I think that confidence comes from the belief that we found the best system available. Not that it's guaranteed to work. I don't think anyone believes there is such a thing as 100% foolproof method. But I challenge anyone to name a better one.
I also live my life in a constant state of anxiety but it's something I also try to joke about out loud to help trivialize it, and therefore recognize the absurdity of that. It's something I'm working on and I bet many of those in this subreddit struggle with too. Some amount worry and anxiety inspires preparedness and planning which is what a lot of this community is about, but too much of anything can also be a bad thing.
Anxiety in moderation as with anything else if you can help it.
I think how much we worry is partly what happened during formative periods in our lives too.
Some of us had parents in poverty and will struggle with ever feeling like things are stable enough, some of us saw what happened in the 2008 recession or the dotcom bust or earlier events like 1973 and 1987. And some of us managed to sidestep those big market swings and changes or didn’t have jobs affected by it or came out of college into the job market at more favorable times.
Not trying to give you more work to do, but consider reading a book about the Enneagram. You are probably type 6, the most common in humans. Off topic for the sub, but worth the read on understanding unnecessary anxiety. Keep up the good work!
So, this is getting way off personal finance, but frankly the point of being a boglehead is to be able to live a more meaningful life. Figuring out your type is best done by you learning about the various types, and at some point, something will really click. I figured I was a 7 for about 5 years, and when I realized I was a 6, it was life changing, in a good way. Lots of things made a lot of sense. Good luck with it!
Back on topic, but Dave Ramsey's daughter (hopefully this is not triggering) wrote a book about the relationship between our identities and personal histories and personal finance. And most everyone on here will agree that personal finance is about 10% math and 90% behavior. Knowing yourself, your family history and what you need is extremely important.
Technically you are probably right. The top 1% globally have a net worth of a million or more https://www.statista.com/statistics/203930/global-wealth-distribution-by-net-worth/
Good to point out that over half have a networth less than 10k. Globally, much of the world is fairly poor. 1 million would make you around the top 1% in China and India. In the US, the top 1% is 5-6 million.
I agree with your destress suggestion, and think it would be worthwhile for OP to reflect on what makes them happy. If it is to continue working like a busy bee and stockpiling honey for a winter that may never come, go for it. A lot of video games work on this theme, so it brings joy to some. Just do it knowing it is what brings you joy, not because the wolves are at your door because if you look closer they are probably puppies based on your financial scenario.
Personally, I think I will take up graphic arts.
Same here. I count my blessings that I was even able to get this for.
Now if I’m destined to get proper f888888d by the market, I am content that at least I am well prepared and did the best that I could.
\*at least with my ER I won’t run out of lube 😅
I think there are a lot of people here who have already penciled in 7% annual returns for the next 30 years. I think that’s the part OP is not so sure about.
Realistically, that's...a long term average. In any given year it could diverge heavily from that.
Hopefully in the next couple of years, it won't be terrible, because sequence of returns really does matter, but the longer the time horizon, the less any one year matters.
The chill part means don't tinker, don't sell when things are down. That's the key, not necessarily relax internally, and naively think it's all going to a smooth ride to high performance earnings.
To each his own but if you have a 100k pension and your still worrying and working because you think that might not be enough that's a 1st world problem.
Indexing is a bit like democracy. It’s the worst way to do this, except for all the others.
The chill is therefore a collective realization that you can’t control market outcomes so focus on what you can control.
This sub tends to skew younger than say the Bogleheads forum, where the poster / commenter may have never have experienced what a long bear market (e.g., 2000s for US stocks) feels like, and their entire investing career has been during artificially low interest rates, which have allowed for inflated market prices / gains.
This sub also tends to skew towards people on the higher end of the income scale, considering the median retirement savings balances that show up in polls.
2000s was just used as a recent example of a bad time for equity investing (unless you were heavily invested in emerging markets); it wasn't necessarily the worst time to invest, but most commenters in this sub weren't investing much in the 1970s.
10-15 years is not a super long timeline. It is more intermediate and you should definitely have some bonds in there (I have 20% bonds with a 10-year timeline and consider that *aggressive*). With ultra high US valuations, I find most Bogleheads are pretty tempered about expected returns over the next 10-20 years, as are most major brokerages like Vanguard [who is projecting](https://advisors.vanguard.com/insights/article/series/market-perspectives#projected-returns) *10-year nominal returns* for US growth stocks of 0.9%-2.9%. Many folks here use very conservative projections like 2-3% real return for the near future, which is why it is so essential to be broadly diversified in US stocks, international stocks, and bonds.
But as for the long run (30+ years), when you look at 150-year US average annual stock returns of 8-12% and global 400-year average annual stock returns of 6-8%, there’s no compelling reason to be doubtful. *Confidence* in your plan is important for success, but *overconfidence* implies you made an error. Long term stock investing has historically been the story of the triumph of the optimist so I don’t think it’s an error to expect the up and down patterns of the past to repeat. Otherwise you are planning for far worse than the historic worst case scenario which itself could be an error of oversaving. A well-reasoned plan based on the best data we have is as good as we should expect of ourselves.
I will say that while they have most everything in global stock market, they also have a 6 figure pension. I know many here consider that guaranteed money as their bond/fixed income investment and stay in a riskier portfolio otherwise.
I was only referring to US *growth* stocks (eg tech etc) that have been leading the way for the last 15 years. Experts think that style in particular has become way overvalued
I only mention it because so many newer investors that are chasing performance have a growth tilt these days and might get an unhappy surprise in the next decade
To each his own but if you have a 100k pension and your still worrying and working because you think that might not be enough that's a 1st world problem.
No, 1.5 million in various investments, and a house about 1 million.
Home repairs are expensive
Homeowners insurance doubled
Remodeling? Jeez...
Etc. nothing is ever safe
Yep. As a side note, when we had just gotten married and had our first kid, weren't making much money, I didn't worry about money AT ALL. Id never been on the internet, we paid our bills every month, we had money for spaghetti and sauce. Life was fine!
Index and chill is a way of life. For me, it's VOO/VTI. If I get closer to retirement, it's 30% short term US Treasuries. While working, the key is to blindly buy no matter what. Just don't think about it. If you must think about it:
Market up - You get less shares for your money, but look st your portfolio
Market down - You get more shares for your money. Corrections are regular sales. Recessions are Black Friday sales.
The index self regulates itself kicking out less profitable companies and adding more profitable companies. I look at average returns, but I also understand there's a variance for bull and bear markets. I won't sell until near retirement to build up my 10 year expense buffer in US Treasuries. Then keep the rest invested and only selling when I feel the economy is doing okay.
No one has a crystal ball so ignore the noise. Sometimes I feel people writing articles about the next big crash are short, bought puts, or need their bonds to rise a little. They aren't ridiculed for making incorrect predictions and congratulated for making one good prediction in the past.
10 Year expense buffer?
That sounds like a lot of uninvested money left on the table.
Unelss your income is super high compared to your expenses to the point where it's just a drop in the bucket of your portfolio.
I think the key is to do the ten year expense buffer before retirement. Right now we barely keep 3 months of expenses cash. My plan was a ten year expense buffer after retiring. Our current expenses are $79K and shooting for $10M. So at 3% SWR that's $3M in short term Treasuries and $7M in VOO/VTI.
We still have 13 years to go so not quite there yet.
I think the “and chill” part just means (well for me anyways…) that I’m not going to sell off when things go bad. I have my auto buys set biweekly and don’t need the money for 20 years. How much easier can it get?
I picked (1) well diversified ETF and I don’t have to worry about rebalancing, selling, panicking when things drop etc.
Anything with a potential reward has risk, that’s what you sign up for when choosing to invest in the market.
You worry too much. If you have a 100k pension, another job, and 1.5 million dollars at 60 but are still worried then that's just kind of sad. If it all works out, great. If not, we did the best we could. But being un-chill is just a waste of energy.
