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'Dollar cost Ravaging" in your retirement. Login/Join 
Green grass and
high tides
Picture of old rugged cross
posted
It is a term associated with drawing monies out of your retirement account/s in a bear market. More specifically if your portfolio is overly invested in stocks for growth since we have been in a extended bull market. And we enter in to a correction or a period of a bear market and stocks tumble or drop to what some might say or more realistic values. The combination of taking regular withdrawals, coupled with a bear market can really "ravage" a portfolio that one might of hoped it would last for a few decades.

I am not saying where the market is going. I, like all of you have no idea. But for me not being over invested in equities is a way to protect oneself from this potential reality. Although it does lower your yield in the type of market we have had. So there is a trade off.

Of course everyone's situation is different. This is especially important if you are the only one providing yourself with retirement income other than ss. Ie: a pension or similar.

I read an article about this topic and found it interesting and thought I would share.



"Practice like you want to play in the game"
 
Posts: 19847 | Registered: September 21, 2005Reply With QuoteReport This Post
Ammoholic
Picture of Skins2881
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Link isn't appearing.

But, if you are drawing from equities in retirement you are doing it wrong. You need to have enough in fixed income (MM, Staggered bonds/CD's, etc.) to provide for income. Also if you are in retirement you need to find the right asset allocation for you. A number of people go all fixed income (bad because it doesn't allow you to participate in market gains) and others will go too heavy in stocks (no protection in bear).

Hard balance to strike. Best bet is to save enough during working years so that you don't have to touch your equity investments, but that is unrealistic for many or even most.



Jesse

Sic Semper Tyrannis
 
Posts: 21228 | Location: Loudoun County, Virginia | Registered: December 27, 2014Reply With QuoteReport This Post
His Royal Hiney
Picture of Rey HRH
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Asset allocation. Of course the real solution is to have enough money to absorb losses in weathering the storm while still allowing you to draw your money.

If you don’t have enough, then you really have to watch where you keep your money.

Since this is the longest bull market ever, we know a bear market will eventually come.

I have a money management firm that markets itself on a track record of avoiding the worse of bear markets.

I shall see.



"It did not really matter what we expected from life, but rather what life expected from us. We needed to stop asking about the meaning of life, and instead to think of ourselves as those who were being questioned by life – daily and hourly. Our answer must consist not in talk and meditation, but in right action and in right conduct. Life ultimately means taking the responsibility to find the right answer to its problems and to fulfill the tasks which it constantly sets for each individual." Viktor Frankl, Man's Search for Meaning, 1946.
 
Posts: 20164 | Location: The Free State of Arizona - Ditat Deus | Registered: March 24, 2011Reply With QuoteReport This Post
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everyone's situation is different obviously

not quite there yet -- but I will employ some variation of the bucket strategy

https://www.investopedia.com/a...atic-withdrawals.asp

------------------------------------


Proverbs 27:17 - As iron sharpens iron, so one man sharpens another.
 
Posts: 8940 | Location: Florida | Registered: September 20, 2004Reply With QuoteReport This Post
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Asset allocation is the key. It should be monitored and adjusted at least annually.
Money still invested in stocks needs to have a 10+- year time horizon. Money you will need to tap in the next 5 years needs to be in something much more stable.
 
Posts: 2091 | Location: Just outside of Zion and Bryce Canyon NP's | Registered: March 18, 2012Reply With QuoteReport This Post
Green grass and
high tides
Picture of old rugged cross
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Yes, you are all correct.


https://www.marketwatch.com/st...etirement-2019-12-11


obviously this relates to people who are at retirement age or who are retired and are in the midst of drawing monies from their investment accounts.

It is amazing how many people there are who are baby boomers and approaching retirement age and are oblivious to getting their accounts adjusted for that period of life. And when the market corrects itself they will lose tens of thousands and will be left wondering what happened. It is just mind boggling. It really is.



