<p>Oh, in fact, I just read an article about how the nature of the employer/employee relationship is changing. Employees are a liability and an expense and the world of work is moving to a point where everyone will be an individual, independent contractor. I’ve seen too many of these types of predictions come true and fail so I think its prudent to be ready if the present reality should shift in the next 10-20 years even if you don’t think it will.</p>
<p>In a slightly different vein, I recently read a recommendation to have stop loss orders in place for one’s equity positions, as a safety precaution against any precipitous drop in the market. Thoughts? Can stop loss orders be written as a percentage, or strictly as a particular price? What type of percentage drop in the market would seem to signal another serious, long-term decline (if such a figure exists)?</p>
<p>Thanks for the link, DocT. It was interesting, but not exactly what I was thinking of. I’m more wondering if stop loss could be used effectively to protect against huge losses to entire portfolio a la 2008 - 2009. Or is that really just another attempt at market timing, which is just as likely to miss out on large gains as to avoid large losses.</p>
<p>The biggest one day drop was in 1987. 2008-2009 was not day to day but cumulative effect.
<a href=“List of largest daily changes in the Dow Jones Industrial Average - Wikipedia”>http://en.wikipedia.org/wiki/List_of_largest_daily_changes_in_the_Dow_Jones_Industrial_Average</a></p>
<p>I’m not completely certain I understand what you’re asking. However if you have a portfolio of different stocks, you could come up with a weighting based on each stock’s volatility and percentage of your entire portfolio it represents. You could then buy puts on the spy if all your stocks are part of the s&p to protect against some amount of a drop or reduce the volatility of your entire portfolio. Protection these days is cheap. I guess you could put stops on each individual stock but then how do you determine them? Using support and resistance levels is not particularly wise as there are algos that take advantage of what everybody knows and everybody knows the levels. I mentioned in the investment blog, that I had built models looking at all kinds of indicators. This included stop losses. I looked at percentage losses, 1 - 5 atr losses etc and there is no consistent method that works - exactly the conclusion of the SA article. If there was, everybody would use them</p>
<p>If a hypothetical portfolio was made up entirely of one S&P 500 index fund, and the investor put a stop loss sell order to go into effect if the price dropped, say, 15% from the 12-month high, would that investor have effectively avoided the bulk of the most serious market drops, or only succeeded in jumping in and out of the market to no real advantage?</p>
<p>That is a complicated question. If you get out ok, you also have to get back in. Anecdotally, very few if any can do both with any consistency. </p>
<p>Discussion had me looking at our 401k acct - month of Sept has about 1% down in all four of the categories we have on investments, but still up quite a bit from 1/1/14. We shall see what the markets do as time unfolds…</p>
<p>Most of this thread is way over my head, but I’d like to get back to the original question posed by the OP. How much do you think you’ll need? Do you plan to spend the principle (our accountant says we should spend our last dollar on the last day on earth) or live on the interest and leave the principle to the kids?</p>
<p>Your accountant is a smart man. I’m sure most of us love our children but I hope that we gave them the tools to be able to afford the lifestyle they want. You only go through this once just like they will and you have the right to spend your money in a way that makes you happy. It’s not just about the kids, you have a life also. If it means spending every last cent you have, so be it.</p>
<p>I wish there was more info for those of us with defined benefit plans. (And I guess I wish I had a crystal ball! If the water dries up and everyone moves away, eventually the retirement money will disappear also. 
So many unknowns. The defined benefit plans sound good now, but if the country gets a few years with double digit inflation, the retirement money will lose its value, as there are no COL adjustments. How much money should I have outside the defined benefit plan and Soc Security to protect against inflation? Can anyone suggest a good calculator that doesn’t require me to predict what the inflation rates and interest rates will be?</p>
<p>We do expect to live mostly on the interest, but who knows what will happen? Our son hasn’t been told that he might inherit or how much, because we don’t know how much and we don’t want him to base decisions on expectations that might not happen.</p>
<p>Anxiousmom, there has to be some guessing.</p>
<p>I like this calculator.
