How long could you live off your portfolio if the worst happened?

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unbiased
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Re: How long could you live off your portfolio if the worst happened?

Post by unbiased »

I've mentally "bucketed" for this reason. I have 10 years in "safer" investments to survive a prolonged downturn in equities. If equities decline for 10 years straight, I think bullets and food will be the most important "assets" as our whole system is built on the premise that stocks "always go up."
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Re: How long could you live off your portfolio if the worst happened?

Post by vested1 »

Retired, 68 and 67. In the fantasy world of no inflation, no RMD's, and no gain on investments, 43 years to ages 110 and 111. Add a 50% loss of investable assets, cut that in half to 21.5 years and ages 88.5 and 89.5, that is if we decided not to cut back on discretionary spending. In the worst case scenario of additional negative events of SS disappearing, as well as the pension being defunded, brother can you spare a dime?

Not worth worrying about. I was never a believer in an impending zombie apocalypse, but if I were, I'd be driving a Lamborghini instead of a Hyundai.


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Stef
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Re: How long could you live off your portfolio if the worst happened?

Post by Stef »

4 months lol. But I guess that would be a minor concern.

The scenario you are describing sounds like nuclear holocaust.
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Re: How long could you live off your portfolio if the worst happened?

Post by chipperd »

So based on the OP's scenario with no mention of social security or pension concerns:
With cash and COLA pension to cover living expenses until two social security payments kick in, util we die.
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Re: How long could you live off your portfolio if the worst happened?

Post by chipperd »

redrum wrote: Sun Sep 06, 2020 3:59 pm Lets say the absolute worst is as follows -
a) 50% stock market decline
b) both lose our jobs
c) home values fall by 50%

If we assume a, b and c are permanent, then something has gone very wrong somewhere. We could likely make it for 15-17 years (assuming we start withdrawing from our 401k.)

Alternatively, we could also go back to our LCOL home country and survive just about forever. (we weren't born in america)
If home values drop 50%, our bank gets "jingle mail" from us!
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Re: How long could you live off your portfolio if the worst happened?

Post by BoneSpec »

If I pulled everything out of the market and locked in on 2% CD's/bonds, I have 15-20 years worth right now, pending any major medical issue.

1 mil, 20 years, $50k per year. I'm at $25-28k per year expenses right now. Pension starts at age 55 in 1.5 years, then SS at 62,
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Pete12
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Re: How long could you live off your portfolio if the worst happened?

Post by Pete12 »

Having read all the responses so far it generally seems that Bogleheads are well prepared. I still have some work to do but hope to get there!
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Re: How long could you live off your portfolio if the worst happened?

Post by BeerTooth »

I see a lot of responses with the implicit assumption that you wouldn't downgrade your standard of living. I have a much more pragmatic view - I would draw down some percentage of my savings while maintaining my current standard of living, then gradually "live poorer" as necessary.

In reality, no one continues burning through their assets at a constant rate. They assess reality, then adjust accordingly. It's the only sensible thing to do. You swallow your pride, toss overboard any previous status symbols of your former life, and move forward with whatever you have left.

Gradually your "necessities" become "luxuries" until you're left with just the basics - food, shelter, medicine.

Any and all options are on the table. I think of each expense as a continuum. For example housing:

mortgage or refinance current house-->take in renter in current house-->sell home and rent--> move from HCOL to LCOL--> move in with family--> shared housing with strangers-->government-subsidized housing-->live in my car-->homeless encampment

The size of my remaining assets determines where I am on the continuum at any given time.
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Re: How long could you live off your portfolio if the worst happened?

Post by wander »

We hope to outlive our money.
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Re: How long could you live off your portfolio if the worst happened?

Post by hoops777 »

I do know one thing. It is amazing when times get tough how you realize that you really didn’t need so much.
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Re: How long could you live off your portfolio if the worst happened?

Post by jh »

......
Retired in 2022 at the age of 46. Living off of dividends.
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Charles Joseph
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Re: How long could you live off your portfolio if the worst happened?

Post by Charles Joseph »

This is a great question that remains relevant, so bumping. I just ran the numbers and it looks like if I waited to collect SS at 65, and spent down my portfolio till then (six years), I'd be okay for another 30 years. There wouldn't be all that much left at the end though.

