Strategies for a Shaky Market: the timing of retirement withdrawa

jkom51September 30, 2007

This was a really interesting article from US News & World Report. It's the first one I've run across which points out the timing of when you start taking distributions is extremely important: not age, but the state of the market at the time you begin.

They have a terrible website - it took me forever to track down the URL for this article! Hope it proves useful to those here. The website is free and you don't need to register.

Here is a link that might be useful: Portfolio Strategies for a Shaky Market

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Thanks jkom. I've seen this laid out elsewhere and it really is startling what a bad market early in retirement can do to your game plan.

    Bookmark   September 30, 2007 at 9:47PM
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I have said that I refuse to borrow for consumption, but that I am not averse to borrowing to invest.

Especially since I have calculated that I can borrow for investment purposes, given my plan and in the Canadian context, at very nearly nil net cost.

This is assuming the asset accumulation phase of life.

I am rather inclined to borrow to invest over a period when markets appear to be down, moving through a low-priced phase, then paying off some to most of the loan as stock prices appreciate. Though this may be achieved on occasion by selling some assets, usually it is accomplished through using some savings from my pensions and (required annual) payouts from my tax-deferred retirement account.

But if I were retiring while the equity market (and I am invested about 80% in equity-based assets, even nearing age 80) appeared to be in a down phase, I would not want it to be while I had loans outstanding.

I would be little inclined to liquidate assets to pay off the loan while markets were low, but would leave them outstanding.

Indeed, I might be inclined to increase the amount of the loans, in order to develop retirement income, trusting that, as markets usually increase rather rapidly after a down phase, I would achieve enough increase in value from recovery in price of the stocks to pay off the loan, plus the extra (in this case, non-deductible) interest cost.

I might seek supplementary employment, perhaps part-time, if possible, in order to reduce the net income from other sources needed to keep my system in operation.

So, rather than liquidate stocks that were undervalued at the time, to finance my retirement income, I might be willing to borrow for consumption, in such a situation.

Good wishes for increasing your wisdom in effective management of your income and assets.

ole joyful

    Bookmark   October 1, 2007 at 4:41AM
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I don't think that we've seen the bottom of the market currently ...

... but I am considering making some investments with cash on hand ... in fact, I did, a couple of weeks ago.

Bought some more or less penny stock, as a matter of fact.

That promptly went down.

Of course!

ole joyful

    Bookmark   November 29, 2007 at 4:03PM
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I've followed the investment market for a number of years.

I would try to avoid retiring while having no readily-available assets, which I'd assembled over a few years prior to retirement. I didn't have that amount of readily available assets when I retired ... but I knew that my pensions were more than enough to cover my regular expenses, plus some extra for emergencies, should they arise: the possibility of my having to liquidate some fluctuating-value assets at or shortly after retiring was slim.

If I were to retire at a time of a down market, I was required to remove a certain amount annually (rather smallish - under $4,000.) from my tax-deferred retirment account annually, so had some Money Market assets to cover that withdrawal. I might try one or more of several ways to reduce the damage caused by liquidating investments when the values were way down in order to cover my living expenses.

Perhaps I could delay my retirement for some months or even a year or two - or three.

Or find employment in my previous situation or a similar field as a (possibly reduced-hours) consultant. Sometimes that pays better.

Find some other kind of employment to help cover living costs.

For example, I used to work as driver of a school bus. Also as a security guard - granted, at only a sliver over minimum wage. As the usual work was done nights, weekends or holidays, there would be little conflict with business-related situations. But apart from regular shifts, if they called and asked if I'd accept an assignment, I could turn them down (if I had other plans - or for whatever reason) without negative consequences.

I didn't accept ongoing assignments where I had more than 10 min. or so per hour checking the client's property. I wanted a place where there was a warm place, a table, good light and where there was a radio or I could plug mine in ... so I was able to do at least 3/4 of most hours doing whatever I chose.

