Ray Dalio, a major league hedge fund investor, posted what I think is a pretty deep and thoughtful article on LinkedIn called Paradigm Shifts that is sobering for those who are thinking about living off of their savings for the next 20 years. I can’t include the link because that is blocked by the CC powers that be, but you search LinkedIn for it. Part of what he argues is that in each period, investors come to believe that the future will be like the past and tend to over-invest and create a bubble on that basis. For example, if volatility is low, people take more risks than they would when volatility is high and when their leverage is built up, debt is too high for earnings supporting it and then there is a crash and shift to a new paradigm.
Our current paradigm has cheap government interest rates/quantitative easing adding to the money supply and inflating asset prices combined with a couple of one-time drivers (corporate taxes are down and AI/ML/automation has shifted the allocation of incomes from wages to capital). I highly recommend it. PM me if you can’t find it. I’m trying to think about the implications for investing. Gold? Lightly levered rental real estate.? Trend following trading strategies?
Thanks for the link @NJres . The $100K per year above was after tax. in the story and the assumption was that the money saved was post-tax. If the author’s assumptions are correct, I would have enough given their calculations. Not sure I do…
I agree with @bclintonk. I have to draw down the retirement plans even though I might not want to. I will get SS at least for a while. The real trick is to withstand the 50% or 40% drop in asset values that may occur as part of the end of the current paradigm.
One of my favorite John Bogle’s sayings was, ‘Stay the Course’. And as a buy-and-hold investor, that’s what I do. Just not smart enuf for market timing. Or in reality, by the time I get ‘news’ of any market changes, the elite investors have already acted up on it.
If Medicare is eliminated and ACA is not extended to cover the 65+ population, then it is likely that a very large percentage of people over 65 will not be able to buy medical insurance at any price due to pre-existing conditions.
It is not that people do not care, but that younger people discount its existence for them due to the political risk that it will be cut back or eliminated for them.
A huge tax bill suggests that you have substantial other income.
@Iglooo - @ucbalumnus stated my views very well. Of course, I do care. I’d like to receive some social security. I can’t remember how much mine is, though I’ve looked it up. Dh’s is substantially more as the primary income earner for our family. My working career outside the home was not that significant. We have planned well and should be able to support ourselves whether we ever receive SS benefits or not. Of course, more money would be better. But, were we to have to pay for such exorbitant prices for health insurance beyond the next nine years, we would be in a world of hurt.
I don’t truly expect SS to go away completely. I expect either reduced pay outs, means testing, higher income taxation on received benefits or some combination of those. All those risks make me want to start drawing it as early as possible even at a reduced benefit. I think I’d feel “safer” if I were already in the system and receiving checks. That may be illogical - I don’t know.
My use of “Cadillac” and “Honda” plans was not particularly apt either. Sorry. My use of those terms has to do with the network of coverage. Our plans are basically identical except for that. My network is significantly broader than dh’s under my plan. Has nothing to do with deductibles, etc.
**Moderator’s Note: ** I know it’s hard when discussing the future but please leave political mentions out of the discussion. I deleted just a couple of posts.
Gold - not so useful. When the youknowwhat hits the fan, a large garden, a rainwater collection system, and some hardy non-hybridized seeds are more useful.
And - I Just. Retired! Last day of work was Friday, and I haven’t come to terms with it quite yet. BTW: I am covered under my husband’s health care plan at $180 per month. I didn’t realize how absolutely amazing that amount is until reading all your posts, but it’s a perk of working for the city… When he retires, rates right now show us as paying a combined 500$ a month before Medicare, $350 a month after we both have Medicare. (though the city can increase rates at any time, so it’s not something set it stone…). If we make it fine on my pension and DH’s salary for the next trial year or so, without having to draw down any roth and retirement savings, I know that we will be fine even with inflation reducing our incomes, because we will be also have SS to help buffer that and also the Roth/retirement savings. . I’m not sure when we’ll start SS, but will run the calculators in a few years when I hit 62, and strategize then. Until that time, I’m going to see how we do with fun, frugal living!!
I’m getting that ominous feeling about the economy again. Just starting to worry…company is not doing as well as usual, stock market has the potential to plummet, we could get stuck in another conflict, taxes could skyrocket, economy might go into a recession. I was feeling comfortable and secure in retiring in 3-3 1/2 years, now I’m starting to think, “What if?”
All I can do right now is take a nap, go on a run, and then drink a glass of wine!
You know, bus, I am having a similar feeling. I am not even close to retirement, but I am still worried. The prospect of having another military conflict is terrifying… the rest of it is just worrisome. Sorry not being helpful here. Hope the wine was good!
Actually, it is helpful, @BunsenBurner. I was thinking maybe I’m just overreacting…good to know I’m not the only one who is worried. Most of the time I’m feeling pretty comfortable about the future, but right now there seems a lot of uncertainty and things to worry about.
Yes, the wine was good, so was the run and the nap!
I am hoping to retire in about 6 years. As of today, (and without either kid imminently heading to grad school) we have enough to do that, but I chronically suffer from a “more is better “ mentality. I remember a colleague who planned to retire in 2008 or 9. He had to work a few extra years. And on the other hand, a crash just before we retire would be a lot better than a crash just after!
@CIEE83 - your description of the “more is better,” chronic mentality is spot on for me as well. We have already retired fairly young, but I honestly think that mindset is making me cling a bit more to what we have worked for rather than enjoying it. As a specific example, we have not traveled nearly as much as we had thought we would.
I sense a fair number of people unsettled; however I have a political podcast I listen to and my phone accidentally downloaded a bunch of 2017 episodes I only caught after listening to several. People were unsettled then, too, tons of discussion about “sell now”. I think it is the human condition to wonder, in prolonged times of financial strength, if a shoe is dropping soon. Not that one won’t drop, but we all seem to wonder a lot.
My family has survived several recessions, 2008 we were not in a vulnerable spot, 1990 was spot on horrible, incredibly bad timing to have the investments we had, basically we had to start over :(. I learned from that, yes, be in the market and hope for highs, but have it be money I don’t have to take out during lows. Yes, have RE, but be able to hold onto it through lows, and wait for highs.
I think there will be more lows an highs before we retire, DH has a few years before SS FRA. The thing I struggle with is the passive income streams, will they be reduced, how much of our income safety net can I plan for them to be in bad times? I figure our main job we will keep doing until his FRA and perhaps mine. I just need to weather the next downturn, whenever it is. Though It’d be great to time the market a bit, sell some high an reinvest low, but I’ve been hearing it’s going to drop for several years now, so who knows?
I no longer push as hard to get my wife to retire. I would be happy if she did, but a paycheck for a few more years sure covers a lot of situations. Just sayin’.
But, were we to have to pay for such exorbitant prices for health insurance beyond the next nine years, we would be in a world of hurt.