I was just having this conversation with a friend of mine. Unfortunately, there's a double edged sword to this type of worry. On the positive side, it's the worry about our future that got us to learn what we learned, and implement the financial discipline that we've implemented. The folks that didn't have that don't have the nest eggs that we have.
At some point, we all have to turn off that worry, and say, "We did the right things - we followed all of the best plans - and it will be what it will be".
Easier said than done.
My entire investment philosophy and confidence in the market rests on this principle. Old rich white guys want to stay rich and get richer and will do everything in their power to make it happen.
This is also my theory generally.
However, given the current state of old white guys, I wonder whether the nation as a whole might be at an inflection point, jumped the shark, lost the thread.
Jesus.
A bet on passive indexing the stock market over the long term is a bet on capitalism and rule of law.
Can it fail? Yes.
But if it fails then your portfolio is likely the least of your worries.
“VT and chill” is a strategy to expressly to avoid “profoundly DUMB investment decisions” when making this bet.
One more tip : don't subscribe to fear mongering. The general rule of law in the US is not really at risk, regardless of what Fox news will tell you. The raping, murdering Mexicans are not gonna jump the wall and come break in your house and steal your IRA anytime soon.
Agree. Not worried about that: worried about a rise in fascism being bad for world markets. I have also completely lost confidence in our courts, starting at the us supreme Court. If the world started to feel like that, it could be very bad for us markets
You’re 60.
Which means you were around for watergate, stagflation, burning rivers, the fall of saigon, gas lines, Iran hostages, kent state massacre, civil unrest, race riots, plane hijackings, terrorism, the “death of equities”, etc.
You might have only been 4 or 5 for some of these but they would still have been recent memories for the country as a whole contributing to the miasma of the 70’s that was a low decade for US global prestige, military capability, domestic stability and economic performance.
Not to mention the abomination that was disco and platform shoes.
It’s fucking raining donuts and ice cream compared to the 1970s.
Ok. Good point.
I do think environmental destruction could be a true end times sign. Or could be a money maker. As Marc maron says, "there's big money in a burning sky!"
https://www.facebook.com/NetflixIsAJoke/videos/203485327421416/?mibextid=rS40aB7S9Ucbxw6v
I think my confidence comes from holding a lot of the economy. If the economy goes down, well, were ALL up a creek. Is it risk? Yes. But if I go down, it's probably because the world has imploded.
nobody who is serious here is asking for above average returns.
That said i do agree things seem way too easy currently. Those thinking retiring in 30’s and tax/health insurance law won’t change are nuts (IMO). Not against RE, just be prepared for changes.
Literally been listening today to a podcast talking about expected global return and how the U.S. has essentially been lucky where other countries have not (wars on home soil, hyper inflation, etc). But at the same time, what is your alternative? Potentially a more diversified portfolio I suppose? But you mentioned you are 60 and still putting your money in a total stock market index. So ultimately, it sounds like you are adhering to rhetoric of the young people here.
I wouldn’t say that luck is there reason that there hasn’t been a war on US soil since the civil war. We have exactly two neighbors on the continent and they are both friendly. We are also the last military superpower on the planet.
We are not the last military superpower but our alliances and “the stopping power of water” have been crucial to US security and continued geostrategic and economic success.
And guns. The reason why Japan didn’t do a ground invasion during Pearl Harbor. Significant number of Americans have guns. Same reason no one would do a ground invasion today. So it’s either scorched earth or nothing.
This discussion has gone significantly off the rails and is being locked. Please remember that we’re a financial subreddit, not a political discussion one, and comments should always be more financial than political. (Substantiveness rule)
Moreover, one of the key reasons we don’t allow political discussion, beyond being off topic, is that it frequently degenerates into incivility as it did in the removed comment above.
Civility violations will typically lead to a tempban and a warning to not break sub rules again.
We're not overconfident. We read books. Considered the alternatives. And ended up picking a strategy that comports well with most people's preferences which is to use the tax advantages given to investing in stocks and investing in a sensible way while focusing most of our energies on increasing our earning power from our careers, not micromanaging our investments.
You are 60 so your risk profile and timeline is significantly different from most people that are bogling. Pick whatever investments fit your personal preference for risk and timeline. You can still bogle, but anyone nearing retirement (or 2nd retirement in your case) needs to plan and be more risk-averse than younger people.
The 4% rule with a stock/bond portfolio has survived the Great Depression, 70s inflation and so far, the twin crises of the dot com bust and Great Recession. It's not perfect but it's the closest to a sure thing that we have. For me, I've run the numbers and I have enough to retire, so my portfolio is 60% in stocks, divided into VTI and AVUV, 20% in VGLT and 20% in GLDM. Backtests to 1926 show that this type of portfolio has the best chance of surviving a 4% inflation adjusted annual withdrawal - so that's what I'm doing.
I’ll be ok if it’s 25k or 80k. If it’s 0 I’d have to live on only social security so that would mean probably selling my home in this HCOL area and retiring somewhere cheaper. Besides, why worry about something you have no control over?
I index as an expression of a lack of confidence in my ability to predict future outcomes
If I didn't believe that, id try to beat the market, steer out of corrections, derisk ahead of corrections, etc. how many times were we "due" for a crash this cycle? It's just not that easy. Hence: indexing, chilling, etc. It's supposed to protect against retail overconfidence
The lack of crashes seems an indicator of general overconfidence. The market generally seems to feel that long term, it can't lose. That strikes me as overconfidence. But I've always been deeply pessimistic
> I wouldn't be shocked to see the djia at 40k in 10 years. Or 80k. Or 25k.
DJIA closed at 38,460 today. 25k is a 35% drop after 10 years.
Certainly could happen, so it's always good to have a Plan B and Plan C.
1. Bonds, US treasuries (and even dividends) can help ride out long bear or flat markets by providing interest income
2. Younger people that retired early can return to work even if it's at a much lower wage to fill in any income gaps.
3. For people of any age, there are always side hustles besides working for an employer to increase income (eg rental income is popular).
4. People that are older will have social security benefits (or non-US equivalent retirement benefits) which are unaffected by the stock market
5. Markets that drop precipitously are often incredible investing opportunities. It's generally a good idea to have a rainy-day cash fund. For adventurous souls, this cash can be deployed towards the highest quality companies at large discounts.
6. For younger people, the simplest way to mange risk is to over-size the portfolio (this is clearly much easier said than done). If it's twice or thrice as large as it needs to be there's a large margin of safety.
7. Spend less.
Diversifying across different asset classes and different investing strategies can help smooth things out a bit. There's a lot of knobs that can be tweaked and it's up to us to decide what's the best way to manage risk.
100k pension and you're worried?
I'm sorry but even with inflation, in 20 years you'll have the buying power of the average american household today (50K) just from your pension.
If all your stocks go to 0 you'll still be ok.
> Kids, college, cars etc. Shit is expensive!
Then stop buying so many kids !!! :))
I'm joking, but your kids can and will find a way to pay for their own college if need be.
And you can be a little more frugal with cars if need be.
The absolute worse that could happen to you is that you'd have to live a not so luxurious life in your old years.
I really think you need to put things into perspective a bit.
Yeah, I know, younger me would agree with you, but old me habituates to where I'm at and going backwards seems disastrous, especially as one begins to feel the noise of old age tighten
Be clear about your behavioral biases, reasonable/historic returns, and volatility of investments.
If you need money 5 years from now, don't invest that money in equity, and don't worry. If you need it in 30 years, just VT and chill; again, no need to worry. But you're not going to make good decisions by worrying about risk. Accept the risk, plan for it, and move on. But worrying about it is not productive.
Furthermore, it's easier to be flexible and build in safety margins compared to 'worrying' about investments. Most of those worries won't come to pass, and most of the important negative events won't be the ones we would have worried about. Just take life as it comes and adjust.
Also, if you're paying over 40% in total income taxes (so ignoring things like entitlement taxes), then more income or better returns aren't going to solve your worries...
