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  • FIRST POST
    • ams25
    • By ams25 5th Feb 18, 2:52 PM
    • 135Posts
    • 150Thanks
    ams25
    Bear Market/Crashes: how do Retirees Deal with it?
    • #1
    • 5th Feb 18, 2:52 PM
    Bear Market/Crashes: how do Retirees Deal with it? 5th Feb 18 at 2:52 PM
    So maybe this is the beginning of a crash, correction, bear market, buying opportunity or maybe its nothing.

    And seems to me that we are really still very early in the accelerating shift from defined benefit pensions and annuities to more and more people having to live off a pot of savings and investments.. and to be able to deal with investing that and handling market sell offs as a norm. Not sure how well equipped people are for that.

    So whatever the current market movement is, it's a good opportunity to raise this question for retirees who have stopped regular work and rely on savings and investments (not defined benefit pensions/annuities of private or state varieties) for the majority of their income - how do you (or how do you think you will) cope with seeing a 10, 20, 40% portfolio decline and knowing you are reliant on the same portfolio for your future income.

    - will you ignore it and just carry on because you know markets go up, down and eventually up again
    - will it make you grumpy and irritable with loved ones
    - will you buy more equities because you saw this coming
    - are you comfortable your portfolio is structured to ride out the more common 1-3 year downturn, or the less common 5-10 year downturn/poor returns (or even the 1966 retiree nightmare of 17 years of poor returns and high inflation )

    I've lived through several crashes and bear markets but as I was working it was not all that difficult to ignore them because at the end of the day i didn't need the money anytime soon. In 2008 I (thought) I was around 15 years from retirement, or longer.

    I have tried to structure my asset allocation to suit what I think is my risk tolerance, not to need to sell equities any time soon and even have some funds available if I am brave enough at some point to buy. I believe I can cope with a 3% withdrawal rate over the long term which according to most experts should be a safe withdrawal rate.

    I've read loads to educate me that I am well set up so I should be fairly relaxed. So far the latest global sell off has not bothered me much, but if (or when) it proves to be the next bear market, we haven't seen anything yet.

    So if you have previous experience, as a retiree, how did you cope and what advice for us newbies.
    If, as many here are I suspect, this (or whenever) is going to be the first time as a retiree dealing with a major sell off, how do you see yourself dealing with it. what suggestions do you have for this community here to help them deal with it calmly and to maintain low stress levels.

    As they say, a problem shared.....
    Last edited by ams25; 05-02-2018 at 3:05 PM.
Page 4
    • gadgetmind
    • By gadgetmind 10th Feb 18, 6:05 PM
    • 10,758 Posts
    • 8,650 Thanks
    gadgetmind
    Note the book looks at various combinations of GI (guaranteed income) versus bonds/equities and is well worth a read. In fact, read once to get a feel, and then again to mark the pages needed to work the spreadsheets.
    Last edited by gadgetmind; 10-02-2018 at 6:20 PM.
    I am not a financial adviser and neither do I play one on television. I might occasionally give bad advice but at least it's free.

    Like all religions, the Faith of the Invisible Pink Unicorns is based upon both logic and faith. We have faith that they are pink; we logically know that they are invisible because we can't see them.
    • chucknorris
    • By chucknorris 10th Feb 18, 6:13 PM
    • 9,475 Posts
    • 14,218 Thanks
    chucknorris
    Note the book looks at various combinations of GI (guaranteed income) versis bonds/equities and is well worth a read. In fact, read once to get a feel, and then again to mark the pages needed to work the spreadsheets.
    Originally posted by gadgetmind
    I'll only have a small DC pension pot, which will be only about 3% (after taking the TFLS) of my my portfolio value, so it is far from critical to me. But I'm interested out of curiosity and of course getting the best value, even if it is of minor significance.
    Chuck Norris can kill two stones with one bird
    The only time Chuck Norris was wrong was when he thought he had made a mistake
    Chuck Norris puts the "laughter" in "manslaughter".
    After running injuries I now mostly hike, gym classes and weight training (also a bit of cycling and swimming), less impact on my joints.
    • gadgetmind
    • By gadgetmind 10th Feb 18, 6:23 PM
    • 10,758 Posts
    • 8,650 Thanks
    gadgetmind
    I'm 100% DC all the way. Market risk but not much in the way of the "counterparty risk" that affects many.
    I am not a financial adviser and neither do I play one on television. I might occasionally give bad advice but at least it's free.

