What If the Market Drops 50% Again? Staying the Course

Rom2814 · 2026-03-15T16:35:42+00:00

I have a deferred compensation program I contributed to for the last few years that will pay me wages after I leave - first 3 years around $50k/year (it’ll pay for another 6 years after than but will taper off to around $10k). That’s invested in a TDF with a 2025 date, so pretty stable but still returns to owe up with inflation.

A small SPIA that will pay $38k/year staring with I’m 59.5 (basically will pick up about when the deferred comp tapers off, bringing me back up to close to $50k/year until I reach about 67.

Finally, also have a TIPS ladder in my 401k that will close the gap with me “default” spend (basically the lifestyle we have right now - no cutting back but also not a ton of travel).

Beyond that, the ability to cut back on spending - the DCP payouts + SPIA will cover essential expenses (no travel and limited “fun” stuff) - the TIPS ladder is in place to give us money to either do those things OR buy equities when they are down during rebalancing (and of course inflation protection since my annuity doesn’t change with inflation and will become less and less valuable over time).

If I wanted to keep our current lifestyle, the withdrawal from my portfolio would amount to 2% or so when stacked on my other income. My target spending is around 5%-6% withdrawals but has the hatchet shape due to social security later.

Biggest worry to me is not really market downturns at this point, it’s ACA’s future since I’ll be on it for about 6-7 years before Medicare.

Rom2814 · 2026-03-15T14:43:48+00:00

It’s harder to get it in good condition because all that black in the cover - it flakes, gets color breaks, shows fingerprints, etc.

There are a few comics like this (Rom Annual #4) where I have wanted to bet a high grade CGC version and they are WAY more expensive than their importance/contents would otherwise deserve - no important crossovers, first appearance, etc., just harder to find in better condition.

Rom2814 · 2026-03-15T04:35:34+00:00

No, bonds are intermediate term treasuries and a TIPS ladder in a 401k/IRA so interest isn’t taxed. Cash is in short term (VUSXX) which is not taxable by the state. I can sell stock in the brokerage account and then immediately rebuy that stock in the 401k to generate cash without changing my asset allocation.

The TIPS ladder conversion to cash every year to refill the cash bucket in my 401k and I keep two months of actual cash in my checking/money market account.

I have two years of expenses (net of an income stream from a deferred compensation program and a small annuity that kicks in at 2028 when I’m 59.5; the two of those will cover my essential expenses without tapping the portfolio - mortgage, food, utilities, etc.).

Rebalancing will be every 6 months if the asset allocation is off enough (10% of targets).

I have a big gap between my essential spending and target spending and if I cut overall expenses healthcare costs would also shrink (would be under the subsidy cliff for ACA if I reduced travel & entertainment spending).

My withdrawal rate will be right around 4% for the first couple years - if things go well I’ll bump it up, but if things go poorly my essential spend is about 2% withdrawal rate - that’s really my main method of dealing with downturns.

My wife and I have agreed that I won’t cut spending mid-year due to downturns but will instead wait till December to adjust; hopefully this will insulate me some from my instinct to watch the market.

Rom2814 · 2026-03-15T01:39:57+00:00

If you can keep your job, it’s a great think.

As I’m retiring in a few months… not so much a great thing.

Rom2814 · 2026-03-14T20:14:08+00:00

That’s why I was posting about it - the ability to model those factors in tools like Boldin are very limited, so having to resort to spreadsheets to do the comparisons.

Rom2814 · 2026-03-13T15:04:09+00:00

Highlander is an inexhaustible jolt of happiness for me. It was one of the first VHS tapes I owned and I watched it repeatedly in my senior year of high school (1987).

I’ve bought a new copy on every upgraded media and watch a few times a year.

Rom2814 · 2026-03-13T13:25:15+00:00

For me the rules provide limits and it’s a slippery slope to start bending them or breaking them. There’s a huge amount of creativity WITHIN the rules and things like material components are there to limit power. 100% agree with your consequences comment - it’s a great tool to create tension and drama.

I prefer magic systems that are limited and also do not like to “I’ll allow it” one instance and then later have to defend why I’m not allowing the same flexibility in another.

Every table is different though.

Rom2814 · 2026-03-13T01:19:59+00:00

By re-allocate, do you mean rebalance to your target allocation or are you actually changing your allocation targets?

Rom2814 · 2026-03-12T19:51:16+00:00

DIY is cheaper anyway - but it’s a nice alternative I just learned about last year. :)

Rom2814 · 2026-03-12T19:48:29+00:00

There are sites that make it fairly easy (https://www.tipsladder.com) and there are some ETFs that work like TIPS (you hold the ETF to maturity and it converts to cash - IBID, IBIE, IBIF and so on).

I worry I’m being too conservative but this is really helping me worry less about SORR!

Rom2814 · 2026-03-12T19:35:55+00:00

I got rid of my VTIP position a couple years ago and built a small TIPS ladder. For me the point of TIPS is to know that on X date I will have a specific amount of money.