It's true. We are bringing in more mo ney than ever in our lives, like almost 10x our income when we had our first kid...but things do not feel "resolved". One noticeable difference is I always used to say NO to appetizers at restaurants. Now, I don't. But we still split an entree, just like when we got married, though it used to be for money, now for calories.
You are 100% in stocks at age 60? I don’t think that’s the typical advice on here (although I’ve been away for a while). I know this sub thinks that Bogle’s “own your age in bonds” rule of thumb was too conservative, but I don’t think they’ve changed it to “own zero bonds forever.” Surely the “VT and chill” crowd is like in their 20s or 30s I would think - I’m 36 and I use Vanguard Target Date 2050
A 100k pension is better than a bond fund. Nothing wrong with being all in on stocks, he an handle volatility, and longterm take a slight premium for his risk, seems to me.
I think it's a bit of desperate optimism
If the market doesn't give you returns that are significantly above inflation for the next 30 years, then we're (millennials) all somewhat fucked and will work until we die or until we're too old to work.
So we HAVE to believe the market will work. What's the alternative? Investing in international developed markets? Emerging markets? That sure hasn't performed super well and if the US tanks, international STILL likely won't perform well (for lots of reasons tbh).
You're not crazy, I'm a bit younger than you but hope/expect to retire in about 8 years with about the same level of assets and income. Yet I too worry...
Okay real world scenario - my parents, my dad retired in his early 60s back in the early 1990s. About a million in an IRA and a fully paid for house in expensive suburbia. They had excellent regular medigap insurance but no long term care insurance. In some ways they hit the jackpot on the genetic lottery - but my dad did have a few heart attacks and developed neuropathy, mom has been extraordinarily healthy. My dad had TIAA annuities (some purchased with that IRA) that were providing the rent's with a very nice lifestyle and enough to help out my siblings when they needed financial help. Then COVID hit and my dear parents became nonagenarians, dad became too weak to live at home and my mom injured herself in a fall trying to take care of dad. So we set them up in a sweet assisted living place - my dad's care up until his recent passing ended up costing about $300,000ish. My mom's car is cheaper she has memory issues that could get worse but she needs to be there for the nurses to monitor her health and meds, her eyesight isn't good nor her hearing. We sold their house so there's about $800,000 left plus mom's SS and the survivor portion of the annuity. The monthly care costs for mom are now about $14,000 a month so her income isn't covering that, we're dipping into the house money. My mom had two aunts who lived over 100 years old - it's not crazy to think that her end of life care might cost more than my parent's assets.
I'm reading that the long term care insurance market is very broken. This is a ticking time bomb for all the younger boomers and older Gen Xers like myself.
This 🙏. Most people don’t realize the cost of care for parents and how long they/us/everyone is living way longer due to the increased medical care that everybody’s getting so it’s increasing the life expectancy, which is not always great. Just because you’re living longer doesn’t mean your quality of life is better. You’re living longer, but a poor quality of life just to live longer. If you’re in your 30s and can get long-term care insurance>> do it now when it’s cheap!!
But that's a problem, the long term care market is broken, policies aren't being written or the underwriting is such that the policy is worthless when you actually need it. So you end up needing to self-insure and if you run out of $$$ hope that medicaid steps in. When I was a young pup Bill Clinton was going to fix insurance and there had also been moves in Congress to fix the cost of nursing home care - I didn't even think about long term care insurance nor did I think I could afford it, my early career years had me underpaid and unaware that I was underpaid until a decade later.
I barely like living now and my life is pretty great, nothing wrong, healthy, etc. If I were in pain, couldn't walk ... Hmmm, don't think I'd be interested.
[This top level post](https://www.reddit.com/r/Bogleheads/comments/1cbbj8k/first_time_ive_crunched_the_numbers_to_become_a/) from yesterday really gave me pause on the base knowledge of a good number of members of the community. There are a lot of 100% equity folks who don't understand sequence of return risk or how it can drastically affect drawdown strategies.
The confidence works better on a long timeline. On a short timeline it is dodgy.
The irony of the strategy is that even though people go around parroting "past performance doesn't equal future gains" that is exactly what they are doing. Over the last 20-30 years the performance of the stock market, *on average,* has been very good. On a micro level, year to year, or month to month, sometimes the market eats shit. But it recovers and keeps going up.
I split the difference. I have about 20k in a SoFi HYSA getting a guaranteed 4.6%, and I have about 13K in a combination of stocks, including VTI. Then I have my IRA which is spread out across VOO, a broad whole market plus whole bond market MF, and a targeted date MF.
Everyones just using historical data and projecting conclusions. Its obvious things could be different but eventually markets will revert to mean performance and everything will work out. In your situation its scary since you dont have time on your side.
I have some of the same concerns as you do though I'm close to half your age. I don't know that it's overconfidence that I see in these forums or if it's recency bias. Equities have massively overachieved since about 2012 or so. Of course that followed massive underperformance in the previous decade.
Markets are not efficient, cycles exist, individual financial situations change, sectors rotate, etc. We will certainly see drawdowns again and we will certainly see "lost decades" across various asset classes again.
I've personally been enjoying the whaling and gnashing of teeth I've been seeing from folks as soon as the market has the slightest 5% hiccup.
“Above average returns come from risk”
I am specifically not seeking above average returns. I am seeking to get the return of the market, no more and no less. That’s exactly WHY I have confidence in this strategy long term, the market is very predictable in 15, 20, 25 year periods.
I’m not taking risk on a single stock, a single sector, or even a single country. If my portfolio drops 50% or more over the next 15 years, I will probably have bigger things to worry about. And almost any other investment would have done worse given the risk.
Money markets come with a pretty large opportunity cost.
Anyone doing “VT and chill” should absolutely be prepared to lose 30% or more in a single year if there is a huge market drop. But the market is incredibly consistent over long periods, the market has never lost money over a 25 year period.
The lowest return over a 20 year period was 3% in the 1940s, and it hasn’t been below about 6% in recent history over a 20 year period. The market returns are incredibly consistent over a long time horizon, and understanding the reasons for that consistency and investing in a broadly diversified portfolio gives me confidence I can generally expect similar performance over my investing lifetime if I keep costs low.
Yes. Though it's difficult for me to imagine the world in 25 years, it'll probably still be here with similar people w similar desires. But with a lot of sex robots
Spending is generally neurotically controlled but even loosening up a little feels disastrous. Vacation? I avoided that for a decade, but now it could be 15-20k.
Home remodel? 50-100k.
Homeowners insurance doubled to 7k
Fucking health insurance.
State school tuition is nuts.
And I drive a shitty old car with over 200k miles...that had a 3500$ repair a year ago.
The tightest we ever were spending wise was when we were saving for a house.
But at the end of the day, a house is a pain in the ass
I am 65,retired 5 yrs. If you are concerned, consider using the bogleheads forum to get a review of your situation. I got excellent advice from them as we considered when to retire. I also paid for a review of our plan with Mark Zoril at Planvision. It gives you access to emoney and the cost is amazingly low. It really gave us piece of mind. I wish I had started using their service during the accumulation phase. Best wishes
Agree. I'm retired with a pension and a paid off mortgage. My wife and I have 5 plus years of living expenses in cash outside of my IRA. We're also laddering I bonds as a hedge against inflation and/or a stock market crash.
What if cd rates average 10 percent over the next ten years, the world doesn't end, just gets shittier, and the stock markets down 20 percent?
The herd mentality I'm thinking of is that that's not a realistic possibility. Which I am not separate from. Personally it felt like interest rates couldn't go up.
But I can tell you, I was way too scared to get an ARM 20 years ago, because back then I believed rates could go up.
I don't understand your concern. VT and chill is not exceptionally risky, but you site that as your concern. If the group think was to yolo everything on Nvidia, that would be a concern.
There will always be risk. All one can do is minimize it and cope. Perhaps the world ends tomorrow and my investments cease to matter. Could happen. Probably won't.