You can enter your defined pension in the lower section with no inflation. You can enter social security with a small increases… Maybe 2.2 percent. Inflaton at 3 percent. You can enter your average tax rate. You can enter 4 to 7 percent on your expected return… </p>
<p>You can play around by omitting things… </p>
<p>This will give you an idea…</p>
<p><a href=“Best Retirement Calculator: Simple, Free, Powerful”>http://financialmentor.com/calculator/best-retirement-calculator</a></p>
<p>The End of Retirement is Near</p>
<p>By Glen Hiemstra, 1995, 1999</p>
<p>One invention of the 20th century that is likely to disappear early in the 21st century is the concept of retirement. Retirement has come to mean that after a period of income- generating work lasting until age 65 or, in recent times, age 60 or even 55, one should cease income generating work. The “final” phase of life is expected to be one dominated by leisure, paid for by savings and benefits accumulated in the employment phase of life.</p>
<p>A surprising number of modern institutions and assumptions have been built around this notion. Now it appears that retirement will go the way of the dodo bird. For those approaching age 50, and the generations to follow, the idea of the end of retirement is a challenge, an opportunity, and certainly a wake up call.</p>
<p>Various myths underlie the concept of retirement. First, that age 65 is old. Second, that those over 65 are not generally capable of useful work. And third, that those remaining in the paid labor force will, through social security tax contributions, pay for the benefits of contemporary retirees.</p>
<p>Each myth is refuted by current realities. Age 65 is no longer old. People are living and maintaining vitality longer, a phenomenon known as down-aging. When the Social Security System was established, the age for collection of benefits was set at age 65, because the planners knew at the time that the average life span was age 63. Thus, few persons were expected to actually collect benefits, with benefits going only to the truly needy. As the century turns the average 65 year old can expect to live another 20 years on average. In the near future people will live even longer, in better health, and unless the retirement concept changes will need to collect retirement benefits for periods averaging 20 to 40 years, perhaps even longer.</p>
<p>The second myth, that people over the age of 65 are not capable of meaningful work also flies in the face of tomorrow’s realities. When retirement began early this century the most common work was manual and depended heavily on strength. People over 65 were indeed old, more similar to the 75 or 80 year old of today. The primary work of tomorrow is knowledge work, requiring little or no manual strength. Research demonstrates quite clearly that maintaining mental activity can sustain a sharp mind far into old age, barring illness. If the culture is short on anything these days it is wisdom, often the unique strength of elders. It can also be pointed out that even muscle strength can be maintained at a far higher level than previously thought, with proper exercise.</p>
<p>Finally, the myth that future workers will support future retirees with social security taxes flies in the face of demographic realities. When the system was established, there were about 20 workers paying an annual tax of $30 to support each retiree. By 2011, when the first baby boomer turns 65, there will be about two workers per retiree, paying an annual tax of up to $15000. Social security, conceived as a kind of insurance, works as a kind of pyramid scheme in which those “in early” benefit the most, and those “in last” may not benefit at all. It is difficult to imagine how such a system can sustain itself, though many proposals are being floated in an attempt to maintain the program.</p>
<p>For a variety of reasons other financial sources are unlikely to be adequate to pay for a 20-40 year retirement. Private pensions are diminishing or disappearing, and harder to accumulate anyway because of the disappearance of the single career job. Home equity is not expected to increase at near the rate of the post World War II years, and those under age 50 are not saving at the rates needed to pay for a long retirement.</p>
<p>The 20th Century concept of retirement was largely deliberately invented. A variety of interests wanted to move people out of the labor force so younger people could be accommodated. The work was not easily done by elders. New industries revolving around investing for retirement and the activities of retirement set out to convince people that retirement was natural, and a kind of new right of modern living. For a time it has seemed to work.</p>
<p>Now however, it seems likely that most 21st Century elders will not retire. They will slow down, work less, work at new things, have some leisure, but continue to engage in useful, income producing work in a variety of arrangements and patterns, perhaps for all of their lives. It is safe to say that the first quarter of the 21st Century will see a great re-invention of the third phase of life, away from classic retirement and toward something like “life fulfillment.” The end of retirement and beginning of life fulfillment may be a kind of liberation.</p>
<p>Glen Hiemstra is a futurist speaker, author, consultant, blogger, internet video host and Founder of Futurist.com. To arrange for a speech contact Futurist.com.</p>
<p>^I can’t believe people are still repeating that canard about life expectancy only being 63 back then. Of course those averages in the past included ALL people, including the much higher rates of childhood deaths in the past. Old people lived to their 70s and 80s very commonly; and you can read any book set then, or at your own family most likely, and see that. It’s just such sloppy thinking how that inaccurate factoid gets bandied around.</p>
<p>What matters is how many people reached 65 (now 67) and what your life expectancy was when you reached 65.</p>
<p>Both those numbers are higher today, which is why, along with changing demographics, both the tax rate and taxable amount are considerably higher now.</p>
<p>I haven’t met too many people who have expressed interest on working until they die. And while there may not be as many intensely physical jobs now as there were 60 years ago, there are a lot that are demanding enough that old people won’t be able to do them. And you can’t switch to a knowledge-based job when you are 70.</p>
<p>I think that guy is way off base, and in the twenty years since he wrote it, I don’t think much has come true. If anything more people are collecting SS as early as possible because they can’t get a jobof any kind.</p>
<p>I agree. Also I find I do not have the capacity to learn new things as fast as people in their twenties nor do I have the capacity to work 12 hour days as they do and I’m only 63.</p>
<p>I think the author also understates how much the brain changes as we age. The body is not the only thing that goes downhill.</p>
<p>Exactly! I’ve had my phone for almost two years and I ask my daughter, who has had the same phone for a month how to use it. I also no longer have the patience to read long winded directions.</p>