[USER]

Help me gain some clarity- if you are eligible to retire today, based on the 4% rule and the current balances, does that still stand true in the event the following year a brutal recession hits and your portfolio drops 50%.

Are you able to safely withdraw 4% to cover expenses ?

Thank you for feedback- additional question- to help diversify current portfolio to include bonds to have for a rainy year or two, it would require to sell shares.

Long term taxes expenses would come with that transactions- seems painful to pay taxes to move funds around- is it still worth it if currently all funds are invested in large capital fund?

Hard to time the market, I was tempted to bite the bullet last year for “peace of mind” but at this point, glad I didn’t given we had a great year.

[Kenneth]

If the market drops 50 percent I’m not drawing anything out. I’m going to get a job.

[Barrett]

That is called sequence of return risk, and it may mean you adjust your retirement timing accordingly, but also have increased cash reserves to help balance it out

[Jule]

We are over saving on purpose. We truly will only need 1/3 of what we might end up with at the rate we are saving and investing. So, if the nether drops, it’s fine.

By the way, we love our jobs so stopping is not an option.

We are higher earners so we will be giving up a lot as well.

[Russell]

The 4% rule assumes you put 50/50 in bonds and stocks. In down years, take out bonds. In up years, take out stocks.

Either way, take out 4% the first year and then the same amount adjusted for inflation from then on.

It should last 30 years…if you need it to last longer, save enough to get by on 3% and/or keep more in stocks.

[Allison]

Depends on how your portfolio is allocated. As most people move towards retiring or being in retirement, many transition their investments into less risky/volatile allocations like bonds etc.

not everyone keeps it in the s&p

[Amy]

That’s why a lot of retirees move a certain amount of their assets into dividend stocks or even a bit of fixed income. For myself I do dividend stocks.

Buy good companies that pay a good dividend and have a history of not cutting the dividend.

Then you can withdraw the dividend for retirement income and never worry about the share price.

If there is a big downturn I buy more, cause they are on sale!

[Aaron]

I think anyone with common sense would have a cash cushion for this situation.

[Scott]

If your portfolio dropped 50% you’d need to withdraw 8% to get the same equivalent in cash out.

[Author]

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