This is assuming I wasn't working either. The current plan is to work another 2-3 more years and then retire, as long as the creek don't rise.

This assumes a 50% drop in the market at my current 50/50 asset allocation.
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Re: How long could you live off your portfolio if the worst happened?

Post by MarkRoulo »

Pete12 wrote: Fri Aug 28, 2020 10:27 am I know there have been threads in the past about "stress-testing" a portfolio but I was looking for some real examples to compare to. I just did a stress test of our portfolio using the following rules:

- Both myself and wife lose our jobs and never work again (we are actually both self employed so in our case I assume we both go out of business.)
- Stock market permanently declines 50% and does not recover. Bonds remain the same.
- Portfolio does not grow at all after this happens- no dividends, no interest
- We remain in our current home, paying the mortgage and bills as scheduled
- We continue to pay other expenses such as kids school fees (K-12), health insurance, life insurance premiums etc.
- We cut back on all other discretionary expenses such as eating out, vacations etc.
- When kids go to college they will have to take loans / other financial assistance etc.
- Ignored inflation

In reality I am sure we would have to cut back way more than this (for example downsize our home) but let's keep it simple for now.

Based on this, I estimate our current portfolio of retirement accounts and taxable account would last about 9 years. I am 44 and wife is 46 so we would obviously have a ways to go before social security / medicare kicked in.

I would be curious to see how we stack up against other Bogleheads. Having run this exercise I do feel fairly good that we would be able to survive although of course the prospect of this actually happening is quite scary :shock:

Best wishes,
Pete
Um ... you are assuming that the bonds all stop paying interest, but their market value remains the same? If US Government bonds stop paying interest (forever) then I think you will see a lot more financial excitement than just a 50% drop in the stock market and a flat bond market.

And all stocks stop paying dividends but their market value only drops 50%?

This is no "worst case." This is totally unrealistic.
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Re: How long could you live off your portfolio if the worst happened?

Post by homebuyer6426 »

Pete12 wrote: Fri Aug 28, 2020 10:27 am - Both myself and wife lose our jobs and never work again (we are actually both self employed so in our case I assume we both go out of business.)
- Stock market permanently declines 50% and does not recover. Bonds remain the same.
- Portfolio does not grow at all after this happens- no dividends, no interest
- We remain in our current home, paying the mortgage and bills as scheduled
- We continue to pay other expenses such as kids school fees (K-12), health insurance, life insurance premiums etc.
- We cut back on all other discretionary expenses such as eating out, vacations etc.
- When kids go to college they will have to take loans / other financial assistance etc.
- Ignored inflation
Fun exercise!

Portfolio goes down to $150,000. Sell both vehicles and buy bicycles: +$15,000.

House $550/mo until 2032 where it's paid off and becomes $200/mo.
Barebones but still nutritional food for me and wife $200/mo.
Utilities and internet $200/mo.
Dropping health insurance.
No vacations, no education. No eating out.
Self-home-maintenance, let's call it $100/mo.

From a $165,000 pot we subtract $12,600 per year for the first 10 years. Now the house is paid off and there's $39,000 left.

From $39,000 we subtract $9,600 per year. Giving us 4 more years.

So 14 years of a pretty basic existence. But still a lot more comfortable than the one our ancestors had.
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skierincolorado
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Re: How long could you live off your portfolio if the worst happened?

Post by skierincolorado »

6 years. I assumed 33% spending reduction. We have near 1.5x leverage which amplifies the losses. Without the leverage would be 10 years. Early 30s.
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Pete12
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Re: How long could you live off your portfolio if the worst happened?

Post by Pete12 »

Nice to see this thread again! I enjoyed re-reading the responses very much!
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Re: How long could you live off your portfolio if the worst happened?

Post by Hillview »

11 years assuming we stay put (we would most likely sell) took our fixed expenses and then added in half of our discretionary (still very generous) and added in a rough guess on taxes. I didn’t add in the kids 529s but if I could magically do that it is another 2-3 years of expenses I could accommodate.
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Re: How long could you live off your portfolio if the worst happened?