"Practice like you want to play in the game"
 
Posts: 19847 | Registered: September 21, 2005Reply With QuoteReport This Post
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quote:
Originally posted by old rugged cross:
.....they will lose tens of thousands and will be left wondering what happened. It is just mind boggling. It really is.


another one is the folks who are over-weighted in their own company / employer's stock

company goes under and they lose their retirement because they weren't diversified

kinda feel bad for them but at the same time you kinda wonder what were they thinking...

---------------------------------


Proverbs 27:17 - As iron sharpens iron, so one man sharpens another.
 
Posts: 8940 | Location: Florida | Registered: September 20, 2004Reply With QuoteReport This Post
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Agree with many of comments here. Better have something liquid to sustain your lifestyle through a bear market. Then you won’t be locking in losses.
Like theOP states, we don’t know the future, but you can expect a reversion to the mean. May want to harvest some winnings.
I also believe most articles are written to sell advertising, not truly educate.
I just try to follow advice from Jack Bogle. Accept what the market earns. You’re not smarter than the market as a whole.


"The days are stacked against what we think we are." Jim Harrison
 
Posts: 1133 | Location: Ann Arbor | Registered: September 07, 2011Reply With QuoteReport This Post
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quote:
It is amazing how many people there are who are baby boomers and approaching retirement age and are oblivious to getting their accounts adjusted for that period of life. And when the market corrects itself they will lose tens of thousands and will be left wondering what happened. It is just mind boggling. It really is.

^^^^^^^^^^^^^^^^^^^
More mind boggling is the paltry amount in retirement for many baby boomers. Poverty and old age are not a pleasant combination. The majority of the American public has little knowledge of basic saving and financial matters.
 
Posts: 17606 | Location: Stuck at home | Registered: January 02, 2015Reply With QuoteReport This Post
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I have a BS in Business Finance. But everything I was taught is when you're younger you want to take more risk and be more vested in aggressive growth portfolio's. But as you get older, you start moving your portfolio to more and more of it to safe investments and dividend paying investments such as bonds/cd's/ etc.

Many Americans aren't properly prepared for retirement at all. Most have next to nothing saved for retirement.
 
Posts: 21421 | Registered: June 12, 2005Reply With QuoteReport This Post
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A reminder that post-retirement withdrawals from a traditonal (non-Roth) IRA are considered income the year you take them out and will raise your adjusted gross income (AGI). This may put you into a higher tax bracket.

And if you're on MediCare (over 65) and take out a LOT, you'll get hit with the MediCare penalty and thus pay more for Part B.

https://www.medicare.gov/your-...e-costs/part-b-costs

https://www.ssa.gov/pubs/EN-05-10536.pdf
 
Posts: 16044 | Location: Eastern Iowa | Registered: May 21, 2000Reply With QuoteReport This Post
Lost
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Never heard that term before, but it does make sense. "Dollar Cost Ravaging" must be the dark side of Dollar Cost Averaging (DCA).

In DCA you make equal periodic purchases of stocks. In a bull market you get higher value, in a bear market you get more shares. In theory you accumulate wealth efficiently no matter which direction the market is going. That's if you're buying.

If you're selling, as you would in retirement, DCA would work against you. In a bull market you're throwing away value, and in a bear market you're liqidating excessive shares. That same efficiency is now depleting your money at a faster rate.

DCA is fine going in, but taking out you might want to use a different strategy than liquidating stocks.


This message has been edited. Last edited by: kkina,



ACCU-STRUT FOR MINI-14
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Posts: 17080 | Location: SF Bay Area | Registered: December 11, 2003Reply With QuoteReport This Post
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I had a thread similar to this a couple weeks ago. I'm turning 60, no plans to retire but obviously in the somewhat near future. I've struggled with this, been highly invested in the market, half very aggressive and half fairly conservative. I've been through 2 different downturns in the economy, took 5+ years to get back to even each time. I don't have the working years left to recover again. Even though the market continues to roll on I bailed out on half the aggressive funds, went to cash, did this last Friday when the market hit 28k. First week of January I am selling the other half. Still will have a bunch in the market, ETF's that are moderate risk but the majority in conservative, mainly bond, funds. The market won't waver until we get closer to the election, there is no where else to put your money. The market will correct if we have even a hint of the dems taking the senate or pres.
 
