View Full Version : She took all her money out of market
This article showed up on Money magazine today, by Roz Warren, "I Took All My Money out of the Stock Market":
https://www.msn.com/en-us/money/personalfinance/i-took-all-my-money-out-of-the-stock-market-and-it-feels-amazing/ar-AAuovIq?li=BBmkt5R&ocid=spartandhp
Wonder if anyone else saw this and what you thought of it?
It's a bit coy with how much she actually has--she says, "high six figures but not a millionaire". I wonder how much would be enough--it sounds kind of freeing.
Anyway, did anyone else read this and what is your take on it?
I think it’s a fine strategy if you have “enough” - time is valuable, and not having to spend time investing, doing taxes, and incurring stress related to that is priceless.
I keep an almost-completely-invested stance, but I also keep enough “cash” investments to pay the bills for the next 20+ years or so, which is relaxing.
As to “how much is enough” - ”Your Money Or Your Life” offered some guidelines for figuring this out, and determining what sort of investment strategy would be low-risk and lazy.
I’m not trying to spend my assets down to zero as I age, I’m trying to maintain-and-grow, so that I will have funds to help others. So I figure on taking 4% or so out of my portfolio every year, which gives it a decent statistical likelihood of longevity. I usually don’t end up even taking this though, we try to live “reasonably” frugally.
There is actually wise strategy at work. She has a steady modest ongoing income, has met her life goals, has enough of whatever is a priority and is protecting it.
Is moving out of the stock market much different than deciding to quit a paid occupation because one has earned 'enough'?
I have an old friend whose finances and life situation are similar to the article and did almost exactly the same thing. He had been 100% stocks for many years and bailed completely into laddered CDs around election time. Some of his logic was around Trump, but mostly just that he had enough and no longer wanted the risk. I don't think it's a bad strategy as long as you can keep ahead of inflation. Inflation for people in the retired or early retired age groups is likely high than whatever government figures float around. I don't think 5 year laddered CDs will keep up at present interest rates.
I also would wonder if the often recommended a 3% or 4% withdrawal from savings would have good odds of money lasting an actuarial lifetime for an average person in their early 60's. I've sort of lost track of the retirement calculators, but I might want to run a few simulations just for basic ideas. I took early retirement in my 50's in the midst of the financial meltdown. I pretty much decided at the time that traditional investment advice was a bit of hoodoo and I would not ever want to be needing money from a stock portfolio in the midst of being beat up in a stock market crisis and facing a long (if ever) recovery.
I also would wonder if the often recommended a 3% or 4% withdrawal from savings would have good odds of money lasting an actuarial lifetime for an average person in their early 60's. I've sort of lost track of the retirement calculators, but I might want to run a few simulations just for basic ideas.
I "retired" when I was 36, ~20 years ago. The math seems to work.
http://www.madfientist.com/safe-withdrawal-rate/
Williamsmith
11-5-17, 3:24am
I saw the figures that the state has invested in me and if I reach 68 years of age...I’ll have exhausted those funds. The actuaries predict I’ll be gone if not by then shortly thereafter. So if I’m an actuarial outlier, I’ll continue withdrawing on the funds made available by retirees who check out earlier. It’s all a morbid game to me.
I squirreled away some investment money by saving sick and annual leave and contributing to a deferred compensation plan. So when I retired I got a lump sum and a “good luck with that” from the state. I put it in the market with a financial advisor for 7 years and then split it into a Charlie Schwab account and a Transamerica suck the life out of your earnings with fees variable annuity insurance chocolate sundae policy.
I also got a year guaranteed term term life insurance policy which will pay the wife off just enough for her not to want to put strychnine in my coffee and provide enough money to pay for some sort of health insurance supplement.
I went through the phase of trying to nickpick about the best the best way to invest this or that and is the market going to crash and should I just get out.......I finally just committed to a plan and went golfing.
Life is good. I’m happy for the librarian. I would tell her to enjoy today as deeply as she can.
dado potato
11-5-17, 8:41am
The Roz in the article is a fascinating individual. I got a hearty laugh from the title of her book of library humor: Our Bodies and Our Shelves
In my view, today's investor sentiment is powerfully bullish about the stock market, maybe even complacent about the risk of loss. For every investor like Roz, I believe there could be thousands who had been "out of the market" since the 2008-2009 melt-down, and who have capitulated, buying equity funds in a fear of missing out on the marvelous stock market gains.
