Reply to How much to retire at age 55? We are 50

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[quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous]Two thoughts.  First retirement is not a one way street but if you decide to reenter the labor market you will take a hit.  Second, what’s your return assumption?  Have you processed the fact that real interest rates are negative?  What do you think that means? [/quote]

Of course. If we retire , it would be very difficult to find jobs in our field again as we are very specialized unless we are willing to move etc.  We are right now invested very aggressively for our age and have most in equities. Obviously if the stock market takes a big hit in the next few years we’ll be singing a different tune. My plan is before we retire to move 1M into safe assets.   In 2008, our portfolio dropped by half and as traumatic as that was it was only 400k or so at that time- now it would be a much different story.[/quote]

Yeah.. Tell me about it.  We prob. had close to $1.5m at that time and it dropped to less than $1M.  Now at $7.5, a 50% drop would be terrible.  In my spreadsheet model, I assume a 50% drop sometime during the current year so the projected beginning balance for the next year is adjusted down 50% (if it doesn't happen this year, I just push it out to next year in my model on Jan 1).  I just got to the point where things don't turn negative over the next 50 years even with the 50% drop in the next year.  I also assume 5% investment growth, 3% expenditure growth and try to model in all known large expenses - college, home remodel, car purchase every 10 years, etc. [/quote]

NP.  So what is your plan if the market drops by 50%?  Will you keep enough in cash for expenses to ride out the drop or plan your retirement based on 50% drop or just plan to live in less?  Are there any other mitigation strategies?  [/quote]

Couple of more details.. The model assumes that we will begin drawing living expenses only in 2031 when spouse retires.  Until then, the only drawdowns will be for car replacement, home renovations and college expenses for kids.  I was only stating that even with a 50% drop (that never recovers), we should be fine.   Per the model, our current $7.5M will get cut down to about $3.8 in '22 with a 50% drop but will grow back to to $4.5M by 2031 even factoring in all withdrawals. Good enough for our target withdrawals.

Also, we do carry at least 10% in cash at all times for emergencies as well as to capitalize on market opportunities.  We will continue this into retirement.
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