Posts: 1594 | Location: Ohio | Registered: May 27, 2008Reply With QuoteReport This Post
A teetotaling
beer aficionado
Picture of NavyGuy
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I'm not market genius by any stretch, but I do read a lot and talk to my Fidelity guy to the point he has to get me off the phone.

My IRA account is 40% domestic stock, 5% offshore stock, 30% bonds and 20% short term/cash.

I'm not saying this is the best, but I've withdrawn about 25% each year, and the account balance is still up a few ticks from the day I retired.

Since I'm getting on in years and have a realistic view of my life expectancy, next year I think I'll be moving more out of the securities.

I don't care if I leave any of this to my survivors except my wife. My main concern is not to be a burden on my kids in any way. I think they will appreciate that more than a few bucks when I kick off.



Men fight for liberty and win it with hard knocks. Their children, brought up easy, let it slip away again, poor fools. And their grandchildren are once more slaves.

-D.H. Lawrence
 
Posts: 11524 | Location: Fort Worth, Texas | Registered: February 07, 2007Reply With QuoteReport This Post
If you see me running
try to keep up
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Unlike most people I’m not counting on living off what my principle makes by only taking my gains out. I’ve got a small pension I’ll live off (SS if there will be a bonus) and withdraw from my 401 as I please. I’m not working to leave it for others, I plan on enjoying it with my wife.

I grew up poor (and so did my wife) and never finished college. I managed to work my way into a decent living but really couldn’t start saving until I was 30. My wife has never worked (we chose for her to be at home with my daughter. Ow my wife’s health is such that she’s better off at home) but by 45 we paid off all of our debt. I’ll never be able to accumulate millions in a 401 to live off. I’ll retire at 60 and live frugal enough within my means. I’d rather retire at 60 and enjoy life (in my way which doesn’t require loads of money) than work another 10-15 years until I croak. I already told my daughter to not expect to be left all the money I’ve saved over my life, she’ll get what’s left but I told her to plan now and prepare since I’ll enjoy spending my money. I’m not like most people though.
 
Posts: 4259 | Location: Friendswood Texas | Registered: August 24, 2007Reply With QuoteReport This Post
Ammoholic
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quote:
Originally posted by mrvmax:
Unlike most people I’m not counting on living off what my principle makes by only taking my gains out. I’ve got a small pension I’ll live off (SS if there will be a bonus) and withdraw from my 401 as I please. I’m not working to leave it for others, I plan on enjoying it with my wife.

I grew up poor (and so did my wife) and never finished college. I managed to work my way into a decent living but really couldn’t start saving until I was 30. My wife has never worked (we chose for her to be at home with my daughter. Ow my wife’s health is such that she’s better off at home) but by 45 we paid off all of our debt. I’ll never be able to accumulate millions in a 401 to live off. I’ll retire at 60 and live frugal enough within my means. I’d rather retire at 60 and enjoy life (in my way which doesn’t require loads of money) than work another 10-15 years until I croak. I already told my daughter to not expect to be left all the money I’ve saved over my life, she’ll get what’s left but I told her to plan now and prepare since I’ll enjoy spending my money. I’m not like most people though.


I see nothing wrong with this.

If you do plan to spend down in retirement then it's extremely important to be heavy cash/bond/CD/MM (like 90%+) because a down turn will ruin your plan and take years or even decades of your ability to spend down principal.



Jesse

Sic Semper Tyrannis
 
Posts: 21228 | Location: Loudoun County, Virginia | Registered: December 27, 2014Reply With QuoteReport This Post
I started with nothing,
and still have most of it
Picture of stiab
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You guys are probably right to be concerned about this subject, but all my assets are tied up in fishing lures and ammo, so I am having a hard time relating. What is this "equity" you speak of?


"While not every Democrat is a horse thief, every horse thief is a Democrat." HORACE GREELEY
 
Posts: 1880 | Location: Central NC | Registered: May 18, 2005Reply With QuoteReport This Post
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