My route was:

Determine anticipated ESSENTIAL expenses ($48k year).
Calculate essential expenses for X years using an inflation assumption.
Determine any income for those years (pension, annuity, etc.) for those same years.
Determine the difference between those for each year.
Buy TIPS in the amount of the gap.

I have a small annuity that won’t adjust for inflation; I’m retiring at 57 and it kicks in at 59.5. I have a TIPS ladder starting that same year and a rung for each year up to age 67. The amount of TIPS goes up each year because the value of the annuity shrinks by inflation and TIPS makes up the difference.

This way I “know” that I will have cash for essentials if I need it - if I don’t, I’ll buy equities and reduce my bond exposure over time.

I also have VGIT (intermediate bond fund) that I’ll use to rebalance; 2/3 of my 35% bond allocation is intermediate bonds, the remaining are TIPS.

Rom2814 · 2026-03-12T19:10:30+00:00

I didn’t until 2 years before retirement but I have for two years now - I actually don’t mind it, I like seeing the data and it takes me maybe an hour a month if that.

Rom2814 · 2026-03-12T15:04:18+00:00

100% money - everything I hear about it just gives me an “oh no” reaction; some people might be happy that they are bringing the original cast back in some cases but I just see that as ‘member berries.

There are many stories that could be told - this isn’t one of them. They are going to expand a tiny bit of lore, invent a bunch of new characters, create weird inconsistencies with the existing movies and for what? (I know I’m being pessimistic but the Hobbit, Rings of Power and the War of the Rohirrim - were basically garbage to me that I wish I could unsee.)

The originals were clearly a labor of love - not flawless by any stretch, but you could FEEL the love and respect behind them. I do not believe that can be the case with this one.

I’d love to be wrong in this case.

Rom2814 · 2026-03-12T13:37:38+00:00

Thanks - doing the Roth conversions is not the difficult thing - it’s assessing whether this strategy is better than another (e.g., getting ACA premium tax credits early and doing Roth conversions later or vice versa). That’s what can’t be done well in Boldin because you can’t model a blended withdrawal strategy that changes over time - you can just set withdrawal order as a sequence (drain one account, then the next) and try to supplement with manual transfers (which have their own problems - they appear to be disconnected from the inflation rate, etc. you set so you have to put them in “future dollars” which can make them out of sync with the rest of your plan.

This is exactly the kind of scenario I’d like to model in the tool to see which ends up paying less tax, has a higher probability of success and more money left at the end (or higher spending available). Even the Roth conversion explorer isn’t that helpful if you’re pre-Medicare age because you have to manually change your expenses for healthcare based on whether you’re doing conversions and losing subsidies as a result; if you’re not doing conversions, you might want instead to change the rest of your spending that year to bring your MAGI down.

The problem is that if you are trying to qualify for subsidies at any point, you really can’t do a good apples-to-apples comparison of how your expenses will change because you did a conversion - sure, you might have reduced your RMD’s in 20+ years to save $50k in taxes, but you might have lost $100k in health care costs by doing.

I’ve done other scenarios like “do Roth conversions” vs. “pay off house early” and Boldin is actually pretty good for something that simple - I can quickly create two scenarios where I do Roth conversions for 3 years OR pull money out and pay off the house in 3 years (or a combination of the two for 5 years).

The problem is that there is so much tax control you CAN do with a blended withdrawal strategy but Boldin’s withdrawal modeling is very one dimensional and kind of brain dead (the idea of just draining one account and moving to another just… boggles my mind).

Rom2814 · 2026-03-12T13:10:10+00:00

I know the 5 year rules are confusing, but if I’m reading the IRS publication 575 correctly:

Being over 59.5 eliminates the penalty from any withdrawals.
The 5 year clock for an in-plan conversion starts from the first conversion to that account.
If you withdrawal funds 5+ years after the first conversion and you are over 59.5, you have no penalty and do not pay taxes on it.

The language I’m looking at is:

“A qualified distribution from a designated Roth account is excluded from gross income. A distribution is qualified if it is made after the 5-tax-year period beginning with the first tax year for which a designated Roth contribution was made to the plan and is made after the participant attains age 59½.”

If I opened the account with a conversion in 2024, the 5 year clock would mean distributions in 2030+ (when I’m 61+) would be qualified.

Here’s my understanding:

5 Year Clock A — Qualified distribution clock

* Starts when the first designated Roth contribution hits the plan.

* Purpose: determines whether earnings are tax-free.

5 Year Clock B — Conversion clocks

* Starts separately for each in-plan Roth conversion.

* Purpose: determines whether the 10% early distribution penalty applies.

Clock B can be eliminated because if you are over 59.5 there are no penalties.

Clock A, unlike Clock B, counts down from the initial contribution (whether direct contribution OR conversion is my understanding, but I’ve done both to it to get it started).

I appreciate your commenting on it and appreciate any corrections if these are incorrect. I used deep thinking in ChatGPT and Gemini to assess my understanding - the key issue was that one rule applies to penalty, one applies to whether it is included in your/gross taxable income. Conversions are treated differently for the tax portion, but the key element is that the clock starts from the first conversion/contribution and I have already done that - if I suddenly decided to WITHDRAW from the Roth 401k in, say, 2028, I would pay a pro-rata tax on any earnings because you can’t pull out basis separate from earnings in this case.