Post by sean.mcgrath »

TomatoTomahto wrote: Fri Aug 28, 2020 10:29 am
Stock market permanently declines 50% and does not recover
What happens to bonds? Inflation?
And can I sell real estate that I don't live in?
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Re: How long could you live off your portfolio if the worst happened?

Post by Lawrence of Suburbia »

If my portfolio declined permanently 50%, SS and Medicare/Medicaid are defunded by the [political reference deleted], inflation at 10% permanently? ... about 4-5 years. Plenty of time to research a painless way out.
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Re: How long could you live off your portfolio if the worst happened?

Post by sean.mcgrath »

Pete12 wrote: Thu Sep 10, 2020 8:01 am Having read all the responses so far it generally seems that Bogleheads are well prepared. I still have some work to do but hope to get there!
It really depends on your age. We're 58 and could continue indefinitely under your rules. Even maintaining current spend until 85, we'd probably manage indefinitely. In reality we'd probably cut back some to leave a bit to the kids.
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Re: How long could you live off your portfolio if the worst happened?

Post by Tamalak »

I'd last about 15 years. I'm at leanFIRE portfolio levels atm.
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Re: How long could you live off your portfolio if the worst happened?

Post by lws »

Till death.
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Re: How long could you live off your portfolio if the worst happened?

Post by ResearchMed »

TomatoTomahto wrote: Fri Aug 28, 2020 10:29 am
Stock market permanently declines 50% and does not recover
What happens to bonds? Inflation?

Hmmm... were you peeking ahead 2+ years?

If only it was "just inflation", eh?

RM
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Re: How long could you live off your portfolio if the worst happened?

Post by TomatoTomahto »

ResearchMed wrote: Fri Dec 09, 2022 3:46 pm
TomatoTomahto wrote: Fri Aug 28, 2020 10:29 am
Stock market permanently declines 50% and does not recover
What happens to bonds? Inflation?

Hmmm... were you peeking ahead 2+ years?

If only it was "just inflation", eh?

RM
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Re: How long could you live off your portfolio if the worst happened?

Post by afan »

I agree that the postulated event-dramatic drop in stocks with no effects on bonds or the economy- is unrealistic. But this is an exercise to stress test a financial plan. I check the same thing and run it at deeper drops in the market to see where we would stand.

I still do this although we now have enough in fixed income to last longer than our possible survival. Of course, as this year has shown, bonds are not protected against losses.

So the answer to how long we could last with a 50% drop in stocks with no recovery is "longer than it is possible for humans to live at our current level of spending". Longer still if we were to cut back or deflation set in.

Where I find trouble in modeling is stagflation. How high an inflation rate and how flat a market for how long?
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Re: How long could you live off your portfolio if the worst happened?

Post by afan »

My base case is a 1% real return on a balanced portfolio. Then I take the total portfolio value down until we run into trouble. That tells me the margin for error in our forward projections.

I suspect that an 80% drop in portfolio value followed by 1% real growth is unlikely, but it is a place to start.
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Re: How long could you live off your portfolio if the worst happened?

Post by AnnetteLouisan »

If my portfolio dropped 50 percent and never recovered, and then since it’s mostly tax deferred and will be taxed around 25 percent, after deducting that, I could live off it for approximately 5 years, assuming I had no salary, ss, pension or other assets, but I do. I’m not depending on my portfolio, in other words. If I cut back I might be able to have it last ten years.
Last edited by AnnetteLouisan on Sat Dec 10, 2022 3:28 pm, edited 1 time in total.
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Re: How long could you live off your portfolio if the worst happened?

Post by afan »

Lawrence of Suburbia wrote: Fri Dec 09, 2022 2:23 pm If my portfolio declined permanently 50%, SS and Medicare/Medicaid are defunded by the [political reference deleted], inflation at 10% permanently? ... about 4-5 years. Plenty of time to research a painless way out.
Good point about SS and Medicare.

It is easy run sims with zero SS and that is a standard report I do.

I do not simulate the absence of Medicare because I do not know what to do in its place.

If I were to zero out Medicare, I would have to pick an amount to budget for health care. That would be such a dramatic change in the healthcare system that I could not begin to predict what those costs might be.

