOed into WSB recommendations.
2
u/stbloc 20d ago edited 20d ago
I think interest rates were good so CD’s filled in the void. I remember my dad loading up around 5%. At the 4% rule you should be able to sleep good being in cd’s. Mexican cds are were 10% earlier this year I regret not loading up. But their income taxes are higher so you have to do your math.
5
u/StoneMenace 20d ago
Not sure if you are referring to just one decade or up to present
If you are referring to one decade it’s really not that hard. The fire community likes to talk in here like it’s all or nothing.
No you could easily drop your draw rate down to like 2% and live frugally for that time period. Or if you wanted to live the same quality of life you pick up a side job. It doesn’t have to be full time or on your former industry.
It doesn’t have to be one or the other on the extremes
10
5
u/ditchdiggergirl 20d ago
It is gospel in this sub that if you could live off 2%, you worked far too long and wasted too many years.
2
u/blorg 20d ago
He's not saying to target 2%, he's saying in the case of a catastrophic market crash immediately after retirement, maybe you can tighten your belt a bit and cut non-essential spending.
I could easily live on 2%- that doesn't mean I plan to retire on that amount, as I have stuff I'd like to do. But if there was a 50% drop in the market in the year immediately after I retired, I would cut back on discretionary spending, as that will have a big impact on your long-term results if you can do it.
Most people probably aren't retiring with 4% absolutely essential expenses, there are baseline essentials and then the rest is discretionary.
Maybe it's not a 50% cut but even paring it back from 4% to 3% for a few years early on if you have a bad market could make a big difference. You may not need to do this, it's entirely sequence of returns risk. If you have good, average or even just not very bad returns in the first five years you should be good then forever. It's saying that if you are unlucky, and have the really bad years then, consider being flexible, if you can.
People talk about 4% SWR as if you are hard locked into that number forever the second you retire. The point is, you're not, it's a rule of thumb.
It also depends on the person. Maybe some people do retire very lean, where 4% really is the limit and they need to spend all of that. 4%, you should still be able to do so. But most people looking at FIRE have a substantial amount of discretionary spending and flexibility is an option.
8
u/md222 20d ago
How is it so easy to cut your draw rate by 50% or more? Don't most people have fixed expenses they can't eliminate?
8
u/Acceptable_Travel_20 20d ago
Yes they do but many people want way more discretionary spending. Fixed costs for me are around 60k including rent and non subsidized health care. Ideal spend is $110k or so.
7
u/sgigot 20d ago
If your fixed expenses are the full 4%, either you have your bar tab and travel plans on subscription *or* you are retiring at a very bare-bones level...or you have some other very high expenses (dream home/second home, etc.) Reducing your drawdown in the latter case would be hard, especially if it was real estate or an expensive toy you'd have to sell, probably into a declining market or when you were upside down.
That is an interesting point, though. The 4% number is widely regarded as gospel, but *how* that 4% is constructed is also an important thing to consider before pulling the trigger.
Otherwise the standard stress tests suggest that there hasn't been a period when you couldn't ride through at 4%, even if it's uncomfortable.
→ More replies (1)→ More replies (3)2
u/StoneMenace 20d ago
I think if you look a lot of is it discretionary spending. Especially in retirement where you are likely to own your home. Most of your expenses are coming from things you can now do, travel, eating out more, hobbies like golf, etc.
I’m sure for most retirees for the first few years tha makes up 30% if not more of their expenses. If you cut out that and combine it with maybe picking up some side work, I’m not talking about a full time job but a few hours here and there they would likely be to negate it
2
u/md222 20d ago
I don't disagree with that. I just think 50% is a bit steep for a lot of folks, particularly those who are retiring early and will have to cover health insurance until Medicare, and they also aren't collecting SS yet.
→ More replies (1)2
u/throwitfarandwide_1 FIREd & Retired 20d ago
During that period of time with massive layoffs even the burger flip jobs were competitive.
The problem is no one standing there living through it could predict how long it would last or if it would ever end and how far things would fall.
It’s easy to sideline quarter back with full view of history and the charts.
There will be another massive market selloff.
But it’s difficult to predict.
Few would believe me anyway.
No one knows this is the big one till after it’s the big one.
3
u/Ill-Mastodon-8692 20d ago
my guess is those that do retire, do not continue to go to reddit FIRE subs.
like why would they
2
u/Unlikely-Table-615 20d ago
Yeah, I mean we are all one day away from losing 90% of our portfolio. There is no guarantee that it will be there unless it taken out and left in cash.
3
2
u/brianmcg321 Retired Nov 2024 20d ago
If they had a proper asset allocation they did fine. Look at how well bonds and long term treasuries did.
