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  1. #1
    The Fool on the Hill bowie's Avatar
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    Recession – Are You Prepared?

    In the Retire? How much do you need per month? Thread – it was asked on Aug 30TH “All you guys living of investment returns what happens when the market takes a dump?”

    So, the Fortune Article “Why the next recession may feel very different than 2008” copied below is somewhat timely.

    So, Are you prepared for the next market dump – they happen without fail, yet, you cannot time them, people have been attempting to time the markets (unsuccessfully of course) since they were born.

    So, what have you done to prepare for the Next Recession?

    For myself, my nest egg is managed by a large brokerage firm in a “Conservative Retirement Platform” that, at last analysis breaks down into a diversification of: US Stocks 45%, International Stocks 6%, Bonds 42%, other 2%. When I figure in my cash in Thailand I’m at a diversification of Cash 20%, US Stocks 38%, International Stocks 5%, Bonds 36% and other 1%. Note, the diversification does not include real estate which is approximately 25% of my total assets.

    Now, this diversification resulted in a 2008 recession performance that showed a total decline in value of -22% over 16 months with a full recovery over the course of six months at +29%.

    To answer my own question above – I feel I am as prepared as I can be for the next recession by maintaining an actively managed well-diversified retirement portfolio. Cost of portfolio is 1.25%. The portfolio has historically provided annual returns of 6-8%.

    How ‘bout you?



    The S&P would have to lose over 1,000 points to reach 'Great Recession' levels. The stock market has been on a tear thanks to central bank stimulus and a low Federal funds rate. YARDENI RESEARCH.


    https://www.msn.com/en-us/money/mark...008/ar-AAGOh5L

    FORTUNE: Why the next recession may feel very different than 2008
    10 hrs ago

    Recession? Who's scared of a little recession?

    Leslie Saul wasn't when she started her eponymous architecture and design firm in 1992. "I think because it was a recession, people wanted to help me," she said. Through multiple later downturns nothing spooked her: Dips lasted only a few months. Then came 2008.

    After previous experience, Saul stayed staffed up. "I thought I was so smart to hold onto everyone," she said. Just one small problem: no follow-on projects. "Big firms were talking about a 30% drop in income. For us, it was 90%. It was 15 months of misery." And, eventually, layoffs.

    People who lived through the Great Recession are understandably nervous about the "r" word. But there's good reason to believe that when the next recession hits (and it will) the pain won't be nearly as great as what people experienced in 2008.

    Part of the business cycle
    Recessions — a drop in GDP for at least two successive quarters—are part of the ebb and flow of finance. But they are difficult to further categorize. "The nature of each recession is different and unpredictable," said Dr. Tenpao Lee, a professor of economics at Niagara University. "Some recessions have minimal impact and some are significant and make everybody poorer."

    The early 1990s recession that Saul coasted through hit others hard. Jeremy Ong, who operates multiple ecommerce sites and blogs like Hustlr, was a kid whose father ran a construction business.

    Customers didn't have the cash to pay and his father in turn couldn't pay supplies. "It took about five years to pay off our creditors," Ong said in a note to Fortune. The family sold its home to move a smaller one, sold cars and laid off a family driver. "We went from eating steak almost every day to having bread for about 2 years."

    On the whole, though, the 2008 recession was generally terrible. "There was roughly 50% or 60% decline in the S&P," said Greg Ghodsi, managing director of the 360 Wealth Management Group at Raymond James. A typical recession, he notes, sees a drop closer to 30%.

    GDP also took a huge hit in 2008: 5.1 percentage points, according to Ted Rossman, an industry analyst at CreditCards.com. Compare that to the 2.7 points from 1981 to 1982, 1.4 points from 1990 to 1991, and 0.3 points in 2001. "Almost nothing by comparison," Rossman said.

    It might have hit already
    Preparing for a recession can be difficult because you never know who will be hurt most. Some businesses thrive because they are counter-cyclical and find more customers, like bankruptcy lawyers and discount stores. Others suffer.

    Trying to time one is impossible. "We do know that there is a recession coming," said Cindy Kuppens, the COO of O'Brien Wealth Partners. "Maybe next year, maybe 2021. We're coming to the end of a business cycle."

    We could even be in a recession now without knowing. Economists have to wait for the data to measure GDP and new estimates come as additional information arrives. A previous quarter can slide in hindsight and a current period may be starting to slow.