I might have some materials around that I might not need any more, that I could sell locally, on eBay, etc.? This may be even more possible if one plans to retire to a different location.

Cut expenses to the bone, even deferring some if possible.

I might use whatever assets I had to use as collateral for a line of credit - at retirement age, it's my opinion that everyone should have some assets. Draw some stock or mutual fund certificates to use as collateral to make the loan fully secured to obtain a lower rate of interest.

It's been my experience that, following a year or two (or three) of down markets, the gain for a year or two following that is at a substantial rate - sometimes 20 - 50%, for a year, often a year or two, even carrying over into the third year.

If I can borrow at about 5 - 6% or so, even if, as it's not for investment, the interest isn't deductible, if I can achieve 15 - 20% growth after a year or so, I'll not be doing any complaining.

If I hold off liquidating the asset for two or three years and see it grow by 50% or so ... can you see me shedding any tears over the interest that I'd paid on that loan?

One advisor with a 16-year track record had initial growth rates of 50.1% and 77.8% in 1992 and 1993. His portfolio suffered growth rates of 0.5% in '98 and 9.2% in '99, leading up to a 17.4% loss in value in 2000. His growth rate was 64.8% in 2001, 47.3% in 2002 and 68.4% in 2003 ... 180% not counting compounding in 3 years is O.K by me - and, quite unusual! Yes, unusual ... but not hugely so. If I can see that $10,000. that I avoiding withdrawing at the end of 2000 grow to $40,000. at the end of 2003 - no complaining from me. But, like I said - unusually high growth!

Don't believe me? 10,000 + 64.8% + 47.3% + 68.4% = 40,879.

His growth rates have been low for three years of the most recent four: 6.0% in '04, 24.3% in '05, 9.1% in '06 leading up to a loss of 15.5% last year. So if I were using his system and about to retire now, I'd be using some of my assets to float a line of credit at the bank, rather than withdrawing any of my invested dollars, for I expect him to develop great growth over the next few years ... and if not great ... at least above average.

If all else fails - send the spouse out to work (outside of the home, for pay, that is)! Resulting, of course, in you doing *all* of the household chores, meal-making, of course, instead of only 50% that should be the lot of every retired person who has a spouse.

I hope that you're celebrating your life on this lovely weekend.

ole joyful

    Bookmark   March 22, 2008 at 1:39PM
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As I near age 80 (with, as I said earlier, about 80% of assets invested in stocks or similar type of assets), I'm still not using all of my pensions for living expenses, but am able to save and invest some.

As some of you have learned over on "Money Saving Tips" and "Household Finances" ...

... I'm a Fairly Frugal Fella!

Good wishes for learning how to make your money work more effectively.

ol joyful

    Bookmark   June 12, 2008 at 7:50PM
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I don't know about CA but in USA if on Social Security, one's benefits are cut if one works and earns a certain amount of money. It seems that social programs (helping those of any age who are disabled, displaced, etc) are a means of keeping people poor.

    Bookmark   June 13, 2008 at 7:42PM
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Cali --

Social security is going to be underfunded. Lets all recognize that those over a certain age will take out more than they put in. What is the govt supposed to do?? BTW, above a certain age, I think 70, your SS old age benefits are not cut if you work, just a portion (which is the estimate of the part that is not the return of what you put in) is taxable. And I think if you are under that age and work, yes your current benefits are cut, but your future benefits will increase. And if you are disabled, why are you working.

If we want to keep SS, we need fair rules. IMHO.

    Bookmark   June 15, 2008 at 4:53PM
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kkny, I am sorry I didn't go into detail. You are absolutely right.

I am not on SS or any disability. I do not receive any funds from any agency. My husband is working. Neither of us are of retirement age.

I agree about fair rules!

    Bookmark   June 19, 2008 at 12:03PM
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My private pension comes regardless of whatever other income that I may have.