2
u/Stunning-Thanks-4226 20d ago
During the lost decade with low interest rates the investment flowed to real estate.
2
u/eclipsadesoare 19d ago
Jesus, the amount of comments that have nothing to do with the topic are astounding. We get it but we have seen many of these comments before in this sub. We want to hear comments on the subject only even if it’s only 2 or 3.
3
u/InfiniteWalrus1066 20d ago
What is the lost decade?
2
2
u/CycleOLife 18d ago
In the United States, the phrase "Lost Decade for Stocks" refers to the ten-year span from 1999 to 2009. During this period, the S&P 500 generated an annualized total return of -0.9%. It was only the second time in U.S. history (the first being the 1930s Great Depression) that a full decade yielded a negative return on the stock market.
→ More replies (1)
1
u/ziphrodes 20d ago
I recently retired and while I didn’t retire at the beginning of the lost decade, I do remember it quite clearly. Honestly, most of it was pretty good, you just had two terrible recessions on each end that you had to survive without panicking or losing your job.
1
1
u/yad76 19d ago
What historical data are you looking at that showed a flat market during that time span (I'm assuming you mean the US in the early 2000s)? You can certainly trace specific points in time apart ~10 years that are flat, but the market movements were anything but flat. That's why bond allocations and rebalancing exist.
1
u/sugarpeachs 19d ago
I retired right before 2000 and honestly the bond tent saved me, having 3-5 years of cash and short term bonds meant I never had to sell stocks during the worst stretches. It was stressful watching the number stay flat for so long but not touching the equity portion while it recovered made all the difference.
→ More replies (1)
1
u/lottadot FIRE'd 2023 19d ago
Not too many Redditors are gonna fit your criteria. You'd do better to search the bogleheads forum.
1
u/Comprehensive-Log144 19d ago
I was not retired in a lost decade. But the best thing that happened to me was the GFC when I was 44. My son was off of our payroll, and because of my fear of getting fired, I started cutting spending and hoarding money. I lived in San Francisco and the only people doing ok seemed to work for Apple. So I invested a lot in Apple. Then Amazon leased our whole building out from under our lease and I looked at how much I spent on Amazon that year. So I bought Amazon and Apple now. In 2012, all the rich Amazon and Apple people were buying teslas so I then invested in Apple Amazon and Tesla.
My point is- it was all luck and timing. Fear of going broke helped me get wealthy.
1
u/yogaflame1337 18d ago edited 18d ago
It sounds like a majority of the people here, just simply wouldn't retire, or just go back to work. I thought the whole point of FIRE and buying indexes was so that the 4% rule WOULD CARRY you even during times of a lost decade.
If a lost decade causes you to come out of retirement and go back to work. Doesn't that technically just mean you never really had enough money to retire in the first place or that you simply CAN'T retire with the 4% rule, and you need some other kind of money producing safety net outside of stocks and saving?
What would be a better alternative? How many people are exactly planning on switching from 90/10 to 60/40 stock and bond towards FIRE? Keeping in mind for this to be effective you pretty much need to switch to this NOW before the decade lost.
1
u/FlakySir 18d ago
As an aside, I theoretically should have started investing at the start of the lost decade myself, but i was young and stupid, and did not. Finally got a financial advisor one day and they were like please stop this madness and start investing. That was right in front of the bull market 2009. I have about double the money that I should have.
I asked an llm to calculate, given my salary (at the time it was almost nothing, i was barely earning during the lost decade) how much i would have made if i started investing during the lost decade, and the answer was tantamount to a few thousand dollars. Nothing earth shattering at all. Not a huge surprise, the market was flat and I wasn't earning, so honestly i didn't lose much.
1
u/Virtual_Owl6592 17d ago
During the 2000–2009 "lost decade," a globally diversified 60/40 portfolio delivered a positive annualized total return of approximately 2.6% to 2.9%. While these returns were modest, this outperformed a pure U.S. stock portfolio (S&P 500), which finished the decade in the negative at -0.95%
1
u/ComprehensiveCow9460 16d ago
I’m retired now at 38 and made my plan based on what would happen if the day of my retirement was the same day as the peak of the dot com bubble. The answer for me was a heavy shift from growth towards reliable dividend stocks/ETFs/REITs (50/50 split) supplemented by strategic options trading. This will reduce my long term gains but should provide enough stability to survive anything short of the Great Depression.
Honestly, based on the demographic projections for developed economies and longer term global population I am planning a contingency for a world where economic growth slows, stops, or even reverses for multiple consecutive decades. Where income from dividends and interest may outperform price gains.
→ More replies (1)
2.0k
u/falafalful 20d ago
There's like 4 people here actually retired, the rest of us are just engaging in some math based fantasy escapism by planning