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Even if the market didn’t make 15%, he said, he
read somewhere that “over the long haul, the market returned a
little over 10% per year, going back to the 1920’s.”
So, since he planned to only take out 6 or 7% per
year, and it’s growing at least by 10% or more, he estimated he
would never run out of money.
So he made big plans!
He planned to renovate his house, put in a pool.
Also do a little traveling, something he never had time to do while
he was raising a family and working. His wife also made plans to
stop working as well.
His retirement date was Friday, April 14, 2000;
his 401K had a value of $1,277,000.00.
One year later, in April, 2001, his 401K plan had
a value of $979,000.
By December 2002, his 401k account was worth
$764,000.
He had not even made a withdrawal yet, but his
solar-powered calculator told him bad news: he’d be scrounging for
money by the time he was 76. The $80,000.00 per year he planned to
take out would now drain this account entirely in about nine years.
The distribution was scaled back, from $80,000 to
$24,000.00 a year.
Going from $80,000 to $24,000 a year was a
lifestyle change for him. He felt burned. Dreams of traveling went
out the window. Buy a new car? No chance.
His wife has taken a job in the library. He’s now
back at work, as a consultant, hustling for jobs. And now he’s just
learned that his former company is changing their healthcare plan
for their retirees.
What if this were you in this situation?
Right now, he wants to forget about asset
allocation, pie charts and “pie in the sky” stories of long-term
returns and growth rates. He told me that pretty soon, he won’t be
worrying about “pie in the sky,” he’ll be wondering... how to get
pie on the table!
Moral of the story: when the point and figure
charts go on defense, we should heed the warning!
Please don’t get “sucked in” to the concept that
the market returns an “average of ___% per year” and “over the long
haul” things will work out OK.
Just know that going on defense doesn’t mean the
market will go immediately straight down.
What we DO know is that the risk of losing money
in our accounts is much higher when the indicators are flashing
defense. This has been the case since the bullish percent charts
were created over 50 years ago.
If you want me to show you how these charts can
guide you, just call me and I will GLADLY show you in less than 10
minutes.
This is where stock selection is key.
There has never been a more crucial time for you
to be working with someone who watches the market on a daily basis.
If you have any questions whatsoever regarding our game plan, you
need to call me immediately at the office. The number is
732-223-9000.
Since the summer of 1998, there have been four
times where the S&P 500 has returned 20% or more. And there have
been four times where the S&P 500 has LOST 20% or more. In just
seven years!
But if you just sat there and “held on,” no real
progress was made. You can look it up; you’re right where you stood
in 1998. Pretty soon it will be a decade where the “buy and hold”
investor will have made no money.
Thomas P. Mullooly, President of Mullooly Asset
Management, LLC (http://www.mullooly.net/)
has spent over twenty years in the investment industry, as a broker
and as an investment advisor.
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The
Point Behind Point & Figure