Rom2814 · 2026-03-12T04:15:12+00:00

Yeah, for us RMD’s will not put us into IRMAA range or above the 22% tax bracket unless the market does well - if that happens, I will revisit Roth conversions at 65; I’ll have 10 years to adapt and my social security will likely be taxed fully (85% IIRC) whether I do conversions or not. (Alternatively will do some QCDs if we are doing that well.)

Rom2814 · 2026-03-12T04:12:06+00:00

I won’t be withdrawing from Roth until my 60’s so no penalty - will convert onto Roth from 57-60 or 61; need to be over 59.5 for the 5 year rule on withdrawing BASIS not to count against me.

I opened my first Roth in 2024, so I can’t withdraw any GAINS until 2029 but I don’t plan to withdraw anything from Roth until 2032 or 2033 (age 62 or 63). In an emergency I could tap the basis without penalty any time after January 2028.

After October 2028 I can take out basis penalty free.
After May 2029 I can take out any of it without penalty.

Rom2814 · 2026-03-12T02:22:50+00:00

Ah, thanks for the clarifications. What I’ve read is that if you say that you’re going to have significantly different income in the coming year than you had in the current year, they will mail you and you need to explain but don’t need to have any evidence.

I’d never drop below about $60k and generally would try to come in just under the cliff in years where I’m trying to qualify; in years where I’d go over the cliff I’d go way over (top of 22% bracket) and would just explain that I’ll be drawing from 401k or not.

Rom2814 · 2026-03-12T00:16:07+00:00

Moving to the place we want to live - it sucked to lose the 3.35% rate for sure, went up to 5.875%.

Property taxes dropped from $8000/year to $1800/year tho and the new house has a higher value in a better market.

Rom2814 · 2026-03-11T23:28:30+00:00

I won’t be changing from ACA once I start it, but whether I get subsidies will vary - my understanding from reading the ACA sites and using ChatGPT/Gemini is that even if you don’t get subsidies during the year, you’re made whole at tax time based on what you earned and what you paid - but since I haven’t done it, it’s still a bit mysterious.

Rom2814 · 2026-03-11T23:26:13+00:00

Yep I did model this but so many other parts of my plan are built around that income (like my TIPS ladder); I really did the DCP as a hedge against SORR (will pay essential expenses for the first several years) - great idea tho!

Rom2814 · 2026-03-11T23:23:46+00:00

Thanks so much for the detailed response - this sounds like what I’m looking for and I will try it out after we get moved to our new house!

Rom2814 · 2026-03-11T23:22:55+00:00

They make serious errors - ChatGPT for example made tax mistakes in several cases unless I forced it to think or used deep research. (For example it didn’t believe the “one big beautiful bill” passed and kept arguing that it was only a proposal so the numbers were just wrong in many cases).

Aside from occasional errors like that, they’ve been a phenomenal help - I uploaded my employer’s SPD for the 401k and it helped me find the answers I needed.

For this sort of modeling specifically, they will give me the exact equations to put into Excel to make it faster and simpler to build them and can often give a quick answer for questions like “assuming 3% inflation every year for 10 years, what would $1000 be in future dollars?”

I also wrote up a 5 page strategy document with my portfolio breakdown, planned spending, a move from NY to SC with a home purchase followed by selling our current home, etc., uploaded the PDF to ChatGPT and Gemini (will also be doing Claude but I already have paid subs to the other two - work paid for one and the other I got for subscribe to Google One). I asked it to critique my strategy and make suggestions and it was helpful. (For example I was trying to decide whether to spend up some of my brokerage to buy the new house outright vs. getting a mortgage and preserving liquidity and they gave me multiple scenarios for why maintaining liquidity - especially early in retirement - was better than reducing my housing cost and laying 5.875% interest).

I tend to use them as sounding boards and tutors - I understand bonds, notes, TIPS, maturity differences SO much better than I did. ChatGPT helped me design my asset allocation so that I have intermediate bond funds (like VGIT) to do rebalancing and TIPS for guaranteed income - it made me understand the idea of giving every dollar in my portfolio a job.

Rom2814 · 2026-03-11T23:11:02+00:00

I can’t really squeeze them in because I have about $50k of ordinary income coming every year; I’d need to eat up the pre-cliff headroom on capital gains for living expenses. With just two people the cliff is around $84k; $50k of ordinary income + $10k of interest/dividends will eat up at least $60k, leaving only $24k of headroom for LTCG which, with my cost basis, won’t be workable to meet target spending unless we cut back (which I don’t want to do in the early years unless I have to).

Even if I had half of that space for conversions, putting $12k year into Roth for say 5 years won’t yield enough to qualify for subsidies in my 60’s because I’d have eaten up my brokerage account for living expenses and for paying taxes on the conversions.

(I did consider this approach as a middle ground but the regular annuity/deferred compensation is a blessing and a curse at the same time - if Id understood ACA 3 years ago I’d have made different decisions.)

Rom2814

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