From my sexagenarian perspective, my life went through stages of preparation, accumulation (& saving & equity investment), and then around age 50 I reached a "crossover point", where I believed the income on my investments would be adequate to live on (simply)... I call the present stage "Steady State". Asset allocation in my portfolio is presently 72% Fixed Income and 28% Risk Assets (Risk Assets include a few stocks and 3 funds which have negative beta in the -1.13 to -1.33 range ... you could say I am hedged for a 50-62% drop in in the SP500.) In my plan for the future, when I am age 73-75 I anticipate a stage of dissipation, when I intend to liquidate long-term investments (except for Treasury I Bonds I have stashed away) and buy Single Premium Immediate Annuities. (I have no interest in leaving an estate: I prefer to give with the living hand, and in our household the second to die is intended to die broke.)
When I first read YMOYL, I invested in treasury bonds and they did very well, so I sold them over the years and bought other things. If I had enough, I would do what she did, I think. I think Bae and Razz are correct, it is figuring out what is enough, and thanks for the reminder that YMOYL should help a lot with that. I am working on figuring that out and figuring out where to go post retirement, as I seemed to have semi-retired during a blood bath at work, and now have a part time income that may or may not stay.
Unlike Roz, I want to leave money to my kids and a little nest egg for my grandchildren. I am not comfortable with spending down to zero, at all, as that assumes when I will die,and I can't do that.
I have done one real estate for money deal, and found it pretty stressful but exhilarating. I have no pension from work. At 61, with some disability, my ability to go out and get another job seems to be pretty low. Roz has done better for herself than I have done for myself, and I guess if I had about twice what I have now, I would probably do what she has done.
I am also following the 4% withdrawal rule as of this summer, but it is not enough to live on, by any means.
Of course if all the baby boomers did what she has done, it would certainly impact the market. I think?
In The Ages of the Investor, William Bernstein asks the question "why keep playing if you've won the game?" If you can live the way you want invested in less-volatile assets, why not? For myself, I'm going for a strategy of covering the basic lifestyle plus a bit extra with guaranteed sources, and using riskier assets for some inessential extras.
Yes, LDAHL, I think that is the wisest strategy, to cover the basic lifestyle with guaranteed sources. I also think this is much more difficult to those who do not have a defined pension, so then they try to up their ampage in the market. Which can be unfortunate as it is riskier.
I have thought about doing something similar from time to time, but it's likely I'll stay with stocks for the long haul. Partly this is inertia, but insofar as I reason about it, my thinking is that around half of my assets are in equities now. If the market tanked--say, lost half its value--my net worth would be reduced by one-quarter. This would be a blow, but not a fatal one. My retirement would go from comfortable to modest, assuming the market didn't recover (although it always has). To me, this is a risk worth taking, one that simple living has made possible. Knowing you can get by with less, not a particular financial strategy, is the best insulation from risk.
ApatheticNoMore
11-6-17, 12:05pm
Oddly before that she invested money mostly in a balanced fund that was 60% stocks, 40% bonds all along, doing really well for not being in stocks more heavily all these years, because really that kind of fund is never heavily in stocks, not if that's what your in in your 30s etc. as she must have been.
Yes, LDAHL, I think that is the wisest strategy, to cover the basic lifestyle with guaranteed sources. I also think this is much more difficult to those who do not have a defined pension, so then they try to up their ampage in the market. Which can be unfortunate as it is riskier.
In my case, the pension is really what makes the strategy possible. Even with Social Security delayed to age 70, we wouldn't have enough guaranteed (and I realize there are policy risks involved) income to make it work. I looked at the possibility of a TIPS ladder or some sort of inflation-indexed annuity, but both options seemed more expensive.
I think you're absolutely right that a largely stock/bond driven retirement can be very risky, especially since so many people have an imperfect understanding of the actual risks involved and insufficient savings to weather the inevitable volatility.
Another advantage of a "pensionaized" retirement, is that as you age your income is less vulnerable to fraudsters targeting large pools of invested money and your own cognitive decline.
I wondered what you all thought about this article so I'm glad to see this thread.
I cannot help but wonder if there was a settlement from the rich ex she mentions. Also, not mentioned in the article: she was an attorney before quitting to be a library worker (NOT a librarian; a circulation assistant) and part-time writer. So I wonder if there's something she's not telling us.
dado potato
11-6-17, 7:08pm
LDAHL,
On 2 occasions 6 months apart I got quotes from about 20 insurance companies on Single Premium Immediate Annuities on my life, and the same with a Rider for a 3% annual cost-of-living escalator. Assuming that monthly payments begin immediately for a man aged 68 years, buying a $100,000 contract,
the average of the nine companies with the highest monthly annuity payment was $581.88...
the average of the same 9 companies initial payment with a rider for a 3% compound annual increase in the monthly payment was $436.04, a reduction of $145.84 in the monthly payments in the first year of the contract.