    Like all religions, the Faith of the Invisible Pink Unicorns is based upon both logic and faith. We have faith that they are pink; we logically know that they are invisible because we can't see them.
    • chucknorris
    • By chucknorris 10th Feb 18, 8:23 PM
    • 9,475 Posts
    • 14,218 Thanks
    chucknorris
    I'm 100% DC all the way. Market risk but not much in the way of the "counterparty risk" that affects many.
    Originally posted by gadgetmind
    About another 47% of my portfolio will be in equities and investment property, so I will still subject to market risk, but I'm comfortable with that. That might actually lead me to consider an annuity (from the DC pension) if it doesn't turn out to be such a poor comparison to drawing down.
    Chuck Norris can kill two stones with one bird
    The only time Chuck Norris was wrong was when he thought he had made a mistake
    Chuck Norris puts the "laughter" in "manslaughter".
    After running injuries I now mostly hike, gym classes and weight training (also a bit of cycling and swimming), less impact on my joints.
    • Thrugelmir
    • By Thrugelmir 10th Feb 18, 10:28 PM
    • 57,471 Posts
    • 50,751 Thanks
    Thrugelmir
    It's helped a lot that over the past 18 months since I stopped accumulating and went into withdrawal mode that markets have been good so my withdrawals are much lower than my investment growth (though that's maybe changing now). But I find 18 months later I am becoming more relaxed about going into withdraw mode.
    Originally posted by ams25
    You couldn't have timed it better. That's the fortuitous part of investing. Fine line between winners and losers.
    Last edited by Thrugelmir; 10-02-2018 at 10:30 PM.
    Financial disasters happen when the last person who can remember what went wrong last time has left the building.
    • cloud_dog
    • By cloud_dog 10th Feb 18, 11:15 PM
    • 3,501 Posts
    • 2,028 Thanks
    cloud_dog
    I know Im’ not the only one having trouble with apostrophes.
    Originally posted by TBC15
    I believe it is a iPhone (Apple device) known issue/thing on the site. There is an MSE workaround link somewhere.
    Personal Responsibility - Sad but True

    Sometimes.... I am like a dog with a bone
    • Keep pedalling
    • By Keep pedalling 11th Feb 18, 12:39 AM
    • 4,532 Posts
    • 4,963 Thanks
    Keep pedalling
    I believe it is a iPhone (Apple device) known issue/thing on the site. There is an MSE workaround link somewhere.
    Originally posted by cloud_dog
    No, it happens regardless of what device you are using, and it does not happen on any other forums I post on. This is a MSE forum bug.
    • TBC15
    • By TBC15 11th Feb 18, 12:42 AM
    • 374 Posts
    • 173 Thanks
    TBC15
    I believe it is a iPhone (Apple device) known issue/thing on the site. There is an MSE workaround link somewhere.
    Originally posted by cloud_dog
    I’m using a PC.
    • chucknorris
    • By chucknorris 11th Feb 18, 8:52 AM
    • 9,475 Posts
    • 14,218 Thanks
    chucknorris
    Note the book looks at various combinations of GI (guaranteed income) versus bonds/equities and is well worth a read. In fact, read once to get a feel, and then again to mark the pages needed to work the spreadsheets.
    Originally posted by gadgetmind
    What conclusions did you come to when you considered drawdown v annuity, do you feel that at least having some annuity protection is worthwhile? With state pension and DB I should have about £23k index linked pension, if I used up 75% of my SIPP to buy an annuity, it would probably almost get that up to about £30k, I'll think that over, it might be not as I first thought, when I originally dismissed the idea.
    Last edited by chucknorris; 11-02-2018 at 8:54 AM.
    Chuck Norris can kill two stones with one bird
    The only time Chuck Norris was wrong was when he thought he had made a mistake
    Chuck Norris puts the "laughter" in "manslaughter".
    After running injuries I now mostly hike, gym classes and weight training (also a bit of cycling and swimming), less impact on my joints.
    • gadgetmind
    • By gadgetmind 11th Feb 18, 9:08 AM
    • 10,758 Posts
    • 8,650 Thanks
    gadgetmind
    What conclusions did you come to when you considered drawdown v annuity, do you feel that at least having some annuity protection is worthwhile?
    Originally posted by chucknorris
    Were I retiring in my late 60s, then an annuity at this stage to cover basic needs might make sense. As I'm in my mid 50s, it's just too expensive.

    I'll think that over, it might be not as I first thought, when I originally dismissed the idea.
    I need to read this section of the book again TBH. Our only guaranteed income will be state pension but there are good ways to rerisk drawdown while maximising income, which is what LOYM is mainly about.
    I am not a financial adviser and neither do I play one on television. I might occasionally give bad advice but at least it's free.

    Like all religions, the Faith of the Invisible Pink Unicorns is based upon both logic and faith. We have faith that they are pink; we logically know that they are invisible because we can't see them.
    • OldMusicGuy
    • By OldMusicGuy 11th Feb 18, 10:04 AM
    • 298 Posts
    • 569 Thanks
    OldMusicGuy
    Were I retiring in my late 60s, then an annuity at this stage to cover basic needs might make sense. As I'm in my mid 50s, it's just too expensive.

    I need to read this section of the book again TBH. Our only guaranteed income will be state pension but there are good ways to rerisk drawdown while maximising income, which is what LOYM is mainly about.
    Originally posted by gadgetmind
    I'm in a similar situation to you, large DC pot, no other pension apart from state (my wife has small DB pension). I see annuities playing a role later in our lives because they are better value as you get older (in terms of guaranteed income) but they are not good value right now (I am 60).