One of my government pensions is a contributory system and is to be asked for if I am "substantially retired" ... but I can return to work later, if I choose.

I am not sure whether I can ask to stop receiving pension and begin to contribute again.

The only penalty is that, as I am receiving a pension and employment income as well, I may move into a higher tax bracket.

I receive another government-sponsored "Old Age Security" program that is given to all (e.g. stay-at-home-Moms) who have lived over 20 years or a similar period in Canada. It is partially clawed back after one's net income exceeds $58,000. or so, at 15% of the excess, and becomes clawed back in its entirety at approximately $100,000. annual net income.

On achieving age 69, I must cease contributing to my tax-deferred retirement account and close out by:
1. taking the entire proceeds in cash at that occasion, which few choose, as it results in a heavy tax cost,
2. buying an annuity, which many prefer not to do, in these days of low interest rates, or
3. reversing it into a retirement income fund, which requires me to take a payout in the following year of about 7.5% of its value and annually thereafter, the percentage increasing annually to 20% at age 90 and beyond. I can withdraw additional amounts in any given year, should I so choose.

I keep some readily available assets in it, enough to cover a couple of years' payments, should the market be down when the withdrawal date appears.

If you choose to put some time and effort into learning how money works, and tax implications, I'm pretty sure that after a few years, you'll be surprised at how well it has paid.

ole joyful

    Bookmark   June 23, 2008 at 2:37AM
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The guys running the investment advisory that I referred to last March, as having super growth rates over a numbr of years but less well in recent years, with a 15% loss in '07 ...

... had a really bad year in '08 - down 36 or 38%!!

Check their system principles and results at "".

But a lot of the rest of us had some rather heavy losses, as well.

Although the markets look pretty bad now, I think that this may be a good time to start buying some stocks. And I want well-researched ones ... so I'm subscribing to their advisory service ... I don't think that they've lost their touch!

It seems to me that they're on sale now ... and doesn't 40% off sound like a good sale price?

Of course ... they may go down more, so be on "fire sale" later ... so I'm not too enthused about committing too much at present ...

... but it isn't much fun to arrive at the station to see the back of the train moving down the track/plane climbing into the sky.

So, after a few months, buy some more ... and a few months later, buy some more.

They've been telling us for years not to try to time the market!

Invest more or less equal dollar amounts on a regular basis, over a substantial period when the market is down. But only money that you can leave alone for a good five years.

If it stays down longer than you'd expected ... you have that many more dollars at work when they do not only start, which they usually do several times, then drop again ... to grow again on a sustained basis.

By the way - during the investment phase, you want to invest equal number of dollar amounts on a regular basis.

But when you enter the withdrawal phase, it seems to me best to develop a good nest egg of guaranteed-dollar investments, then withdraw equal number of units of investment on a similar periodic basis.

That way, you aren't forced to sell an unusually large number of stocks in order to achieve the dollar amount that you need to cover your rather immediate needs.

I feel that I can safely avoid the need for that substantial cushion on hand to cover immediate needs during a prolonged downturn without being forced to cash out an unusually large number of stock/equity-based mutual funds in order to cover immediate needs, for I regularly live on less that my monthly pension income.

Going in - invest equal numbers of dollars on a regular basis.

Going out - cash in an equal number of shares on a regular basis and, since the number of dollars per cash-out will vary, have some cushion on hand to offset the low current income.

Learning how money works (and the tax implications of various strategies) ... an interesting hobby ... that pays well!! "pays" and "well" - a couple of "four-letter" words with which I can enjoy being associated!

But life is much more than money - I enjoy being associated with a number of other situations in life, as well.

ole joyful

    Bookmark   February 20, 2009 at 3:13AM
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Learning how money works (and the tax implications of various strategies.............

OJ - Never too late to learn as long as one can. Read the "contratheheard"; what other sites might you recommend for learning money strategies? We must move our 401K in a few months due to loss of job.