Year 2 (age 69) Monthly indexed payment $449.12... reduction of $132.76 per month
Year 3 (70) $462.59... $119.29
Year 4 (71) $476.47... $105.41
Year 5 (72) $490.77... $91.11
Year 6 (73) $505.49... $76.39
Year 7 (74) $520.65... $61.23
Year 8 (75) $536.27... $45.61
Year 9 (76) $552.36... $29.52
Year 10 (77) $568.93... $12.07
Note: Year 10 is the last year when the annuitant's monthly income is reduced by the 3% COLA Rider. The cumulative reductions in monthly payments equal $819.23 over 10 years. In future years the monthly
payments with the Rider will be greater than $581.88. Using $819.23 as a break-even point, it will be Year 20 (age 87) when the annuitant breaks even with 3% COLA. IF he lives beyond his 86th year he breaks even with the Rider.
The catch is: at age 68 when the decision needs to be made to go with straight payments or COLA-indexed payments, the individual does not really know if he will still be alive beyond 86. Standard mortality tables like the ones available at the Social Security Administration website say the average male will not live beyond 84. The 9 insurance companies also have their own actuarial statistics that are quite elegant.
In conclusion, I was not impressed by the value of the 3% COLA Rider, relative to the cost of it in the annuities offered by the the average insurance company. Before I would actually be serious about buying SPIAs, I would want to get new quotes and run the comparisons again. It is possible that a particular insurance company may be an outlier in the pricing of its COLA Rider... and if such a the company is highly rated by A M Best, I would consider it.
Hello! I am the person who wrote that Money article. My Google alert brought me to this forum and I've really enjoyed reading your comments about it. It probably won't surprise anyone that my way of life is pretty much aligned with what seems to be the overall philosophy of this site and I look forward to exploring other threads. Roz Warren
LDAHL,
On 2 occasions 6 months apart I got quotes from about 20 insurance companies on Single Premium Immediate Annuities on my life, and the same with a Rider for a 3% annual cost-of-living escalator. Assuming that monthly payments begin immediately for a man aged 68 years, buying a $100,000 contract,
the average of the nine companies with the highest monthly annuity payment was $581.88...
the average of the same 9 companies initial payment with a rider for a 3% compound annual increase in the monthly payment was $436.04, a reduction of $145.84 in the monthly payments in the first year of the contract.
Year 2 (age 69) Monthly indexed payment $449.12... reduction of $132.76 per month
Year 3 (70) $462.59... $119.29
Year 4 (71) $476.47... $105.41
Year 5 (72) $490.77... $91.11
Year 6 (73) $505.49... $76.39
Year 7 (74) $520.65... $61.23
Year 8 (75) $536.27... $45.61
Year 9 (76) $552.36... $29.52
Year 10 (77) $568.93... $12.07
Note: Year 10 is the last year when the annuitant's monthly income is reduced by the 3% COLA Rider. The cumulative reductions in monthly payments equal $819.23 over 10 years. In future years the monthly
payments with the Rider will be greater than $581.88. Using $819.23 as a break-even point, it will be Year 20 (age 87) when the annuitant breaks even with 3% COLA. IF he lives beyond his 86th year he breaks even with the Rider.
The catch is: at age 68 when the decision needs to be made to go with straight payments or COLA-indexed payments, the individual does not really know if he will still be alive beyond 86. Standard mortality tables like the ones available at the Social Security Administration website say the average male will not live beyond 84. The 9 insurance companies also have their own actuarial statistics that are quite elegant.
In conclusion, I was not impressed by the value of the 3% COLA Rider, relative to the cost of it in the annuities offered by the the average insurance company. Before I would actually be serious about buying SPIAs, I would want to get new quotes and run the comparisons again. It is possible that a particular insurance company may be an outlier in the pricing of its COLA Rider... and if such a the company is highly rated by A M Best, I would consider it.
I would tend to agree with you. The inflation riders don't seem to be a good value. If I buy annuities at all, it will probably be plain vanilla SPIAs on a piecemeal basis in my later years, and only enough to cover the basics if the pension and social security come up short.
I'm more in the camp that views annuities as "longevity insurance" than as investments.
Hi Roz, how cool that you found us! I found your article very thought provoking, and I wonder how many people our age will come to the same conclusion that you have, that you have enough, and you are getting out of the "game."
My mom used to have a stock portfolio and used to take me as a kid to watch the ticker at the brokerage office, so I have an emotional attachment to the stock market, but I can certainly see getting out, if I had enough.
I always wanted to be one of those old ladies you saw at the bank with the long scissors, in the vault, clipping coupons.
So I am definitely programmed to buy utilities...
iris lilies
11-7-17, 11:28am
I think it’s a fine strategy if you have “enough” - time is valuable, and not having to spend time investing, doing taxes, and incurring stress related to that is priceless...