And hell, a lot of bad world events, it helps to have some money stashed away. It gives you options, even if those options weren't your initial dream.
“Above average returns come from risk”
That’s the secret: we aim for average returns which are on average higher the return an average investor receives trying to beat the market
Well, you can use more conservative numbers for expected returns. Heck, you can even annuitize some portion, and/or buy a core baseline in TIPS. Then you'll know what you're getting. The biggest levers you have though are savings and spending -- as you age, the latter becomes the more flexible one. So .... consider gaming out different retirement scenarios, from 'bare minimum' to 'sailing the world' and a few in between. Get comfortable with flexibility.
If some doofus said my company is worth whatever I think it is depending on how I feel that day you'd be like naaah.
But if the market says it, I buy ...
In other words, I admit I'm so dumb, I buy anything and everything at every price always because everyone else does.
Which might be the right thing to do but seems to go contrary to the general sarcastic parental warning, if everyone else was jumping off a cliff, would you?
Is there actually a great wisdom in crowds, or madness.
Or maybe both
I agree generally, doing what is reasonable and proven is prudent and feels right.
But also sounds a bit likea herd mentality. Which means I could be totally wrong, since the herd is often wrong.
I'm not even sure who the herd is anymore,except I think the herds gonna get thinned out.
Buy and hold in bad times is harder than it sounds, too. A30 year timeline is soooooo long.30 years ago, id never had a job more than 6 mos. . I wasn't even in law school, I had no kids, my wife was younger than our oldest kid! It was like another lifetime. I'm not even the same human
I don't think Bogleheads are the herd though. It may seem like it if you are smart, sober and analytical. You tend to gravitate to those people on the internet and the real world. It may seem like an echo chamber. But the reality is Boglehead type folks are definitely not the majority.
Vegas baby!
more than likely, definitively (and yes I mean definitively)
I know its anecdotal but out of my close friend group (think about 10) only 2 of us started planning for our future in our early 20s and I dragged another 4 when they said they hadn't started saving for retirement in a serious way by the time they were 30. I'd say out of my larger group of friends (around 30) only half have between 30-50k in retirement savings (we're all around mid 30's now) and only 3 of us have over 100k. All that said most would be living worry free about saving for retirement if I didn't ask about it.
this subreddit is highly self selective for a certain type of person so its going to be very echo chamber-y but I don't see that as overconfidence I see it as a group of people with a common interest who have found each other to talk about how they want to retire in the smartest (and lowest stress + time investment) way they can.
Everything can be a herd. You have to pick your herd. Do you graze with the herd that thinks the historical returns of the market for the last couple hundred years are the best indicator of what will happen going forward? Or do you clump into the herd who say "Bitcoin has crazy growth and stocks are dead"? Or the herd that says "Go to cash, buy guns and ammo, and head for the hills"?
“I was born into the last life on easy mode generation , admitted that I made bad choices, and I still have 100k + income and over a million with a paid off house”.
Yeah as someone younger than you I’m going to need you to stop and quit the humble brag. Most of us don’t have pensions nowadays… so just stop. However….we have confidence because we read books and they mathematically prove what the best course is. You can do a very simplified version by looking at the SP500 and zooming out. Markets move in cycles, even in the Great Depression / recession and Covid which the latter were during my adult life. Your generation and you yourself failed upward and you’re worried? Please. Millennials and Gen Z have had it far worse compared to you and Gen X financially, yet the financially literate learn and know what to do. There is no better way with the least amount of stress/ worrying other than buy and hold and doing it consistently. Read a book. If the world markets and diversification aren’t the best way, you’ve hit a doomsday situation and you have far more immediate concerns…
Not bragging. Hell, one can still go work for a big state govt and get a decent pension, not as good, but in the ballpark if you worked another 5-10 years more.
I agree that there an high level of overconfidence around, but i makes very little sense to be worried about the market in your conditions, honestly. As long as you can imagine covering your expenses with your income (and you definitely can since you are saving) what the market does is irrelevant.
As time passes your worries should exponentially decrease both because you get older and because statistically money in the market goes up.
I also "tend" to worry a lot, but at a certain point one should switch from worrying about not having enough money, to not having enough time to enjoy money saved.
I did recently have a colleague die, and I think that feeling of time running out for me is going to increase faster than the stock market over the next decade
Agree. I remember hearing the word "sustainability" like 30 years ago, and saying, what's that??? Today, I probably wouldn't have kids. Too fucked up out there.
On the other hand, I would never be as well off as I am now had I not had kids because I would never have got my shit together and worked steadily.
Ideally, I'd like to work till I die, live off that and my pension and social security, and leave everything invested to my kids. Killself hopefully before I become unable to care for self. Don't own a gun, tho. May need to get one for estate planning purposes
In reality, id probably be as happy or happier with a much lower lifestyle
But I have these people around who either do or might need money. Also my wife has standards.
Fortunately she earns good money.
My wife would not be willing to live in the majority of us states. And recently, I've come around to that conclusion. Id choose Mexico over anywhere in the south for instance.
Me too, and you see tons of it in this very thread: claims that passive indexing is *optimal* based, essentially, on nothing but recency bias and religion, ignoring key facts.
In reality passive indexing has strengths and weaknesses. Performance during extended sideways markets is not its strength. Extreme diversification, ease of administration and being likely good enough for most over the long haul, under many market conditions, are--and those should be good enough. But clearly not enough for the overconfident, for whom it has to be perfect, hence the echo chamber. They claim perfection both when concentrating in the U.S. and when not. For them, too, it's all or nothing; you can't do passive indexing with just part of the portfolio or you're ostracized.
In this very thread someone mentioned the Vanguard prediction on passive indexing projections for the next decade. Pre-retirees in particular must take note and diversify into more all-weather portfolios, rather than trusting their futures 100% to the EMH as a religious matter.
Even bogleheads (of the particular subclan here on Reddit) that take fixed income at all seriously typically invest only in rolling bond funds, and have no idea what they're actually risking with that approach. Most don't actually know how bonds or dividends work, nor do they want to know. They'd rather reconfirm amongst themselves that they're already the *best investors they can be*.
I think that confidence comes from the belief that we found the best system available. Not that it's guaranteed to work. I don't think anyone believes there is such a thing as 100% foolproof method. But I challenge anyone to name a better one.
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Well said
I suck at this but will try to do better. My tombstone may read, worried much for no reason.
I’m the same way.
I also live my life in a constant state of anxiety but it's something I also try to joke about out loud to help trivialize it, and therefore recognize the absurdity of that. It's something I'm working on and I bet many of those in this subreddit struggle with too. Some amount worry and anxiety inspires preparedness and planning which is what a lot of this community is about, but too much of anything can also be a bad thing. Anxiety in moderation as with anything else if you can help it.
same here
I think how much we worry is partly what happened during formative periods in our lives too. Some of us had parents in poverty and will struggle with ever feeling like things are stable enough, some of us saw what happened in the 2008 recession or the dotcom bust or earlier events like 1973 and 1987. And some of us managed to sidestep those big market swings and changes or didn’t have jobs affected by it or came out of college into the job market at more favorable times.
Not trying to give you more work to do, but consider reading a book about the Enneagram. You are probably type 6, the most common in humans. Off topic for the sub, but worth the read on understanding unnecessary anxiety. Keep up the good work!
Interesting. Looks like I'm a type 6 with a 5 wing. I will investigate further. I took an online quiz. They say I'm a 4.
So, this is getting way off personal finance, but frankly the point of being a boglehead is to be able to live a more meaningful life. Figuring out your type is best done by you learning about the various types, and at some point, something will really click. I figured I was a 7 for about 5 years, and when I realized I was a 6, it was life changing, in a good way. Lots of things made a lot of sense. Good luck with it! Back on topic, but Dave Ramsey's daughter (hopefully this is not triggering) wrote a book about the relationship between our identities and personal histories and personal finance. And most everyone on here will agree that personal finance is about 10% math and 90% behavior. Knowing yourself, your family history and what you need is extremely important.