    Too much worry about a recession can bring one on as businesses react by pulling back and people save money instead of spending it. That shrinks GDP. In other words, you can make yourself crazy trying to forecast the future.

    "We've had a 10-year bull market and people need to make sure they're appropriately invested for the future," said Julie Fox, managing director and market head mid-Atlantic private wealth manage at UBS Financial Services. Whether or not a recession is officially here or on the way, prudence suggests taking preventative steps.

    What to do now
    First step is consider where you are. Are you in the 46% of families that would have to sweat an unexpected $400 bill. Then, Ghodsi says, figure out your expenses and where you might cut.

    Also, now's the time to shop for a better-paying job. "The labor market is still very strong and there are still plenty of jobs being advertised out there," he said. "If you were going to make a move, this is the time to do it." Wait for a recession and it's likely too late.

    If you can, take on extra work and use the money to build a cash buffer and reduce debt. If you've got credit card debt, Rossman suggested looking for new cards with no-interest balance transfers so payments go right into principle and lower balances faster.

    If you do have assets, aim for a cash reserve for six months at least and a year if possible and also reduce debt. Reconsider your current plan with your financial advisor. Don't try to time your investments, especially as you can't know when a recession starts or ends. Even in a deep recession like in 2008, investment values bounced back within two years. "In smaller recessions they bounce back much more quickly," Kuppens said.

    While recessions may be a fact of life, it's important to remember: they too shall pass.
    Attached Thumbnails Attached Thumbnails -crisis-chart.jpg  

  2. #2
    disturbance in the Turnip baldrick's Avatar
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    Quote Originally Posted by bowie View Post
    I feel I am as prepared as I can be for the next recession
    buy 1 bitcoin

    if it becomes very wild and crazy it may have been your best diversification

  3. #3
    The Fool on the Hill bowie's Avatar
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    Quote Originally Posted by baldrick View Post
    buy 1 bitcoin
    Don't know 'bout bitcoin. Don't know how they work or don't work. Hafta check with the forum bitcoin maven. Hey Lu - just how do bitcoins work?

  4. #4
    CCBW JPPR2's Avatar
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    I left a moderate risk portfolio to a cash position and I work for fun money.

    That said, I am set up now that I would not be impacted by a recession or a housing bust. Am I leaving money on the table not riding the recent wave, yes but it's that risk versus reward and aligning your expectations to your means.

  5. #5
    Thailand Expat
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    ^Yeah, that's me too. All cash right now and my home paid off. Can probably ride out my savings for a few years if I couldn't work.

    I will not invest in the stock market. The numbers are phony and they will "sheer the sheep" again at some point. My Dad took a beating on his retirement fund in
    '08. Seen too much grift and nonsense to ever trust that Wall St casino.

    Barring some sort of medical calamity I'm probably ok financially for any downturns/layoffs.
    "I can't be worried about that shit. Life goes on, man."
    ~The Dude

  6. #6
    Thailand Expat

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    i got a GOOD WIFE who will do what she needs TO,havnt touched our pensions for 2yrs.in the uk.
    no debt.only the odd bottle of wine now and then,did pay 4,000bht.for 3 legs of lamb [foodland] 6,000bht.for 8kilo's steak,[ausie] so that's my stock unless BORIS unfreeze's our pensions.been here before so its as the saying goes,UP TO YOU.i have never invested in any market apart from the WIFE just hope the banks here are SAFE.

  7. #7
    or TizYou?
    TizMe's Avatar
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    I've got 2 years living expenses in cash. i'm ok to handle any downturn in the stock market when it occurs.

  8. #8
    CCBW JPPR2's Avatar
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    Quote Originally Posted by Agent_Smith View Post
    My Dad took a beating on his retirement fund in '08
    My Dad did as well. Was brutal to watch. I kept telling him to get out and like many they thought it was all secure and never go sideways. He lost damn near 50% of his portfolio value. He has recovered about 25% back but he is remained in a very conservative position since the beating he took. I manage my parents investments for them nowadays.

    I knew over a dozen colleagues that on paper had a few million dollars in stock but again they thought it would always go up or remain stable. I watched them go from your basic middle class living lifestyle to millionaires and back to middle class living and check to check. Good ole American greed. Sometimes it gets the best of folks.

  9. #9
    Thailand Expat cyrille's Avatar
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    I’m always prepared.

    Waay too fookin prepared.

