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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 5
    • chucknorris
    • By chucknorris 11th Feb 18, 3:41 PM
    • 9,476 Posts
    • 14,223 Thanks
    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.
    Originally posted by bostonerimus
    I would still have plenty in bonds, property and equities, this would merely be a small diversity to bring my guaranteed index linked pension up to a round £30k. I don't think that it would be a bad thing to do, but I've realised that it would be an almost irrelevant thing to do.
    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.
  • jamesd
    Oh, and I've spent my career working in jeans and T-shirt about 99% of the time and wouldn't know how to work a trouser press!
    Originally posted by gadgetmind
    You had to wear clothes?!

    From a person who's worked remotely from home since 2005.
    • TBC15
    • By TBC15 11th Feb 18, 4:01 PM
    • 374 Posts
    • 176 Thanks
    TBC15
    You had to wear clothes?!

    From a person who's worked remotely from home since 2005.
    Originally posted by jamesd
    Steady on, there are certain dress/posting standards that verge on why not/trolling.
  • jamesd
    Iím using a PC.
    Originally posted by TBC15
    The Apple bug is described here. On a PC you might be first typing into a word processor that has smart punctuation then copying and pasting here.
    • TBC15
    • By TBC15 11th Feb 18, 4:23 PM
    • 374 Posts
    • 176 Thanks
    TBC15
    The Apple bug is described here. On a PC you might be first typing into a word processor that has smart punctuation then copying and pasting here.
    Originally posted by jamesd
    Youíve knocked that on the head, thanks.

    Edit: the punctuation was all my own work Iíll have you know.
    Last edited by TBC15; 11-02-2018 at 4:36 PM.
  • jamesd
    There's a risk of you getting blocked by the MSE spam filters, see Warning: Do not copy and paste content from Word, PDFs etc into your posts.
    • TBC15
    • By TBC15 11th Feb 18, 4:48 PM
    • 374 Posts
    • 176 Thanks
    TBC15
    There's a risk of you getting blocked by the MSE spam filters, see Warning: Do not copy and paste content from Word, PDFs etc into your posts.
    Originally posted by jamesd
    What!!!8217;s the problem with using word to do one!!!8217;s spell checking?

    Edit: thanks for the link, I!!!8217;ll have to have a good think about this one.
    Last edited by TBC15; 11-02-2018 at 5:05 PM.
  • jamesd
    This looks like the sort of thing that I wanted to read, I'm rushing out to the gym right now, so I'll read this tomorrow:

    https://www.unbiased.co.uk/news/pensions/drawdown-or-annuity-crunching-the-numbers

    https://www.unbiased.co.uk/news/pensions/drawdown-or-annuity-rolling-with-the-risks
    Originally posted by chucknorris
    Careful, that looks rigged to make annuities look better than drawdown! Here are at least some ways:

    1. It never annuities in drawdown. It gives a dual life annuity paying 5.1% at 65 with 66% survivor payment as the comparator. Current level dual life at 50% spousal pay only 4.75% at 65, 5.35% at 70 and 6.23% at 75 so to try to be consistent in time when that was written I'll scale the 70 and 75 rates up by 5.1/4.75 to 5.74% and 6.69%.

    After 5 years at age 70 the remaining pot is given as £83,305 and at 5.74% that would buy £4,781 a year of annuity income. At 75 the pot is given as £60,961 and at 75 that'd buy an annuity of £4,078. Unfortunately this suggests that my attempted correction is inadequate because mortality effects should be causing the possible annuity income to increase with age, not decrease. Needs to be recalculated wholly at current rates and preferably for 80 and 85 years old because 75 is still quite young. Also increased chance of an enhanced annuity paying more as you get older.

    2. The couple could buy "annuity" income by deferring the state pension. That pays more per Pound than the annuity and matching drawdown assumption and provides good longevity insurance. The existing comparison shows some pot left at 990 so there's time to break even and get ahead, though using 50% spousal is what both deferring delivers.