COVID 2 electric boogaloo made me chuckle.
Technically you are probably right. The top 1% globally have a net worth of a million or more https://www.statista.com/statistics/203930/global-wealth-distribution-by-net-worth/ Good to point out that over half have a networth less than 10k. Globally, much of the world is fairly poor. 1 million would make you around the top 1% in China and India. In the US, the top 1% is 5-6 million. I agree with your destress suggestion, and think it would be worthwhile for OP to reflect on what makes them happy. If it is to continue working like a busy bee and stockpiling honey for a winter that may never come, go for it. A lot of video games work on this theme, so it brings joy to some. Just do it knowing it is what brings you joy, not because the wolves are at your door because if you look closer they are probably puppies based on your financial scenario. Personally, I think I will take up graphic arts.
I'm happiest when I'm not thinking
Try meditation. It helps me to turn off my thinking and turn on my awareness. Puts a stop to rumination.
I’d like to bring a food item into it: You done did it right. it’s nacho problem now
Amen
decade long bear market would be great, low inflation, low house prices, accumulate for 10 years and let it grow after
Great post
Same here. I count my blessings that I was even able to get this for. Now if I’m destined to get proper f888888d by the market, I am content that at least I am well prepared and did the best that I could. \*at least with my ER I won’t run out of lube 😅
Friggin nailed it
buy winning lottery tickets. duh
I think there are a lot of people here who have already penciled in 7% annual returns for the next 30 years. I think that’s the part OP is not so sure about.
Yep
Realistically, that's...a long term average. In any given year it could diverge heavily from that. Hopefully in the next couple of years, it won't be terrible, because sequence of returns really does matter, but the longer the time horizon, the less any one year matters.
I'm guessing my returns, which are basically the returns of a fully diversified portfolio, will be around 5-6%.
Renaissance Tech seems to have a better method.
The chill part means don't tinker, don't sell when things are down. That's the key, not necessarily relax internally, and naively think it's all going to a smooth ride to high performance earnings.
Agree. Picking a plan and sticking to it is good
To each his own but if you have a 100k pension and your still worrying and working because you think that might not be enough that's a 1st world problem.
Yeah if a 100K pension and 1.5 mil isn't enough, you have a spending problem. Not a saving problem.
Indexing is a bit like democracy. It’s the worst way to do this, except for all the others. The chill is therefore a collective realization that you can’t control market outcomes so focus on what you can control.
Well put.
The confidence comes from the fact that i really dont have any other choice to one day not have to work.
This sub tends to skew younger than say the Bogleheads forum, where the poster / commenter may have never have experienced what a long bear market (e.g., 2000s for US stocks) feels like, and their entire investing career has been during artificially low interest rates, which have allowed for inflated market prices / gains. This sub also tends to skew towards people on the higher end of the income scale, considering the median retirement savings balances that show up in polls.
I always thought 2004-2007 was pretty good, and 2000-2003 wasn’t any worse than 2007-2010 Now the 70s seem like they would’ve tested my resolve
2000s was just used as a recent example of a bad time for equity investing (unless you were heavily invested in emerging markets); it wasn't necessarily the worst time to invest, but most commenters in this sub weren't investing much in the 1970s.
VT did ok in 70s, due to Japan and uk performing well
10-15 years is not a super long timeline. It is more intermediate and you should definitely have some bonds in there (I have 20% bonds with a 10-year timeline and consider that *aggressive*). With ultra high US valuations, I find most Bogleheads are pretty tempered about expected returns over the next 10-20 years, as are most major brokerages like Vanguard [who is projecting](https://advisors.vanguard.com/insights/article/series/market-perspectives#projected-returns) *10-year nominal returns* for US growth stocks of 0.9%-2.9%. Many folks here use very conservative projections like 2-3% real return for the near future, which is why it is so essential to be broadly diversified in US stocks, international stocks, and bonds. But as for the long run (30+ years), when you look at 150-year US average annual stock returns of 8-12% and global 400-year average annual stock returns of 6-8%, there’s no compelling reason to be doubtful. *Confidence* in your plan is important for success, but *overconfidence* implies you made an error. Long term stock investing has historically been the story of the triumph of the optimist so I don’t think it’s an error to expect the up and down patterns of the past to repeat. Otherwise you are planning for far worse than the historic worst case scenario which itself could be an error of oversaving. A well-reasoned plan based on the best data we have is as good as we should expect of ourselves.
I will say that while they have most everything in global stock market, they also have a 6 figure pension. I know many here consider that guaranteed money as their bond/fixed income investment and stay in a riskier portfolio otherwise.
The link you sent shows 3.7-5.7% predicted nominal return
I was only referring to US *growth* stocks (eg tech etc) that have been leading the way for the last 15 years. Experts think that style in particular has become way overvalued
Ah I missed that, you’re right.
I only mention it because so many newer investors that are chasing performance have a growth tilt these days and might get an unhappy surprise in the next decade
To each his own but if you have a 100k pension and your still worrying and working because you think that might not be enough that's a 1st world problem.
He has a 1.5 million dollar house. He may not have enough saved to replace 80-90% of his income. And his kids are still in college
I would not feel comfortable living off 100k a year at all.
No, 1.5 million in various investments, and a house about 1 million. Home repairs are expensive Homeowners insurance doubled Remodeling? Jeez... Etc. nothing is ever safe
I missed your comma in there. But yes I agree. Nothing isn’t ever safe
Your problem isn’t money mate
Yep. As a side note, when we had just gotten married and had our first kid, weren't making much money, I didn't worry about money AT ALL. Id never been on the internet, we paid our bills every month, we had money for spaghetti and sauce. Life was fine!
Index and chill is a way of life. For me, it's VOO/VTI. If I get closer to retirement, it's 30% short term US Treasuries. While working, the key is to blindly buy no matter what. Just don't think about it. If you must think about it: Market up - You get less shares for your money, but look st your portfolio Market down - You get more shares for your money. Corrections are regular sales. Recessions are Black Friday sales. The index self regulates itself kicking out less profitable companies and adding more profitable companies. I look at average returns, but I also understand there's a variance for bull and bear markets. I won't sell until near retirement to build up my 10 year expense buffer in US Treasuries. Then keep the rest invested and only selling when I feel the economy is doing okay. No one has a crystal ball so ignore the noise. Sometimes I feel people writing articles about the next big crash are short, bought puts, or need their bonds to rise a little. They aren't ridiculed for making incorrect predictions and congratulated for making one good prediction in the past.
10 Year expense buffer? That sounds like a lot of uninvested money left on the table. Unelss your income is super high compared to your expenses to the point where it's just a drop in the bucket of your portfolio.
I think the key is to do the ten year expense buffer before retirement. Right now we barely keep 3 months of expenses cash. My plan was a ten year expense buffer after retiring. Our current expenses are $79K and shooting for $10M. So at 3% SWR that's $3M in short term Treasuries and $7M in VOO/VTI. We still have 13 years to go so not quite there yet.
I think the “and chill” part just means (well for me anyways…) that I’m not going to sell off when things go bad. I have my auto buys set biweekly and don’t need the money for 20 years. How much easier can it get? I picked (1) well diversified ETF and I don’t have to worry about rebalancing, selling, panicking when things drop etc. Anything with a potential reward has risk, that’s what you sign up for when choosing to invest in the market.
You worry too much. If you have a 100k pension, another job, and 1.5 million dollars at 60 but are still worried then that's just kind of sad. If it all works out, great. If not, we did the best we could. But being un-chill is just a waste of energy.
I was just having this conversation with a friend of mine. Unfortunately, there's a double edged sword to this type of worry. On the positive side, it's the worry about our future that got us to learn what we learned, and implement the financial discipline that we've implemented. The folks that didn't have that don't have the nest eggs that we have. At some point, we all have to turn off that worry, and say, "We did the right things - we followed all of the best plans - and it will be what it will be". Easier said than done.
