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Do we have enough money saved as collateral against potential market downturns during retirement?

My wife and I are retiring in 2019. We have no debt. We have $300,000 in a 401(k), $700,000 split into 14 dividend stocks, and four $60,000 CDs laddered for four years for insurance when the market tanks and our dividends pay out less than now (which is $67,000 a year including the 401(k) payouts). We will be 53 and 55 years old when we retire. We can live very comfortably on $50,000 a year, as we will be overseas living and traveling. Should we have more than the four $60,000 CDs for insurance against a major down turn in the market, or is four year's worth enough for the market to recover?

Debt, Retirement, 401(k), Stocks, Insurance
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October 2018

The laddered CDs should be more than enough protection if you're guarding for a downturn. The Great Recession lasting 18 months was the worst recession since the 1929 depression. While it's true some companies slash or even halt their dividend during a time of economic hardship, if the dividend stocks are well capitalized businesses, there shouldn't be much slashing going on. You shouldn't have to factor a total loss or a sizeable loss in dividend income, unless the quality of the businesses you own are poorly capitalized.

Here are a couple more ideas on your current situation:

  1. One of the biggest risks to those retiring early is Healthcare. Do you have proper coverage? Even a sharing network like Medishare is enough to get you by until Medicare kicks in. Having a major healthcare expenditure could ruin your early retirement and travel plans.
  2. You didnt specify, but have you considered adding some Real Esate Investment Trusts(REITs) to your dividend portfolio? These businesses offer diversity from the equity markets and have the divdends built into their organizational structure, so they can be relied upon much more. I assume you do have some exposure currently because the dividend yield is quite high. If not, that high of a dividend yield worries me about the quality of companies you currently have in that portfolio and the quality of companies should be reviewed.


Hope this helps! I wish you the best in your retirement and travels!

Chance Butler - Intelligent Investor

October 2018
October 2018
October 2018