    I ordered a copy of LOYM, shall read with interest (you see what I did there...?).
    • gadgetmind
    • By gadgetmind 11th Feb 18, 10:22 AM
    • 10,758 Posts
    • 8,650 Thanks
    gadgetmind
    My wife will have a tiny LGPS pension but probably only £600pa (in today's money) when it trickles in around 13 years from now. It's cost us close to zero but it's not something worth building into plans.
    I am not a financial adviser and neither do I play one on television. I might occasionally give bad advice but at least it's free.

    Like all religions, the Faith of the Invisible Pink Unicorns is based upon both logic and faith. We have faith that they are pink; we logically know that they are invisible because we can't see them.
    • atush
    • By atush 11th Feb 18, 12:04 PM
    • 16,540 Posts
    • 10,277 Thanks
    atush
    i bought the book for my husband for xmas. I havent read it yet, but will soon.

    Maybe on the beach at Easter?

    No Sous viding for me this WE. Went to the local french bistro for my birthday yesterday. Traditional roast chicken (which has been brined) for dinner.

    What have you SV recently?
    • gadgetmind
    • By gadgetmind 11th Feb 18, 12:44 PM
    • 10,758 Posts
    • 8,650 Thanks
    gadgetmind
    What have you SV recently?
    Originally posted by atush
    Some brisket that worked very well, some lamb leg steaks that weren't very good at all, and some brulee. The brulee tasted great but I made a mess of the caramel on top as I'd had too much wine.
    I am not a financial adviser and neither do I play one on television. I might occasionally give bad advice but at least it's free.

    Like all religions, the Faith of the Invisible Pink Unicorns is based upon both logic and faith. We have faith that they are pink; we logically know that they are invisible because we can't see them.
    • TBC15
    • By TBC15 11th Feb 18, 1:10 PM
    • 374 Posts
    • 173 Thanks
    TBC15
    Could an offset mortgage/current account be used in lieu of cash on the side-lines to cope with downturns?
    • gadgetmind
    • By gadgetmind 11th Feb 18, 1:17 PM
    • 10,758 Posts
    • 8,650 Thanks
    gadgetmind
    I have an offset tracker that I'm planning to use for this but it ends at age 65 as do many/most mortgages.
    I am not a financial adviser and neither do I play one on television. I might occasionally give bad advice but at least it's free.

    Like all religions, the Faith of the Invisible Pink Unicorns is based upon both logic and faith. We have faith that they are pink; we logically know that they are invisible because we can't see them.
    • TBC15
    • By TBC15 11th Feb 18, 1:30 PM
    • 374 Posts
    • 173 Thanks
    TBC15
    I have an offset tracker that I'm planning to use for this but it ends at age 65 as do many/most mortgages.
    Originally posted by gadgetmind
    At what point approaching 65 would it be prudent to start building up the cash reserve?
    • bostonerimus
    • By bostonerimus 11th Feb 18, 2:45 PM
    • 1,544 Posts
    • 986 Thanks
    bostonerimus
    What conclusions did you come to when you considered drawdown v annuity, do you feel that at least having some annuity protection is worthwhile? With state pension and DB I should have about £23k index linked pension, if I used up 75% of my SIPP to buy an annuity, it would probably almost get that up to about £30k, I'll think that over, it might be not as I first thought, when I originally dismissed the idea.
    Originally posted by chucknorris
    There are many people that look at historical returns and the models and go 100% equities....I have a pessimistic streak so I'm glad I have a DB pension to rely on. However, I would not be buying a lifetime annuity right now with interest rates so low; if you life an average life you'd do just about as well from a savings bond ladder. Once annuity rates pick up I can see them becoming popular again at least for a portion of a DC pot.
    Misanthrope in search of similar for mutual loathing
  • jamesd
    as I have £250k to put into the markets next week, and a fair bit more come April, it's come as a welcome drop ... If markets stay low until April, it's also saved me a fair bit of tax for exceeding LTA.
    Originally posted by gadgetmind
    "Don't" is what I suggest. Even after the correction US markets are at a level that's correlated with a 25% a year chance of a major - 40%+ - drop. If you can't resist, money market was shown to beat bonds as an alternative to shares. If you can't resist equities, try moving in evenly over the next two years.

    The current situation has only limited short term upside potential but lots of downside and you're in the happy position of being in cash.

    If markets are a random walk, theory suggests investing as soon as possible. But they aren't and PE10 has a 0.6 correlation with US equity returns over the following fifteen years. The odds are stacked against you at the moment. A fair bit in equities because the one year correlation is low but a deck you know was stacked against you is a poor time to go all in.
    Last edited by jamesd; 11-02-2018 at 4:43 PM.
  • jamesd
    My strategy for retirement is not one based on safe withdrawal rates and I am glad because it looks like a period of volatility means increased risk of pound cost ravaging for those about to retire.
    Originally posted by OldMusicGuy
    It shouldn't have much or any ravaging effect on those who've paid attention to research.

    A year or so of investment income in cash or near-cash, ongoing income from interest and dividends, topping that up from bond rather than equity selling - both Guyton-Klinger and rising equity glidepath do this - should eliminate the ravaging effect. Bonus to those who used Guyton's sequence of return risk taming approach and cut equity holdings in advance.
    Last edited by jamesd; 11-02-2018 at 4:06 PM.
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