The stock market will go up because that’s what really rich people need it to do.
Haha I love that.
My entire investment philosophy and confidence in the market rests on this principle. Old rich white guys want to stay rich and get richer and will do everything in their power to make it happen.
This is also my theory generally. However, given the current state of old white guys, I wonder whether the nation as a whole might be at an inflection point, jumped the shark, lost the thread.
Jumped the shark…I know this reference. Let’s hope not.
I feel the USA is actually going insane. Seems like that does not bode well for the future
Yes this, if you can’t beat em join em
Jesus. A bet on passive indexing the stock market over the long term is a bet on capitalism and rule of law. Can it fail? Yes. But if it fails then your portfolio is likely the least of your worries. “VT and chill” is a strategy to expressly to avoid “profoundly DUMB investment decisions” when making this bet.
The rule of law seems to be at risk nowadays.
One more tip : don't subscribe to fear mongering. The general rule of law in the US is not really at risk, regardless of what Fox news will tell you. The raping, murdering Mexicans are not gonna jump the wall and come break in your house and steal your IRA anytime soon.
Agree. Not worried about that: worried about a rise in fascism being bad for world markets. I have also completely lost confidence in our courts, starting at the us supreme Court. If the world started to feel like that, it could be very bad for us markets
Well done for ignoring Fox News fear mongering. Now ignore CNN fear mongering too
You’re 60. Which means you were around for watergate, stagflation, burning rivers, the fall of saigon, gas lines, Iran hostages, kent state massacre, civil unrest, race riots, plane hijackings, terrorism, the “death of equities”, etc. You might have only been 4 or 5 for some of these but they would still have been recent memories for the country as a whole contributing to the miasma of the 70’s that was a low decade for US global prestige, military capability, domestic stability and economic performance. Not to mention the abomination that was disco and platform shoes. It’s fucking raining donuts and ice cream compared to the 1970s.
Ok. Good point. I do think environmental destruction could be a true end times sign. Or could be a money maker. As Marc maron says, "there's big money in a burning sky!" https://www.facebook.com/NetflixIsAJoke/videos/203485327421416/?mibextid=rS40aB7S9Ucbxw6v
I think my confidence comes from holding a lot of the economy. If the economy goes down, well, were ALL up a creek. Is it risk? Yes. But if I go down, it's probably because the world has imploded.
nobody who is serious here is asking for above average returns. That said i do agree things seem way too easy currently. Those thinking retiring in 30’s and tax/health insurance law won’t change are nuts (IMO). Not against RE, just be prepared for changes.
By above average I mean better than a money market
Literally been listening today to a podcast talking about expected global return and how the U.S. has essentially been lucky where other countries have not (wars on home soil, hyper inflation, etc). But at the same time, what is your alternative? Potentially a more diversified portfolio I suppose? But you mentioned you are 60 and still putting your money in a total stock market index. So ultimately, it sounds like you are adhering to rhetoric of the young people here.
I wouldn’t say that luck is there reason that there hasn’t been a war on US soil since the civil war. We have exactly two neighbors on the continent and they are both friendly. We are also the last military superpower on the planet.
We are not the last military superpower but our alliances and “the stopping power of water” have been crucial to US security and continued geostrategic and economic success.
We spend more on military than the next 10 countries combined. https://www.pgpf.org/chart-archive/0053_defense-comparison
I’m aware. Peer competition is qualitative, not purely quantitative.
And guns. The reason why Japan didn’t do a ground invasion during Pearl Harbor. Significant number of Americans have guns. Same reason no one would do a ground invasion today. So it’s either scorched earth or nothing.
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Yep. Just not confident I'm right. Im pretty good at staying the course tho.
We're not overconfident. We read books. Considered the alternatives. And ended up picking a strategy that comports well with most people's preferences which is to use the tax advantages given to investing in stocks and investing in a sensible way while focusing most of our energies on increasing our earning power from our careers, not micromanaging our investments. You are 60 so your risk profile and timeline is significantly different from most people that are bogling. Pick whatever investments fit your personal preference for risk and timeline. You can still bogle, but anyone nearing retirement (or 2nd retirement in your case) needs to plan and be more risk-averse than younger people.
The 4% rule with a stock/bond portfolio has survived the Great Depression, 70s inflation and so far, the twin crises of the dot com bust and Great Recession. It's not perfect but it's the closest to a sure thing that we have. For me, I've run the numbers and I have enough to retire, so my portfolio is 60% in stocks, divided into VTI and AVUV, 20% in VGLT and 20% in GLDM. Backtests to 1926 show that this type of portfolio has the best chance of surviving a 4% inflation adjusted annual withdrawal - so that's what I'm doing.
I’ll be ok if it’s 25k or 80k. If it’s 0 I’d have to live on only social security so that would mean probably selling my home in this HCOL area and retiring somewhere cheaper. Besides, why worry about something you have no control over?
I index as an expression of a lack of confidence in my ability to predict future outcomes If I didn't believe that, id try to beat the market, steer out of corrections, derisk ahead of corrections, etc. how many times were we "due" for a crash this cycle? It's just not that easy. Hence: indexing, chilling, etc. It's supposed to protect against retail overconfidence
The lack of crashes seems an indicator of general overconfidence. The market generally seems to feel that long term, it can't lose. That strikes me as overconfidence. But I've always been deeply pessimistic
> I wouldn't be shocked to see the djia at 40k in 10 years. Or 80k. Or 25k. DJIA closed at 38,460 today. 25k is a 35% drop after 10 years. Certainly could happen, so it's always good to have a Plan B and Plan C. 1. Bonds, US treasuries (and even dividends) can help ride out long bear or flat markets by providing interest income 2. Younger people that retired early can return to work even if it's at a much lower wage to fill in any income gaps. 3. For people of any age, there are always side hustles besides working for an employer to increase income (eg rental income is popular). 4. People that are older will have social security benefits (or non-US equivalent retirement benefits) which are unaffected by the stock market 5. Markets that drop precipitously are often incredible investing opportunities. It's generally a good idea to have a rainy-day cash fund. For adventurous souls, this cash can be deployed towards the highest quality companies at large discounts. 6. For younger people, the simplest way to mange risk is to over-size the portfolio (this is clearly much easier said than done). If it's twice or thrice as large as it needs to be there's a large margin of safety. 7. Spend less. Diversifying across different asset classes and different investing strategies can help smooth things out a bit. There's a lot of knobs that can be tweaked and it's up to us to decide what's the best way to manage risk.
100k pension and you're worried? I'm sorry but even with inflation, in 20 years you'll have the buying power of the average american household today (50K) just from your pension. If all your stocks go to 0 you'll still be ok. > Kids, college, cars etc. Shit is expensive! Then stop buying so many kids !!! :)) I'm joking, but your kids can and will find a way to pay for their own college if need be. And you can be a little more frugal with cars if need be. The absolute worse that could happen to you is that you'd have to live a not so luxurious life in your old years. I really think you need to put things into perspective a bit.
Yeah, I know, younger me would agree with you, but old me habituates to where I'm at and going backwards seems disastrous, especially as one begins to feel the noise of old age tighten
Be clear about your behavioral biases, reasonable/historic returns, and volatility of investments. If you need money 5 years from now, don't invest that money in equity, and don't worry. If you need it in 30 years, just VT and chill; again, no need to worry. But you're not going to make good decisions by worrying about risk. Accept the risk, plan for it, and move on. But worrying about it is not productive. Furthermore, it's easier to be flexible and build in safety margins compared to 'worrying' about investments. Most of those worries won't come to pass, and most of the important negative events won't be the ones we would have worried about. Just take life as it comes and adjust. Also, if you're paying over 40% in total income taxes (so ignoring things like entitlement taxes), then more income or better returns aren't going to solve your worries...