    Bookmark   February 21, 2009 at 3:34PM
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By the way - if you have been borrowing to invest in the past, or plan to currently, stocks being on sale, about 40% off, at the bottom, and again a couple of days ago, it is quite likely that your interest cost may be deductible.

If that investment loan interest is deductible in your tax system, as it is in Canada, and you also plan to borrow to consume, you must keep those loans entirely separate, as the consumption loan interest isn`t deductible, so you don`t want to mix the two.


Sorry about your job loss - that`s an unsettling experience.

I`m considering your request.

Have you checked Motley Fool. (I`d like to put a question mark there, but just got a new computer and the keyboard decides to not allow me to use the question mark at times, giving me a capital ``` instead. The other day I couldn`t use the ``"`` for a while , but then I could. It`s doing it again tonight - I wanted the symbol above the ``2`` that goes in the middle of an email address - the only way that I could send an email at that time was to highlight one elsewhere and import it ... and I had to do that again tonight.

The quotation mark isn`t coming up right, either, as you`ll note around that 2 above.

Acting like a self-willed kid!

Time to pay a visit to the vendor!

ole joyful

    Bookmark   February 25, 2009 at 5:51AM
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thanks OJ, congrats on the new computer but that keyboard sure does sound like it was shaken and abused! Is it a laptop or pc? I like having a laptop, but my pc allows me to exchange parts easier.

checking out the "fool" - thanks again.

    Bookmark   February 25, 2009 at 4:50PM
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Thre's a lot of hype and salesmanship at the Motley Fool, they say more than there used to be. But you've become somewhat immune to the blatherings (latherings?) of salespeople, haven't you?

And there are some comments by subscribers - some of them critical.

The subscribers to what I believe to be Canada's best personal money management advisory magazine, that sells no ads, meet in about 40 areas of Canada, the local one having been operational for about a dozen years (with me having attended for about seven: we meet for a couple of hours monthly, year around ... there were 28 there tonight, nearly a record, I think). Benj Gallander, one of the principals of "Contra the Heard", told me that he wouldn't mind if several of us in that group subscribed together.

Good wishes for increasing skill at managing both your income and assets.

ole joyful

    Bookmark   February 26, 2009 at 3:48AM
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Unfortunately there is a lot of hype everywhere!! LOL

As for salespeople, I have been immune to them for most of my life. Suppose that is why I could never be one; I can't in good faith recommend something I don't believe in.

We have managed well so far; this down turn is hitting us at the "wrong" time....but this too shall pass.

Appreciate you taking the time to give advice.

    Bookmark   March 5, 2009 at 2:02PM
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Another that I've been slightly interested in, that promotes largely some Canadian issues, especially ones that have agreed to pay out most of their earnings in order to avoid being taxed directly, is called Maple Leaf Memo ... maybe I forget the exact address, it seems.

Several are in oil patch, paying high rates, but that`s related to the earlier high oil prices: some have reduced payout, some quite likely to do so soon, but some have been paying up near 20%. Some REITs, transportation, energy, communications, etc. Part of their payout in most situations is return of capital - which reduces one`s adjusted cost base, on sale.

I`ve been paying some attention to a few of those Income Trusts ... can offer some basic info, if you wish.

Found out what's wrong with the new computer - keyboard could be changed to produce French, with the additions required for various letters.

It seems that I'd changed the settings ... two or three times, it appears.

Too soon old - too late smart!

ole joyful

    Bookmark   March 8, 2009 at 8:06AM
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LOL glad the keyboard is okay. Ours will probably be soon only in Spanish, with an alternate key for English translation if things don't change in this country!

"too soon old, too late smart" - Ahh, unfortunate sentiments that affect me also. However, at 60, I feel I still have some years yet to live and learn.

I will appreciate any information you wish to provide. Anything you do not wish to post, you may email me drectly.


    Bookmark   March 11, 2009 at 1:58PM
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