I agree that tax avoidance as a primary concern can eat up my precious life energy, I have a short attention span for micro financial things. That's why my strategy of frugal living combined with a practice of save muchly/throw into simple investment vehicles/forget about it has worked, more or less. I paid attention only to our annual accounting of assets, an amount that usually went up annually. DH pays some attention to the tax exempt issue, more than I do. actually, we are dancing around ACA subsidy rewards with choices in our income stream and that is the most strategic planning I have ever done with the gubmnt's rewards system.
Right now I am fighting with a stupid financial instrument of $11,000 that is making me crazy. It is under my maiden name and in order to retitle it, it requires 30 pages of hoops to jump through in addition to an official marriage certificate. I could not take time to screw with that in the days I was working, so I just left it alone. Now we have to title it as an asset in our trust, or cash it out. I don't want to cash it this year because it will greatly affect our income for ACA subsidy purposes, but I cannot face the 30 pages of paperwork. Today I think I will continue to ignore it until I am able to take Medicare and these income avoidance games are done.
dado potato
11-7-17, 11:54am
Welcome Roz!
May the gates of friendship never rust.
Hello! I am the person who wrote that Money article. My Google alert brought me to this forum and I've really enjoyed reading your comments about it. It probably won't surprise anyone that my way of life is pretty much aligned with what seems to be the overall philosophy of this site and I look forward to exploring other threads. Roz Warren
I see you've also inspired threads at Vanguard Diehards and the Early Retirement Forums. Comments seem to range from "good for her" to "she's nothing but a dirty market timer".
I see you've also inspired threads at Vanguard Diehards and the Early Retirement Forums. Comments seem to range from "good for her" to "she's nothing but a dirty market timer".
Yeah....I've seen some of those too. Sad to see people make condescending remarks when a person's philosophy doesn't match up to their own. But that's how it goes on message boards.
Yeah....I've seen some of those too. Sad to see people make condescending remarks when a person's philosophy doesn't match up to their own. But that's how it goes on message boards.
I've noticed that. Some of the discussions about the best time to file for Social Security get pretty vicious. It makes you curious about why people care so much about the strategies other people adopt. We all fall on different parts of the risk-return spectrum. Me, I'm willing to risk vacationing in New England instead of Old England, but not eating hot dogs instead of sirloin, so I'm willing to accept a bit more risk for the nice-to-have money in the hope it could jump up to really-nice-to-have. I don't find it particularly upsetting when other people in different circumstances have different ideas.
I wondered what you all thought about this article so I'm glad to see this thread.
I cannot help but wonder if there was a settlement from the rich ex she mentions. Also, not mentioned in the article: she was an attorney before quitting to be a library worker (NOT a librarian; a circulation assistant) and part-time writer. So I wonder if there's something she's not telling us.
No settlement. He became wealthy after we split up.
I kept up with the retire early forum and some of the Bogglehead discussions before I took retirement. They were helpful. One personal issue I've had with the forums and the various retirement calculators is that they count heavily on historical data projected in the future. And in times when the market is down, it will eventually return to the mean. Looking back into the historical stock performance the information is from times when there was no TV, then no internet, no climate change data, no nukes, no IRAs, no GMOs etc. I could think of it loosely as projecting an apple crop from how oranges have grown in the past.
I question whether economic growth can carry on infinitely. Looking at a longer and more global perspective on past performance, I can't think of any of the great civilizations or superpowers that have persisted for more than a few hundred years. For some reason they exhausted their natural resources, fell to corruption, decimated by war, or were conquered by less civilized factions. I don't see societal or economic collapse in my lifetime, but I think the risk is greater than is commonly thought. I have money in equities, but it is much less than the books and forums advise and is money that I can afford to lose without affecting my lifestyle in any major way.
For those reasons I can totally understand taking all of a person's money out of the market.
No settlement. He became wealthy after we split up.
Damn! that's the sort of thing about which my dad would have said, "That really burns my ass."
My mother's friend, on the other hand, was married to a wealthy physician. They split up years ago, but despite his remarrying (more than once), he had this insurance policy he never took her name off. So when he died, she became quite comfortable indeed. The stuff dreams are made of. Except that he was a jackhole...
Williamsmith
11-9-17, 8:18pm
Damn! that's the sort of thing about which my dad would have said, "That really burns my ass."
My mother's friend, on the other hand, was married to a wealthy physician. They split up years ago, but despite his remarrying (more than once), he had this insurance policy he never took her name off. So when he died, she became quite comfortable indeed. The stuff dreams are made of. Except that he was a jackhole...
Maybe he just forgot?
frugalone
11-12-17, 4:07pm
Maybe he just forgot?
Actually, I think that is what happened.
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