Being Prepared for the Next Recession or Bear Market

"No one rings a bell at the top of the market." ~ Wall Street Adage

In the past, I was constant worrier about a market crash destroying my retirement savings. 

I'm not calling a top, but I'm prepared for one.   Currently, I'm not buying an new equity positions, nor adding to any existing equity positions.   Over the past few months, I've been increasing our fixed income positions thought bond and bond funds, building a monthly, though variable, paycheck.

I don't know if have regular investment income via dividends and interest is a good solution yet, since the strategy has been tested with a significant down turn yet.   However, it has done well with high volatility and a short term correction.   Whether it works with a bear market?  We shall find out.

For more on New Beginnings, check back every Sunday for a new segment.

This is not financial advice. Please consult a professional advisor.

Copyright © 2017 Achievement Catalyst, LLC

Bond Values Drop when Interest Rates Rise

Most of my account values are falling due to interest rates rising.  That's because bond/CD values go down when interest rates go up.  Similarly, bond/CD values go up when interest rates fall.

I'm not worried about bond/CD values going down since my plan is to hold to maturity, which means I receive 100% of par value, which is usually the issue price. While waiting for maturity, I am paid a 4-5% total annual payment for holding the bond/cd, no matter what the interest rate is.   The bond/CD payment is what is really important to me, and it will be consistent no matter what the interest rate is.   

That is my strategy for retirement income at this time so that I can be stock market volatility agnostic.  This will be one of the first tests on the strategy.

For more on Ideas You Can Use, check back every Tuesday for a new segment.

This is not financial, fixed income, nor retirement advice. Please consult a professional advisor.

Copyright © 2026 Achievement Catalyst, LLC

Create Revenue for Retirement

In retirement, regular and steady revenue is a better metric than net worth or the size of a stock portfolio.  The reason is net worth include illiquid assets, such as one's home, which doesn't create income to cover expenses and a stock portfolio has volatility that may decline when funds are needed to cover retirement expenses.

With 20/20 hindsight, here's what I should have done by age to build retirement revenue.

• Ages 20-40.   Save and invest for growth on a regular (e.g. monthly) basis. Use taxable and Roth IRA accounts.  Invest 90-95% in a total market index fund.  Dollar cost average and invest more funds during dips.   Do not withdraw or spend any of these funds.  With the other 5-10%, invest, buy and sell individual stock that are monitored periodically.
• Ages 50-65. Continuing saving and investing in growth.  Start converting about 7% a year to income producing options:  CDs, bonds taxable and tax free, government treasuries.  Build a stream of steady dependable revenue that can be counted on during retirement.   If you plan to retire earlier than 65, start about 15 years before retirement age.
• Choose age to start Social Security payments to create a payment amount to complements one's revenue from savings.

In my case, I depended on growth investments much too long until my early 60s.  Also, I retired early at 49, much earlier than the timeline above, right at the start of the Great Recession in 2008.  I did take  Social Security at the right time, starting at 64.  

I was lucky to have survived a 2008 retirement due to the stock market recovering over the next 15 years and some deferred compensation payments.  There was no brilliance on my part, just a lot of learning that I should have done some things a bit differently.  Luckily, in 2022 interest rates started rising, which will help maintain our revenue generation until 2028.

My post My Sources of Retirement Income showed our 2024 retirement revenue by class as:

53% Interest and Dividends in taxable accounts

27% Social Security monthly payments

20% Rental Income quarterly payments

Also, we are starting to convert our retirement accounts from growth investments to income producing investments in preparation for when we will be required to make RMD withdrawals.

For more on Reaping the Rewards, check back every Friday for a new segment.

This is not financial, investment nor retirement advice. Please consult a professional advisor.

Copyright © 2025 Achievement Catalyst, LLC

Reducing Financial Complexity - Starting the Journey

In the past, I typically had funds at several banks and brokerages.   I also had multiple accounts at each bank and brokerage.  Each brokerage account used different strategies and had numerous different stocks, both long term and for trading.  Part of the reason for the higher complexity was  the elimination of brokerage commissions, which allowed me to increase diversity with smaller lots without incurring a cost penalty.  Complexity didn't cost more.

Even though it was a lot, I was able to keep track of our savings, investments and trading without much effort.   I also enjoyed managing the many accounts, thinking I was adding value.     Recently, I evaluated my results and discovered (no surprise) that I would have done better if I had simply invested in the S&P 500 index and didn't ever sell.  Ah, the benefit of 20/20 hindsight.

So here is my plan for simplifying:

• Have a maximum of  two banks, which has been accomplished.  One is our checking account and bill paying service, but pays very low interest rates.   The other is a credit union for our bank savings since it pays the highest local CD rates.  We no longer consider opening a new bank account to earn the bonus.
  
  
• Minimize the number of single stock positions and replace with ETFs and CDs/Bonds. Our brokerage accounts have way too many small lots individual stocks in too many separate accounts. I'm not sure what the endpoint will look like.  At this point, I am selectively selling off many individual stocks and rotating in money market funds or bonds/CDs for now.   I will reinvest in MGK and VOO when there is market pull back or correction.
  
  
• Create regular streams of consistent annual income.  In the past, we put more emphasis on investment capital gains for our income.  However, that can be volatile to highly volatility.  I'm trying to use Dividend and Bond/CD income to create more consistency.  The challenge with this approach is reinvestment at maturity.   I'm stable until 2028.  We'll see how it goes after that.

Thanks for following my journey.  In the next couple week, I will be attend financial advisor presentations that claim to achieve this.  I do not want insurance or annuity solutions so I am interested in their options.

This is not financial nor retirement advice. Please consult a professional advisor.