What figures do you use for health care costs in the absence of Medicare?
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Re: How long could you live off your portfolio if the worst happened?

Post by Lawrence of Suburbia »

afan wrote: Sat Dec 10, 2022 3:24 pmWhat figures do you use for health care costs in the absence of Medicare?
I didn't, really. Just guessed $1,000/month
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Atretes1
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Re: How long could you live off your portfolio if the worst happened?

Post by Atretes1 »

In 9 years I can draw a 6 figure pension and my portfolio will be 7 figures by then. I've told myself that its a nice thought that I could only live off of my pension if I needed to.
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Re: How long could you live off your portfolio if the worst happened?

Post by Wannaretireearly »

Pete12 wrote: Fri Aug 28, 2020 10:27 am I know there have been threads in the past about "stress-testing" a portfolio but I was looking for some real examples to compare to. I just did a stress test of our portfolio using the following rules:

- Both myself and wife lose our jobs and never work again (we are actually both self employed so in our case I assume we both go out of business.)
- Stock market permanently declines 50% and does not recover. Bonds remain the same.
- Portfolio does not grow at all after this happens- no dividends, no interest
- We remain in our current home, paying the mortgage and bills as scheduled
- We continue to pay other expenses such as kids school fees (K-12), health insurance, life insurance premiums etc.
- We cut back on all other discretionary expenses such as eating out, vacations etc.
- When kids go to college they will have to take loans / other financial assistance etc.
- Ignored inflation

In reality I am sure we would have to cut back way more than this (for example downsize our home) but let's keep it simple for now.

Based on this, I estimate our current portfolio of retirement accounts and taxable account would last about 9 years. I am 44 and wife is 46 so we would obviously have a ways to go before social security / medicare kicked in.

I would be curious to see how we stack up against other Bogleheads. Having run this exercise I do feel fairly good that we would be able to survive although of course the prospect of this actually happening is quite scary :shock:

Best wishes,
Pete
50% stock cut. Another 20-30% in taxes, leaves 10 years of expenses
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Re: How long could you live off your portfolio if the worst happened?

Post by AerialWombat »

........................
Last edited by AerialWombat on Sun Dec 25, 2022 7:31 pm, edited 1 time in total.
This post is a work of fiction. Any similarity to real financial advice is purely coincidental.
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Random Musings
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Re: How long could you live off your portfolio if the worst happened?

Post by Random Musings »

It's how you define "worst". U.S. debt defaults? Assets seized? Hyperinflation? Supervolcano? In cases like these, not much time at all. An economic depression and permanent loss of professional employment? Probably until I die but consumption habits would change considerably, and would get as some form of employment once the economy turned around. For most other (less) unpleasant cases, would probably adjust withdrawal rates (at times), but life will go on.

Hard to plan for the real Black Swan events, but can't waste time worrying about them either.

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Re: How long could you live off your portfolio if the worst happened?

Post by Dregob »

Pete12 wrote: Fri Aug 28, 2020 10:27 am I know there have been threads in the past about "stress-testing" a portfolio but I was looking for some real examples to compare to. I just did a stress test of our portfolio using the following rules:

- Both myself and wife lose our jobs and never work again (we are actually both self employed so in our case I assume we both go out of business.)
- Stock market permanently declines 50% and does not recover. Bonds remain the same.
- Portfolio does not grow at all after this happens- no dividends, no interest
- We remain in our current home, paying the mortgage and bills as scheduled
- We continue to pay other expenses such as kids school fees (K-12), health insurance, life insurance premiums etc.
- We cut back on all other discretionary expenses such as eating out, vacations etc.
- When kids go to college they will have to take loans / other financial assistance etc.
- Ignored inflation

In reality I am sure we would have to cut back way more than this (for example downsize our home) but let's keep it simple for now.

Based on this, I estimate our current portfolio of retirement accounts and taxable account would last about 9 years. I am 44 and wife is 46 so we would obviously have a ways to go before social security / medicare kicked in.

I would be curious to see how we stack up against other Bogleheads. Having run this exercise I do feel fairly good that we would be able to survive although of course the prospect of this actually happening is quite scary :shock:

Best wishes,
Pete
The worst that could happen is I drop dead. Problem solved.
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Re: How long could you live off your portfolio if the worst happened?

