Archive note: This essay restores the substance, figures, and first-person perspective of the ERD article published in 2018 and later cited by The New York Times. The presentation has been tightened for the rebuilt site; it is not a newly invented biography.

Yeah, man: we got stung for 48% of our net worth. It sucked. I may as well get the moralizing out of the way first. To survive something like that, you have to keep cash on hand and stick to the plan.

I had partly funded my early retirement through small-scale real-estate work. In 2001 I bought a three-unit building in Boston, lived in one unit, renovated the other two, and rented them out. When we retired in 2005, we sold and moved somewhere much less expensive. The proceeds went into the stock market.

Then the housing and credit bubble came apart. In less than two years, our investments fell from roughly $1.54 million in mid-2007 to about $750,000 in early 2009. At one point the portfolio had crossed below the cost basis of the early-retirement fund. This was not a tidy backtest. It was the money supporting our life.

The cash buffer mattered

In late 2007 I had harvested losses on about $60,000 of stock. I did not know how severe the decline would become, but we also had roughly fifteen months of expenses in a money-market account. That meant we did not have to sell stocks simply to pay bills while the market was collapsing.

I became religious about holding at least six months of expenses in cash, and preferably a year. That is not a universal prescription. Cash has an opportunity cost, inflation changes what it can buy, and another household may have durable income that serves the same purpose. For us, it created time and kept a bad market from dictating an irreversible decision.

I nearly sold anyway

Near the end of October 2008, I called my broker and directed him to sell everything if our net worth reached one million dollars. He reminded me that I had always claimed to be a buy-and-hold investor. I listened.

Over the following years the portfolio recovered and moved beyond its old high even while we continued making withdrawals of roughly 3.5% a year. Had I sold near the bottom, the loss would no longer have been a frightening number on a statement. It would have been permanent.

That does not prove that holding always works, that every allocation is sensible, or that markets recover on a schedule convenient to an early retiree. It proves something narrower: the order of returns can put enormous pressure on a plan, and liquidity can keep that pressure from forcing a sale.

The lesson is not “stocks always go up”

Nobody knew exactly when the next recession would arrive then, and nobody knows now. The useful questions are less theatrical: How many months can the household operate without selling volatile assets? Which spending is flexible? What durable income arrives later? What action would the plan take after a bad first year, rather than after panic has already set in?

The Sequence Risk Lab does not recreate my portfolio or promise the same recovery. It holds one historical return set constant and changes its order so you can inspect the exact risk this experience made impossible for me to ignore.