I was somewhat surprised to see no one identify Sheepdog's base problem in this thread by name.
The base problem is called "Sequence of Return Risk" [sometimes abbreviated as SORR].
Maybe that term wasn't coined yet in 2008.
To Sheepdog's credit, he succinctly identified the base problem.
With dollar cost averaging [DCA], you get to buy more shares when prices go down, which works great when prices recover in the long term.Sheepdog wrote: ↑Tue Oct 14, 2008 10:25 am ..
I had tread on thin ice by selling a mixture EVERY month for expenses since my cash account was depleted a few years ago. I was selling each month sometimes at high, like last year, but recently, like on the first of September and October, selling on lower NAVs. I was selling a constant percentage of stocks and bonds monthly from traditional IRAs and Roth IRAs...a mixture to keep from paying more than $1000 annually for federal income taxes. That was like dollar cost averaging in reverse. I did not want to sell more than I had to while things looked rosy. That worked until the valuations dropped.
But with reverse DCA, you have to SELL MORE SHARES to get the same dollar amount to spend. That is like a downward spiral and can lead to a catastrophic "running out of money" scenario.
And Sheepdog came up with solutions.
Sheepdog wrote: ↑Fri Oct 10, 2008 1:32 pm ..
This is what I did and why. If I had followed the advice of many here, and sometimes myself, I would have kept 3 to 5 years of normal annual distribution for expenses in cash so that when times like this occur, I would not have to sell. I had mostly depleted my cash account last year. I had not kept it up. I just could not expect a 1929 type drop, not today.... So, I exchanged 3 years of our normal annual needs from my stock and bond funds to money market. This amount is 20% of our present IRA stock and bond investments.
..
Sheepdog wrote: ↑Sat May 28, 2016 12:42 am ..
[have] 1.5 years of equivalent normal distributions in the short term investment grade bond fund available when needed and about 1 year of normal distributions in 5 year 3% CDs which I should not now need for expenses (except for maybe a new auto when they mature in Jan. 2019) because I purchased in 2012 and 2013 SPIAs from the "cash" accounts which along with SS are covering all of our normal annual spending. That is great for us, especially, my lady's future well-being if I become incapacitated. We are all set.
Sheepdog implemented what is called a "bucket" strategy today.
Some posters suggested other solutions such as dividend investing [e.g. from "Retired at 48"].
The "stay the course" mantra is usually right.
But if the car you are in is on autopilot and headed for a cliff, sometimes the car will stop or turn before it gets to the cliff. But maybe it won't. It is a survival instinct to grab the wheel and turn the car.
And it takes objective judgement to know when the car is headed for a cliff or not.