Post by iamlucky13 »

A breakdown of a few themes to my thoughts on this thread:

1) It is interesting that probably a majority of the discussion revolves around variations on the meanings of the word "worst" and ignored the fact that the topic author actually provided a fairly specific definition of the "worst" case they wanted to plan for.

2) I'm not very far into the mid-career stage of my life. If I follow my parent's example, I could be working for another 30 years, although my target is about 20 years. Our savings would last about 5 years in the OP's scenario if we didn't cut spending.

This is the normal situation for younger people. Saving is a time-dependent game. The young are at a fundamental disadvantage in this sort of scenario.

3) There are some resources, mostly overlooked in this thread, that may help people reduce spending or provide other income in the sorts of situations that could force the topic author's scenario to occur. My list is based on living in the US. Not all may necessarily apply, but there might be more I'm not aware of:
  • Social Security Disability Insurance
  • Medicaid
  • Children's Health Insurance Program (CHIP)
  • Federal health insurance subsidies (if not eligible for Medicaid)
  • Supplemental Nutrition Assistance Program (SNAP, aka "food stamps")
  • State level programs that may including housing, utility, and transportation assistance, and additional food or health care benefits
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Re: How long could you live off your portfolio if the worst happened?

Post by HeavyChevy »

29 years. But I am a retiree.
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Re: How long could you live off your portfolio if the worst happened?

Post by Nicolas »

Fifty years.
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Re: How long could you live off your portfolio if the worst happened?

Post by Garco »

I COULD live forever if "the worst" happened (in my 70's now), unless "the worst" is that I lose my life.
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Re: How long could you live off your portfolio if the worst happened?

Post by MathWizard »

The problem would be knowing there would be no returns after a 50% drop. That is basically impossible. All businesses would basically shut down ( they aren't making any profit for 30+ years?).

I have no idea what inflation will be as well, so assume 0 real returns (nominal return = inflation).

Assume 75% of SS, and assume entire portfolio goes down 50%,but I still pay the same amount of taxes.

Then with a bare bones budget, no house maintenance, no car replacement, my wife and I can survive 42 years.

If I include house maintenance, then 25 years.

I'm not sure what use this question is.
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Re: How long could you live off your portfolio if the worst happened?

Post by Pete12 »

iamlucky13 wrote: Tue Dec 13, 2022 5:11 am 1) It is interesting that probably a majority of the discussion revolves around variations on the meanings of the word "worst" and ignored the fact that the topic author actually provided a fairly specific definition of the "worst" case they wanted to plan for.
You're right, this was simply an exercise to compare myself to other Bogleheads without over-thinking/over-analyzing it. Debating what the "worst" case is would be its own topic!
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Re: How long could you live off your portfolio if the worst happened?

Post by WhiteMaxima »

I have two pensions and SS that will cover me forever. The portfoilio is just my extra bonus. So I can live off my folio forever.
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Re: How long could you live off your portfolio if the worst happened?

Post by Normchad »

Pete12 wrote: Tue Dec 13, 2022 3:39 pm
iamlucky13 wrote: Tue Dec 13, 2022 5:11 am 1) It is interesting that probably a majority of the discussion revolves around variations on the meanings of the word "worst" and ignored the fact that the topic author actually provided a fairly specific definition of the "worst" case they wanted to plan for.
You're right, this was simply an exercise to compare myself to other Bogleheads without over-thinking/over-analyzing it. Debating what the "worst" case is would be its own topic!
Honestly, your worst case scenario isn’t all that bad. If I could “lock that in” for myself, I would.

I’m an optimist, but when I think about the worst future that could likely happen, it’s a lot worse than this. Mostly due to the erosion of inflation and uncontrolled medical expenses.
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Re: How long could you live off your portfolio if the worst happened?

Post by Zeno »

deleted
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Re: How long could you live off your portfolio if the worst happened?

Post by chris319 »

I just ran the numbers and it looks like if I waited to collect SS at 65, and spent down my portfolio till then (six years), I'd be okay for another 30 years. There wouldn't be all that much left at the end though.
What inflation rate did you use for this exercise?