    If I really get my arse kicked I at least know I’ll be returning to a place where everything’s dirt cheap, even if it is governed by someone with no respect for democracy.

    It’d be a struggle adjusting to UK weather though.

  10. #10
    CCBW JPPR2's Avatar
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    To Cyrilles point, While I am not "all in here" meaning I have a path back to the states for me it would be hell to return and try and fit in with friggen nonsense and over governing of every single thing you do.

  11. #11
    Thailand Expat Pragmatic's Avatar
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    Prepared? Tough question not knowing what the recession will bottom out at. I take life as it comes. If shit happens there ain't a lot one can do about it. IMO

  12. #12
    CCBW JPPR2's Avatar
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    Quote Originally Posted by Shank View Post
    You are always one step ahead of the pack J2
    Well don't know about that but I definitely try to make rationale decisions about many things especially long term financial plans and living locations.

  13. #13
    The Fool on the Hill bowie's Avatar
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    Well, for myself and my wife, spent twenty plus years in the USA accumulating shares of stock. We contributed 10-15% of our salaries to a company sponsored 401k plan. As time went by our number of shares increased. Now, all during that time there was a "dollar value" or metric assigned to our shares. When the 2008 recession hit the metrics indicated our 401k portfolio lost 22% of its dollar value over the course of 16 months, then the market turned and in 6 months the "dollar value" gained +29%.

    Now, that was the dollar value or metric - during the entire 22 month period our number of shares continued to increase. Even during the 16 months when the dollar value of our shares decreased 22% our number of shares continued to increase.

    The point being that the important metric is the cash value you will get when you must Sell XXX number of your shares for cash to live on.

    The other part of the game is taxation. All during the purchase of and accumulation of the 401k shares it was done as or on a tax deferred basis. So, I/we are liable for taxation when we sell the shares for cash to live on.

    For myself and my wife, 25+ years of contributing to company sponsored tax deferred 401k plans, plus after tax contributions to tax exempt Roth IRA's has afforded us the ability to retire "early" (before the magic 65yo).

    Now, on a cost-of-living tangent, Thailand is costing us between 50-60% of our cost of living on the Northeast Coast of America. Here, we are able to buy without concern of cost. In the USA we "cut coupons" to economize. On the long-term, our brokerage managed nest egg (IRA's), are actually maintaining their (metric dollar value) - in other words, even though we are selling $3k/month worth of shares and paying our USA taxes on our distributions, our IRA's principal has not decreased in value (actually the dollar value metric of our number of shares has increased slightly).

    Now, our nest egg is more than sufficient to hold us until we file for our social security retirement benefits. Which, hopefully, will be more than adequate to pay all our bills. Leaving the nest egg to grow for the daughters benefit. So, she will be taken care of should a problem occur. She is an educated individual living in the USA leading her own life and earning her own money. Inheritance money is nice to have but doesn't provide the satisfaction of earning your own paycheck and pulling your own weight.

    Thanks to all for chiming in and contributing to this thread. Best of luck to you all.


    Words to the wise, live within your means, don't spend your money frivolously, prepare for the future and save a portion of your hard earned cash for your retirement. The sooner you start, the better off you will be.

  14. #14
    Thailand Expat
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    Have enough savings not to work for a year, although I am sure I would soon get very bored indeed. I tend to live frugal for most of the year to maximise savings. I always tend to overthink things going for a ball of chalk.

  15. #15
    CCBW JPPR2's Avatar
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    Keep in mind Bowie. You can take up to $25k distribution from your IRA and it will be a wash on taxes.

  16. #16
    The Fool on the Hill bowie's Avatar
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    Quote Originally Posted by JPPR2 View Post
    $25k distribution from your IRA and it will be a wash on taxes.
    2019 USA Taxation:
    $24,400 is the married couple standard deduction, 10% of $0-$19,400 of taxable income, $1,940 plus 12% of amount over $19,400 of taxable income

    For myself, $36k distribution leaves $11,600 taxed at 10%, $1,160 tax bill. But, I'll be contributing $14k from our tax deferred IRA's to our tax exempt Roths plus about $10k to a USA checking account for medical insurance premiums, life insurance premiums, and other misc. All told our USA 2019 bill will be about $5k total.

    As far as the nest egg, I much prefer cashed up Tax Exempt Roths, as opposed to the Tax Deferred IRA's, hence the IRA to Roth distributions. Never know what the future will bring, and, as long as Uncle Sam allows us to contribute to the Tax Exempt Roths, we will. Such allowed contributions may be closed at any time.