Copyright © 2025 Achievement Catalyst, LLC

Retirement Income - Are they really passive?

There is a lot of discussion on the Internet about Passive Income.   IMHO, there is not such thing as completely passive (zero effort) income. Rather, there a sliding scale of effort or initial investment versus zero.

Here's how I rank them on a scale of 1-10, where 10 is full time work and 1 is no effort at all.

Social Security:   After retiring and collecting:  1.   While working:  10, it takes 35 years to get maximize benefits.

Pension:   After retiring and collecting: 1-2.  While working:  10 it takes 30+ years to maximize one's pension.

Rental.  After retiring and collecting: 3-7 because one still needs to deal with tenants..  While working:  3-7.

Dividend and Interest: After retiring and collecting:   3-7 because need to monitor investments.   While working:  3-7 because need to monitor investments.   

Side Hustles:  After retiring and collecting:  3-10,  since a side hustle is really a job. While working:  5-12 since there is no "no effort" side hustle.

I don't believe in "passive" or zero effort income.   Yes, there are lower effort income, but YMMV.

For more on Reflections and Musings, check back every Saturday for a new segment.

This is not financial advice. Please consult a professional advisor.

Copyright © 2025 Achievement Catalyst, LLC

FORO

Fear Of Running Out (FORO) may be a financial challenge that we face should we reach our 90s.  By then, we will be retired at least 41 years which is longer than we have worked.  Unlike our parent and their siblings, neither of us have a pension on which we can depend.   Unfortunately, by 90 we probably won't have the wherewithal to solve the problem of running out funds.  So I am working on it right now.

The strategy I am developing is to create a reliable sustainable stream of income:  a pension like payment, without a pension.   Our approach is a three pronged approach:

• Real Estate -  We own part of a commercial real estate property.   As disclosure, we are accidental landlords, since I inherited ownership from my parents.  However, I have learned the benefits for being a landlord.    The property is paid off and fully rented with multi-year leases.   In addition, the partnership pays a management company to manage the property.   Currently this yields about 25% of our annual expenses.
  
  I like the idea of rental real estate.  However, I have no interest in acquiring other properties, given the hands on involvement that is needed.  So we are increasing our real estate exposure through the purchase of REITs.  Hopefully, we can boost the yield to cover 33% of our annual expenses.
• Dividend and Interest -   At one time, I was planning to have dividends and interest cover 50% of our expenses.   Based on where we are currently, I expect a 33% coverage of expenses is more likely.  My plan to get closer to the target is to execute an NUA this year of my company stock, which pays a 3% dividend.    We will purchase other dividend stock or CDs to cover the balance.
• Annuity -  We will depend on principal or Social Security to cover the remaining 33%.   In order to do so, we will need to wait until I am 70 to qualify for maximum Social Security payments.
• Bonus - Since we are invested in the stock market, there is a chance that we will get capital gains from our investments.  However, we are not counting on this, and if it happens, we will consider it a bonus.

So that's our plan.  Of course, there are no guarantees that it will work.   As Dwight Eisenhower once said, "Plans are useless, but planning is indispensable."   And so we will proceed with our plan, until circumstances require us to adjust.

For more on Reaping the Rewards, check back  Fridays for a new segment.

This is not financial or retirement  advice. Please consult a professional advisor.

Copyright © 2018 Achievement Catalyst, LLC

Creating A Safety Net For Job Loss

I Make $6.50 An Hour, Am I Poor? is an MSN.com article is about how, Karen Datko, a 52 year old woman lost her job and slipped from middle class into near poverty. The article has a positive spin, Karen has avoided borrowing from her retirement savings, cut back living costs and taken multiple jobs in order to meeting financial commitments. While she has "no illusions" about returning to her former job, Karen has a positive can-do attitude about finding solutions to help deal with her situation.

The article has caused me to reflect about how dependent our financial security is on a regular paycheck. And how the loss of one's job can put oneself at significant financial risk. Losing a job could happen to anybody, including me.

Here are some strategies on protecting myself and my family for this risk:

Build a Bigger Emergency Fund. While most experts recommend 3 to 6 months of emergency funds, I think this level may not be sufficient for people who are married and with children. For example, a single person in their 20's has fewer fixed financial responsibilities (e.g. no mortgage) and can use many options to get a new job or reduce expenses, including move to a new location or moving back with parents (however undesirable this may be:-) On the other hand, a person who is married, with children and a large mortgage may have less degrees of freedom. Therefore, it may more difficult to reduce expenses or find a new job, and require a longer use of an emergency fund.

For my own personal situation, an emergency fund of of one year's gross salary is the the level I have chosen. To be clear, these funds serve a dual purpose. While the funds are available for emergency use, they also count in our retirement savings should we not need to use them. These funds are very liquid and accessible, being invested in short term bonds or money markets.

Build A Portfolio of Guaranteed Investment Income. In 2006, our investment income was equal to 1.29 times my gross salary. While that was an excellent investment return, only 19% of the investment income (or 25% of my gross salary) is guaranteed on a yearly basis. That part is invested in municipal bonds, CDs and money markets. That balance of the gain was due to growth in stock prices for both taxable and retirement portfolios.

It would be great if our savings could be guaranteed to generate about 30-50% of my gross salary on a yearly basis. This amount of guaranteed income would provide a good buffer should I ever need it as an emergency fund. This will be one of the items on which I will be working this year.

For more reflections on personal finance, check back every Saturday for the Reflections and Musings segment.

Photo Credit: morgueFile.com, Clara Natoli

This is not financial advice. Please consult a professional advisor.

Copyright © 2007 Achievement Catalyst, LLC