Inflation could be higher or lower than the figure you used.
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Re: How long could you live off your portfolio if the worst happened?

Post by abuss368 »

A goal of ours is to continue to build and increase the passive income stream for dividends. Each year, we aim for wages, as a percentage of overall income, to decrease and that dividends increase in percentage.

At the end of each year, we quickly review the portfolio from a high level. Goal #1 is a higher dividend stream in dollars than previous year. Goal #2 is the overall value.

Jack Bogle often told the stories of walking to your mailbox, opening it, reaching in and getting those dividend checks. He referred to this as income risk.

Best.
Tony
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Re: How long could you live off your portfolio if the worst happened?

Post by windaar »

Forever. Cancel internet, gym, all online subscriptions. Eat like I did in grad school (spaghetti & Ragu, bean burritos made with dried beans, egg-drop Ramen), stop buying new clothes and pretty much everything else that I don't actually need, ride bike where I need to go, finally read the hundred unread books that I've bought in the last 10 years.
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Re: How long could you live off your portfolio if the worst happened?

Post by coffeeblack »

Pete12 wrote: Fri Aug 28, 2020 10:27 am I know there have been threads in the past about "stress-testing" a portfolio but I was looking for some real examples to compare to. I just did a stress test of our portfolio using the following rules:

- Both myself and wife lose our jobs and never work again (we are actually both self employed so in our case I assume we both go out of business.)
- Stock market permanently declines 50% and does not recover. Bonds remain the same.
- Portfolio does not grow at all after this happens- no dividends, no interest
- We remain in our current home, paying the mortgage and bills as scheduled
- We continue to pay other expenses such as kids school fees (K-12), health insurance, life insurance premiums etc.
- We cut back on all other discretionary expenses such as eating out, vacations etc.
- When kids go to college they will have to take loans / other financial assistance etc.
- Ignored inflation

In reality I am sure we would have to cut back way more than this (for example downsize our home) but let's keep it simple for now.

Based on this, I estimate our current portfolio of retirement accounts and taxable account would last about 9 years. I am 44 and wife is 46 so we would obviously have a ways to go before social security / medicare kicked in.

I would be curious to see how we stack up against other Bogleheads. Having run this exercise I do feel fairly good that we would be able to survive although of course the prospect of this actually happening is quite scary :shock:

Best wishes,
Pete
If you run a firecalc calculation you will see that it shows scenarios like you mention and how you would have done historically.
chris319
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Re: How long could you live off your portfolio if the worst happened?

Post by chris319 »

abuss368 wrote: Wed Dec 14, 2022 8:29 pm A goal of ours is to continue to build and increase the passive income stream for dividends. Each year, we aim for wages, as a percentage of overall income, to decrease and that dividends increase in percentage.

At the end of each year, we quickly review the portfolio from a high level. Goal #1 is a higher dividend stream in dollars than previous year. Goal #2 is the overall value.

Jack Bogle often told the stories of walking to your mailbox, opening it, reaching in and getting those dividend checks. He referred to this as income risk.
What are your dividend vehicles?

And don't tell me you get paper dividend checks :D
Financial decisions based on emotion often turn out to be bad decisions.
Dottie57
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Re: How long could you live off your portfolio if the worst happened?

Post by Dottie57 »

I think I would do better than most folks. Yearly $ distribution would be less.
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abuss368
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Re: How long could you live off your portfolio if the worst happened?

Post by abuss368 »

chris319 wrote: Fri Dec 16, 2022 2:08 pm
abuss368 wrote: Wed Dec 14, 2022 8:29 pm A goal of ours is to continue to build and increase the passive income stream for dividends. Each year, we aim for wages, as a percentage of overall income, to decrease and that dividends increase in percentage.

At the end of each year, we quickly review the portfolio from a high level. Goal #1 is a higher dividend stream in dollars than previous year. Goal #2 is the overall value.

Jack Bogle often told the stories of walking to your mailbox, opening it, reaching in and getting those dividend checks. He referred to this as income risk.
What are your dividend vehicles?

And don't tell me you get paper dividend checks :D
Low cost diversified index funds.

What is wrong with paper dividend checks?😂

Best.
Tony
John C. Bogle: “Simplicity is the master key to financial success."
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