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    Thailand Expat
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    Traditional IRAs might be a better option actually, you would be taxed at a lower rate when you retire

    just saying, and Roth is good for emergency funds though since it's post tax contribution and no restrictions on withdrawals if I am not mistaken, need to check IRS website

  18. #18
    Head Skivvie Stacker Storekeeper's Avatar
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    My sources of retirement income will make me a “Triple Dipper” and solely dependent on the US government for cash flow. More concerned with the the possibility of cuts to those than a recession.

    Haven't worked out yet how taxes will work for a US military pension, US civil service pension and US social security.

    Have never really concerned myself too much about a nest egg of any significant amount. Always figured I’d just shoot to be debt free.

  19. #19
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    Quote Originally Posted by bowie View Post
    Don't know 'bout bitcoin. Don't know how they work or don't work. Hafta check with the forum bitcoin maven. Hey Lu - just how do bitcoins work?
    I'd run whith hornblower and associates. As for me I've ran with it and whithout. Up a Pence and down the same. That's the market.

  20. #20
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    Quote Originally Posted by Storekeeper View Post
    Always figured I’d just shoot to be debt free.
    That's a big thing, if times get lean the last thing anyone needs is to be waking up each day knowing they have to find X amount of money to make debt repayments at the end of each month. No big thing when young, not a good thing later in life though.

  21. #21
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    Its about ability to manage risk and absorb adverse factors, that and ensuring you have options. Most here i.e bowie, jp etc look to have ensured they have ticked these boxes through careful consideration and management.

    I still think anyone who goes all in on a country not their own is opening themselves to huge risk - its been mentioned before, if you don't have citizenship you are a guest and that's far too fooking tenuous a status to sell everything into. I'm staggered by those that do though.

  22. #22
    The Fool on the Hill bowie's Avatar
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    Quote Originally Posted by Storekeeper View Post
    Haven't worked out yet how taxes will work for a US military pension, US civil service pension and US social security.
    Have never really concerned myself too much about a nest egg of any significant amount. Always figured I’d just shoot to be debt free.
    Storekeeper, as ex-military you have paid your dues and will be fine. Debt free and you've covered all the basics.

    Only other magic is to live within your means. Once you figure how much money you have coming in along with the associated "tax burden" you know how much you'll have to spend. Then, live within your means. Adjust you standard of living to suit your financial situation.

    Taxes are always a difficult subject, many - makes sense to discuss your tax situation with a tax advisor (one time fee) to see just where you stand, both today and in the future.

    Good luck with it.

  23. #23
    The Fool on the Hill bowie's Avatar
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    Quote Originally Posted by Headworx View Post
    debt repayments at the end of each month
    One of the first steps in preparing for retirement is to achieve a "debt-free" status. Entering retirement with debt is problematic and yet some folk do it intentionally. A Foolish Risk. You know, best laid plans and all...

    https://www.fool.com/retirement/2018...etirement.aspx
    When we think about retirement, we often operate under the assumption that leaving the workforce will be a matter of choice. But the reality is that many seniors wind up retiring earlier than anticipated. In fact, a good 60% of workers are forced into early retirement, according to data from Voya Financial, and the reasons run the gamut from job loss to personal health issues.

  24. #24
    The Fool on the Hill bowie's Avatar
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    Quote Originally Posted by NamPikToot View Post
    I still think anyone who goes all in on a country not their own is opening themselves to huge risk -
    Yup, expating ain't for the faint-of-heart. Gotta have a back up plan, even if the back up plan is returning to your home country. Not by choice, but by necessity. I've done the "math". Repatriation is a most undesired and costly scenario, but, if it happens it will be by necessity (and most likely due to medical), for my case, and probably for most expats, carry expat medical insurance that includes repatriation.

    And, yes, I am fully aware of the aged expat community where medical insurance is either not available or cost prohibitive.

    You still need to "think it out" and have a backup plan - even if the backup plan is palliative care followed by the crematorium.


    Plan, plan, plan... being caught unawares forces one into reacting, as opposed to acting.

  25. #25
    disturbance in the Turnip baldrick's Avatar
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    Quote Originally Posted by bowie View Post
    even if the backup plan is palliative care followed by the crematorium.
    source a LSD supplier - use that bitcoin on the darknet

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