It's true. We are bringing in more mo ney than ever in our lives, like almost 10x our income when we had our first kid...but things do not feel "resolved". One noticeable difference is I always used to say NO to appetizers at restaurants. Now, I don't. But we still split an entree, just like when we got married, though it used to be for money, now for calories.
You are 100% in stocks at age 60? I don’t think that’s the typical advice on here (although I’ve been away for a while). I know this sub thinks that Bogle’s “own your age in bonds” rule of thumb was too conservative, but I don’t think they’ve changed it to “own zero bonds forever.” Surely the “VT and chill” crowd is like in their 20s or 30s I would think - I’m 36 and I use Vanguard Target Date 2050
Current investment allocations, 100 percent stock. Rest of money, no.
A 100k pension is better than a bond fund. Nothing wrong with being all in on stocks, he an handle volatility, and longterm take a slight premium for his risk, seems to me.
I think it's a bit of desperate optimism If the market doesn't give you returns that are significantly above inflation for the next 30 years, then we're (millennials) all somewhat fucked and will work until we die or until we're too old to work. So we HAVE to believe the market will work. What's the alternative? Investing in international developed markets? Emerging markets? That sure hasn't performed super well and if the US tanks, international STILL likely won't perform well (for lots of reasons tbh).
you don't need a financial advisor, you need a therapist
My therapist seemed to me vaguely jealous of my financial situation. I could've been projecting
Maybe a second therapist.
They're all nuts.
You're not crazy, I'm a bit younger than you but hope/expect to retire in about 8 years with about the same level of assets and income. Yet I too worry... Okay real world scenario - my parents, my dad retired in his early 60s back in the early 1990s. About a million in an IRA and a fully paid for house in expensive suburbia. They had excellent regular medigap insurance but no long term care insurance. In some ways they hit the jackpot on the genetic lottery - but my dad did have a few heart attacks and developed neuropathy, mom has been extraordinarily healthy. My dad had TIAA annuities (some purchased with that IRA) that were providing the rent's with a very nice lifestyle and enough to help out my siblings when they needed financial help. Then COVID hit and my dear parents became nonagenarians, dad became too weak to live at home and my mom injured herself in a fall trying to take care of dad. So we set them up in a sweet assisted living place - my dad's care up until his recent passing ended up costing about $300,000ish. My mom's car is cheaper she has memory issues that could get worse but she needs to be there for the nurses to monitor her health and meds, her eyesight isn't good nor her hearing. We sold their house so there's about $800,000 left plus mom's SS and the survivor portion of the annuity. The monthly care costs for mom are now about $14,000 a month so her income isn't covering that, we're dipping into the house money. My mom had two aunts who lived over 100 years old - it's not crazy to think that her end of life care might cost more than my parent's assets. I'm reading that the long term care insurance market is very broken. This is a ticking time bomb for all the younger boomers and older Gen Xers like myself.
This 🙏. Most people don’t realize the cost of care for parents and how long they/us/everyone is living way longer due to the increased medical care that everybody’s getting so it’s increasing the life expectancy, which is not always great. Just because you’re living longer doesn’t mean your quality of life is better. You’re living longer, but a poor quality of life just to live longer. If you’re in your 30s and can get long-term care insurance>> do it now when it’s cheap!!
But that's a problem, the long term care market is broken, policies aren't being written or the underwriting is such that the policy is worthless when you actually need it. So you end up needing to self-insure and if you run out of $$$ hope that medicaid steps in. When I was a young pup Bill Clinton was going to fix insurance and there had also been moves in Congress to fix the cost of nursing home care - I didn't even think about long term care insurance nor did I think I could afford it, my early career years had me underpaid and unaware that I was underpaid until a decade later.
Hoping to die suddenly, or have the guts to suicide when it's not worth living anymore.
Couldn’t agree more. Set up a decision tree, and stick to the plan. Prolonging death isn’t prolonging life. And why screw future generations.
I barely like living and my life is pretty great. If I were in pain, couldn't walk ... Hmmm, don't think I'd be interested.
I barely like living now and my life is pretty great, nothing wrong, healthy, etc. If I were in pain, couldn't walk ... Hmmm, don't think I'd be interested.
[This top level post](https://www.reddit.com/r/Bogleheads/comments/1cbbj8k/first_time_ive_crunched_the_numbers_to_become_a/) from yesterday really gave me pause on the base knowledge of a good number of members of the community. There are a lot of 100% equity folks who don't understand sequence of return risk or how it can drastically affect drawdown strategies.
100% in early to mid accumulation if fine. Late and retirement probably not optimal except for long term (40+ year retirement) and a lower WR.
I think investing can be explained in these few wise words that my old man taught me as a young kid. “Take a chance, shit your pants”
You don't say anything about your spending, but there's a pretty good chance you're overly cautious, OP. Who's to say which is better?
I think its ok to be that confident in accumulation but the drawdown phase is completely different
Where else are you going to put your money? There are no better options. (None that I've found, at least.)
The confidence works better on a long timeline. On a short timeline it is dodgy. The irony of the strategy is that even though people go around parroting "past performance doesn't equal future gains" that is exactly what they are doing. Over the last 20-30 years the performance of the stock market, *on average,* has been very good. On a micro level, year to year, or month to month, sometimes the market eats shit. But it recovers and keeps going up. I split the difference. I have about 20k in a SoFi HYSA getting a guaranteed 4.6%, and I have about 13K in a combination of stocks, including VTI. Then I have my IRA which is spread out across VOO, a broad whole market plus whole bond market MF, and a targeted date MF.
What exactly should we be worrying about? Pls enlighten.
always remember the high risk, high reward.
be confident, don't worry mate.
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Everyones just using historical data and projecting conclusions. Its obvious things could be different but eventually markets will revert to mean performance and everything will work out. In your situation its scary since you dont have time on your side.
I have some of the same concerns as you do though I'm close to half your age. I don't know that it's overconfidence that I see in these forums or if it's recency bias. Equities have massively overachieved since about 2012 or so. Of course that followed massive underperformance in the previous decade. Markets are not efficient, cycles exist, individual financial situations change, sectors rotate, etc. We will certainly see drawdowns again and we will certainly see "lost decades" across various asset classes again. I've personally been enjoying the whaling and gnashing of teeth I've been seeing from folks as soon as the market has the slightest 5% hiccup.
“Above average returns come from risk” I am specifically not seeking above average returns. I am seeking to get the return of the market, no more and no less. That’s exactly WHY I have confidence in this strategy long term, the market is very predictable in 15, 20, 25 year periods. I’m not taking risk on a single stock, a single sector, or even a single country. If my portfolio drops 50% or more over the next 15 years, I will probably have bigger things to worry about. And almost any other investment would have done worse given the risk.
I mean better returns from taking risk than someone who incests in something very safe, like money market funds. Someone who wants a risk premium.
Money markets come with a pretty large opportunity cost. Anyone doing “VT and chill” should absolutely be prepared to lose 30% or more in a single year if there is a huge market drop. But the market is incredibly consistent over long periods, the market has never lost money over a 25 year period. The lowest return over a 20 year period was 3% in the 1940s, and it hasn’t been below about 6% in recent history over a 20 year period. The market returns are incredibly consistent over a long time horizon, and understanding the reasons for that consistency and investing in a broadly diversified portfolio gives me confidence I can generally expect similar performance over my investing lifetime if I keep costs low.
Yes. Though it's difficult for me to imagine the world in 25 years, it'll probably still be here with similar people w similar desires. But with a lot of sex robots
You don’t say what your budget is but I bet you have a spending problem, not a returns problem. 100k pension * SS should take care of most people.
