Risk Averse Dilemma
Straight_Shooter
Posts: 8 Forumite
I have always saved and never invested - would like to retire in 10 years at state pension age, and I currently have £250k cash in fixed rate bonds and Isa's. I would like to generate sufficent funds from this to pay myself £10k per annum throught my retirement (20 years)
Would very much appreciate thoughts, advice & strategies from those far wiser than me...
Would very much appreciate thoughts, advice & strategies from those far wiser than me...
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Comments
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Risk Averse Dilemma
Using cash for the long term actually increases the risks. Shortfall risk and inflation risk mainly.Would very much appreciate thoughts, advice & strategies from those far wiser than me...
Unless you start to accept that you need to be using investment risk, there is little to discuss.I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.0 -
£10k won't be worth £10k in 10 years time. Rumour has it that inflation is on the way. Possibly 3%-4% next year.
What personal pension provision do you have?0 -
You can already pay yourself £10K a year for 20 years. What are we missing?
Do you need the £10k per year to increase with inflation so that your purchasing power remains the same?The comments I post are my personal opinion. While I try to check everything is correct before posting, I can and do make mistakes, so always try to check official information sources before relying on my posts.0 -
Sorry, should have clarified, my risk averse nature is why I have saved rather than invested, but the reason for my post is the realisation that rising inflation and falling interest rates mean I will likely have to invest in order to achieve my goal.
The £10k per annum is based upon today's value - in addition to my savings I have £40k in a pension which I am no longer contributing towards, and a current company pension ( 1 year old) where contributions are the minimum levels. other than that, mortgage, dependent and debt free.0 -
Straight_Shooter wrote: »I would like to generate sufficent funds from this to pay myself £10k per annum throught my retirement (20 years)...
Personally, I would plan on surviving longer than 20 years past retirement age! Or at least, I don't want to run out of money at 87, so would want a strategy that allowed my income to continue as long as required.
From what you outline, it looks like you might benefit from putting a decent portion of your cash into additional pension provision. Why are you only putting the minimum into your most recent scheme?0 -
Straight_Shooter wrote: »Sorry, should have clarified, my risk averse nature is why I have saved rather than invested, but the reason for my post is the realisation that rising inflation and falling interest rates mean I will likely have to invest in order to achieve my goal.
The £10k per annum is based upon today's value - in addition to my savings I have £40k in a pension which I am no longer contributing towards, and a current company pension ( 1 year old) where contributions are the minimum levels. other than that, mortgage, dependent and debt free.
Because ??? If you put the minimum in, guess what you'll get out ?0 -
Given current state pension ages this means that you are already at least 55 years old. Which means that you can get at pension money immediately. Which in turn means that you are throwing away lots of free money by not making pension contributions.
Pension investments can include a wide range of things including just holding the money in cash or near-equivalents like money market funds.
The maximum permitted level of pension contributions is the lower of your earned income or £40k a year plus unused annual allowance from the past three tax years. So your first step is to arrange to make those pension contributions because they are one of the most effective investment choices available to you because of the effect of the tax relief. Even if you were just to use cash.
If you were to take any of the taxable 75% out of a pension you would have your annual contribution allowance reduced to no more than £10k a year and could no longer use carry-forward. Exception is three small pots per lifetime of up to £10,000 each.
Twenty years from age 65 is not a prudent assumption since it's lower than normal life expectancy at age 65 for both men and women.0 -
Bump up your pension, keep your cash investments which are still paying decent interest, look at S&S isas for remaining cash going forwards.
Look to invest those S&S isas in multiasset funds such as the Vanguard series (which have varying amounts of equities so you could gofor one with say 2-40% equities) and look at Income funds, and long standing investment trusts which have maintained AND increased dividends for decades.
As an example, say you use 100K to buy x number of units of a trust that currently pays 4%. So you get 4% on each share you own. So you get 4K per year in a dividend.
But the share value can go up or in fact go down. But the dividend isnt affected as it still pays out regardless of the capital price of the shares you bought. So the volatility of the asset doesnt affect your income.0 -
Personally, I would plan on surviving longer than 20 years past retirement age! Or at least, I don't want to run out of money at 87, so would want a strategy that allowed my income to continue as long as required.
From what you outline, it looks like you might benefit from putting a decent portion of your cash into additional pension provision. Why are you only putting the minimum into your most recent scheme?
Mostly because have been focusing on my cash savings - and have only now got round to seeking advice including my pension arrangments. There is not a lot of wiggle room within my salary to up the % - but had considered puttting all of my salary in to the scheme and using my saved cash (to the value of) to live on (if I am guided that this would be a sensible approach)0 -
Given current state pension ages this means that you are already at least 55 years old. Which means that you can get at pension money immediately. Which in turn means that you are throwing away lots of free money by not making pension contributions.
Pension investments can include a wide range of things including just holding the money in cash or near-equivalents like money market funds.
The maximum permitted level of pension contributions is the lower of your earned income or £40k a year plus unused annual allowance from the past three tax years. So your first step is to arrange to make those pension contributions because they are one of the most effective investment choices available to you because of the effect of the tax relief. Even if you were just to use cash.
If you were to take any of the taxable 75% out of a pension you would have your annual contribution allowance reduced to no more than £10k a year and could no longer use carry-forward. Exception is three small pots per lifetime of up to £10,000 each.
Twenty years from age 65 is not a prudent assumption since it's lower than normal life expectancy at age 65 for both men and women.
I figured that by the age of 87 (if still alive) my thirst for wine,women and song may have run it's course and the need to pay myself £19k with it - reverting back to reliance on state pension solely...0
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