My Financial Plan
In the past I have disclosed some details of my financial plan related to when I plan on retiring (which is to say I don't want to retire for a long list of reasons) and my asset allocation (it has always been very low to stocks).
The main reasons I don't want to retire are that I love my work and I believe not retiring is the best way to stay meaningfully engaged which is a means to successful aging. I realize that people may not be too eager to have an 80 or 85 year old investment manager but I will cross that bridge and as I always say, I may feel differently later. I began to think this way in my 30's and still haven't changed my mind yet but you never know.
One comment I have made in talking about asset allocation generally is to say "if you are relying on normal stock market growth..." By virtue of living well below our means and having made a couple of lucky decisions along the way we aren't necessarily relying on normal stock market growth and so I have maintained a very low allocation to equities over the years.
I've made the comment that while I have no plans to retire, we save money like we are desperate to have retired last year. I feel this creates optionality and allows for better weathering any adverse circumstance that might come along, it is very empowering. Our Plan A is to not need our savings when we are older. My FRA for Social Security in today's dollars is around $2850/mo (more if I wait until a later age) and my wife's spousal benefit then would be $1425. We have one rental property that generates about $1500-$1700/mo in today's dollars and it will be paid off in my mid-60's. All of that more than covers our monthly expenses and then some. We'd even be ok with the potential 23% haircut to Social Security. The hope then is that our savings would be for traveling and any emergencies. Again that is Plan A.
I decided quite a while ago that I would allocate more heavily to equities whenever the next bear market came around, starting to buy down 20%, then 30%, then 40% with no thought beyond 40% for now. Today I started to implement that strategy because, you've read this before here, it's the strategy I spelled out for myself when the market was not panicking. All I had to do was stick to it which I did, buying a broad based domestic equity ETF with a chunk of my SEP IRA. If we get to down 30% then I will buy more. I should also note that I will be saving money a little differently going forward. Previously I've made lump sum contributions to our various accounts but starting on January 15th I will be making monthly contributions to a new Solo Roth 401k that will go into equities as well. I will still lump sum our HSA and my wife's spousal IRA.
Apologies for how crude this chart is but you've probably seen something like it before. It captures what I hope to capture with monthly contributions over the next couple of years or so. If you are unfamiliar with this, if the lower left is the starting point and the upper right is some end point for the broad stock market, which trajectory is better if you're dollar cost averaging? You'll feel better most of the time in the green line scenario but have more money accumulated in the red line scenario, buying cheaper as you go for a good part of the time. If a bear market has started then the next couple of years are likely to look like the red line.
I shared on Facebook and Twitter that I had bought today with the index down not quite 20% (I bought 15 minutes before the close) and will make another purchase at down 30% (as I said above) this drew a couple of comments and quite a few private messages asking if I think it could actually go down 30%. The whole point of my strategy is that it is not predicated on predicting anything. This is also true of client portfolios. I have trigger points for defense that started back in May and I just stuck to the strategy. Ditto, nibbling in my account now.
Everything that has happened thus far is all within the realm of normal. The circumstances of how we got here are different (they always are) but the market manifestations are normal and have happened before. I've said quite a few times over the last few days that the bear market that starts after this one will start from a much higher level than the old high from September and while I don't know what direction the next 25% will be, I know what direction the next 100% will be. If I say that when the market is at a high, no one would disagree. If I say that now, down 20%, some people might wonder if this is some how different. It isn't.