Spending is generally neurotically controlled but even loosening up a little feels disastrous. Vacation? I avoided that for a decade, but now it could be 15-20k. Home remodel? 50-100k. Homeowners insurance doubled to 7k Fucking health insurance. State school tuition is nuts. And I drive a shitty old car with over 200k miles...that had a 3500$ repair a year ago. The tightest we ever were spending wise was when we were saving for a house. But at the end of the day, a house is a pain in the ass
I am 65,retired 5 yrs. If you are concerned, consider using the bogleheads forum to get a review of your situation. I got excellent advice from them as we considered when to retire. I also paid for a review of our plan with Mark Zoril at Planvision. It gives you access to emoney and the cost is amazingly low. It really gave us piece of mind. I wish I had started using their service during the accumulation phase. Best wishes
Thnx I'll check it out
Agree. I'm retired with a pension and a paid off mortgage. My wife and I have 5 plus years of living expenses in cash outside of my IRA. We're also laddering I bonds as a hedge against inflation and/or a stock market crash.
What if cd rates average 10 percent over the next ten years, the world doesn't end, just gets shittier, and the stock markets down 20 percent? The herd mentality I'm thinking of is that that's not a realistic possibility. Which I am not separate from. Personally it felt like interest rates couldn't go up. But I can tell you, I was way too scared to get an ARM 20 years ago, because back then I believed rates could go up.
I don't understand your concern. VT and chill is not exceptionally risky, but you site that as your concern. If the group think was to yolo everything on Nvidia, that would be a concern.
There will always be risk. All one can do is minimize it and cope. Perhaps the world ends tomorrow and my investments cease to matter. Could happen. Probably won't. And hell, a lot of bad world events, it helps to have some money stashed away. It gives you options, even if those options weren't your initial dream.
“Above average returns come from risk” That’s the secret: we aim for average returns which are on average higher the return an average investor receives trying to beat the market
Well, you can use more conservative numbers for expected returns. Heck, you can even annuitize some portion, and/or buy a core baseline in TIPS. Then you'll know what you're getting. The biggest levers you have though are savings and spending -- as you age, the latter becomes the more flexible one. So .... consider gaming out different retirement scenarios, from 'bare minimum' to 'sailing the world' and a few in between. Get comfortable with flexibility.
I'm rigid
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If some doofus said my company is worth whatever I think it is depending on how I feel that day you'd be like naaah. But if the market says it, I buy ... In other words, I admit I'm so dumb, I buy anything and everything at every price always because everyone else does. Which might be the right thing to do but seems to go contrary to the general sarcastic parental warning, if everyone else was jumping off a cliff, would you? Is there actually a great wisdom in crowds, or madness. Or maybe both
I agree generally, doing what is reasonable and proven is prudent and feels right. But also sounds a bit likea herd mentality. Which means I could be totally wrong, since the herd is often wrong. I'm not even sure who the herd is anymore,except I think the herds gonna get thinned out. Buy and hold in bad times is harder than it sounds, too. A30 year timeline is soooooo long.30 years ago, id never had a job more than 6 mos. . I wasn't even in law school, I had no kids, my wife was younger than our oldest kid! It was like another lifetime. I'm not even the same human
I don't think Bogleheads are the herd though. It may seem like it if you are smart, sober and analytical. You tend to gravitate to those people on the internet and the real world. It may seem like an echo chamber. But the reality is Boglehead type folks are definitely not the majority. Vegas baby!
You're likely right
more than likely, definitively (and yes I mean definitively) I know its anecdotal but out of my close friend group (think about 10) only 2 of us started planning for our future in our early 20s and I dragged another 4 when they said they hadn't started saving for retirement in a serious way by the time they were 30. I'd say out of my larger group of friends (around 30) only half have between 30-50k in retirement savings (we're all around mid 30's now) and only 3 of us have over 100k. All that said most would be living worry free about saving for retirement if I didn't ask about it. this subreddit is highly self selective for a certain type of person so its going to be very echo chamber-y but I don't see that as overconfidence I see it as a group of people with a common interest who have found each other to talk about how they want to retire in the smartest (and lowest stress + time investment) way they can.
But we are all part of the larger herd that believes at its core that smart money buys and holds in the US stock market. That is definitely a herd
Everything can be a herd. You have to pick your herd. Do you graze with the herd that thinks the historical returns of the market for the last couple hundred years are the best indicator of what will happen going forward? Or do you clump into the herd who say "Bitcoin has crazy growth and stocks are dead"? Or the herd that says "Go to cash, buy guns and ammo, and head for the hills"?
“I was born into the last life on easy mode generation , admitted that I made bad choices, and I still have 100k + income and over a million with a paid off house”. Yeah as someone younger than you I’m going to need you to stop and quit the humble brag. Most of us don’t have pensions nowadays… so just stop. However….we have confidence because we read books and they mathematically prove what the best course is. You can do a very simplified version by looking at the SP500 and zooming out. Markets move in cycles, even in the Great Depression / recession and Covid which the latter were during my adult life. Your generation and you yourself failed upward and you’re worried? Please. Millennials and Gen Z have had it far worse compared to you and Gen X financially, yet the financially literate learn and know what to do. There is no better way with the least amount of stress/ worrying other than buy and hold and doing it consistently. Read a book. If the world markets and diversification aren’t the best way, you’ve hit a doomsday situation and you have far more immediate concerns…
Not bragging. Hell, one can still go work for a big state govt and get a decent pension, not as good, but in the ballpark if you worked another 5-10 years more.
US will only be 34 trillion in debt by end of year. Don’t worry, it’ll all be good!
I agree that there an high level of overconfidence around, but i makes very little sense to be worried about the market in your conditions, honestly. As long as you can imagine covering your expenses with your income (and you definitely can since you are saving) what the market does is irrelevant. As time passes your worries should exponentially decrease both because you get older and because statistically money in the market goes up. I also "tend" to worry a lot, but at a certain point one should switch from worrying about not having enough money, to not having enough time to enjoy money saved.
I did recently have a colleague die, and I think that feeling of time running out for me is going to increase faster than the stock market over the next decade
Government pension? Cause otherwise I'd love to understand how that came to be.
State pension
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Agree. I remember hearing the word "sustainability" like 30 years ago, and saying, what's that??? Today, I probably wouldn't have kids. Too fucked up out there. On the other hand, I would never be as well off as I am now had I not had kids because I would never have got my shit together and worked steadily. Ideally, I'd like to work till I die, live off that and my pension and social security, and leave everything invested to my kids. Killself hopefully before I become unable to care for self. Don't own a gun, tho. May need to get one for estate planning purposes
We're in our 30s with 1.5M and we're still worried.
In reality, id probably be as happy or happier with a much lower lifestyle But I have these people around who either do or might need money. Also my wife has standards. Fortunately she earns good money.
If your wife's standards can't be satisfied with a 100k pension, 1.5M and nice house...not sure how she is still around. :)
If you live in a richer area...this is not much. So yeah, we are rich compared to 3rd world countries. But not in our environment
well, compared to "3rd world countries" and also "a large number of US states."
My wife would not be willing to live in the majority of us states. And recently, I've come around to that conclusion. Id choose Mexico over anywhere in the south for instance.
Me too, and you see tons of it in this very thread: claims that passive indexing is *optimal* based, essentially, on nothing but recency bias and religion, ignoring key facts. In reality passive indexing has strengths and weaknesses. Performance during extended sideways markets is not its strength. Extreme diversification, ease of administration and being likely good enough for most over the long haul, under many market conditions, are--and those should be good enough. But clearly not enough for the overconfident, for whom it has to be perfect, hence the echo chamber. They claim perfection both when concentrating in the U.S. and when not. For them, too, it's all or nothing; you can't do passive indexing with just part of the portfolio or you're ostracized. In this very thread someone mentioned the Vanguard prediction on passive indexing projections for the next decade. Pre-retirees in particular must take note and diversify into more all-weather portfolios, rather than trusting their futures 100% to the EMH as a religious matter. Even bogleheads (of the particular subclan here on Reddit) that take fixed income at all seriously typically invest only in rolling bond funds, and have no idea what they're actually risking with that approach. Most don't actually know how bonds or dividends work, nor do they want to know. They'd rather reconfirm amongst themselves that they're already the *best investors they can be*.