    Really needs full reworking using current rates and deferral rules to see the effects.
    • gadgetmind
    • By gadgetmind 11th Feb 18, 6:19 PM
    • 10,758 Posts
    • 8,650 Thanks
    gadgetmind
    At what point approaching 65 would it be prudent to start building up the cash reserve?
    Originally posted by TBC15
    There are two kinds of cash reserve -
    1) Small sums to handle boiler death, car failing MOT, that kind of thing.
    2) Multi-year reserves to handle stock market bad times. As it happens, LOYM doesn't (that I recall) discuss this and assumes you'll keep drawing (albeit with tweaks to the amount) from your bonds and equities.

    I'm finding it hard to justify our (inadvertent!) current high cash position and intend to unwind it, but I need to read LOYM again, and do some more thinking about tax and much more.

    I'm also planning to speak to another IFA in the hope of finding one who comes across as knowing more than I do on the subject of retiring using drawdown. The 1st one seemed to give up a mere 20 minutes into a one hour free meeting. I don't claim to know everything, far from it, but a professional more advanced than even myself in years should be able to run rings around me.

    Maybe that's why I'm retired and he isn't?
    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.
    • gadgetmind
    • By gadgetmind 11th Feb 18, 6:28 PM
    • 10,758 Posts
    • 8,650 Thanks
    gadgetmind
    "Don't" is what I suggest
    Originally posted by jamesd
    Ah yes, market timing.

    We took £400k from our ISAs to help rellies with house and it needs to go back in by April 5th. We're going back in with markets lower than when we went to cash.

    We won't be drawing on these ISAs for 13+ years and I've left them at 75% equities as a result despite being 50:50 bonds elsewhere.

    I could reinvest with a different risk profile, and may after doing more reading, but it might even be a profile higher in EM and smaller companies!
    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.
    • Linton
    • By Linton 11th Feb 18, 6:33 PM
    • 9,042 Posts
    • 9,126 Thanks
    Linton
    There are two kinds of cash reserve -
    1) Small sums to handle boiler death, car failing MOT, that kind of thing.
    2) Multi-year reserves to handle stock market bad times. As it happens, LOYM doesn't (that I recall) discuss this and assumes you'll keep drawing (albeit with tweaks to the amount) from your bonds and equities.

    I'm finding it hard to justify our (inadvertent!) current high cash position and intend to unwind it, but I need to read LOYM again, and do some more thinking about tax and much more.

    ......
    Originally posted by gadgetmind
    In normal times safe short or medium term bonds would provide a better large scale reserve than cash. However at the moment such bonds provide no benefit and extra risk over cash so it seems cash is what it has to be. I am trying out Wealth Preservation Funds but as I also have some other sources of income a sizeable secure reserve is less important to me.
    • gadgetmind
    • By gadgetmind 11th Feb 18, 6:35 PM
    • 10,758 Posts
    • 8,650 Thanks
    gadgetmind
    Steady on, there are certain dress/posting standards that verge on why not/trolling.
    Originally posted by TBC15
    I'm OK as long as he's not typing with one hand.
    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.
  • jamesd
    Ah yes, market timing.
    Originally posted by gadgetmind
    You know better than to claim that PE10 is what market timing means, or should. If you need a reminder try Impact Of Market Valuation On Long-Term Equity Returns. It's merely been shown to work for every significant equity market. Or these three which more specifically cover the difference:

    If All "Market Timing" Is Bad, Maybe Itís Time For A New Definition
    What IS The Difference Between "Being Tactical" And "Market Timing"?
    Shiller CAPE Market Valuation: Terrible For Market Timing, But Valuable For Long-Term Retirement Planning


    I could reinvest with a different risk profile, and may after doing more reading, but it might even be a profile higher in EM and smaller companies!
    Originally posted by gadgetmind
    Since I've read the PE10 research and acted on it I'm currently way lower than my usual 100% equities at the moment. Only about 50% if you don't count VCTs as equities. Very heavy in small cap and emerging markets, though, and that's likely to remain my base preference. Pretty late in the economic cycle to be high in small caps and EM, though, so I expect to cut this back at some point.
    • chucknorris
    • By chucknorris 11th Feb 18, 8:29 PM
    • 9,476 Posts
    • 14,223 Thanks
    chucknorris
    Careful, that looks rigged to make annuities look better than drawdown! Here are at least some ways:

    1. It never annuities in drawdown. It gives a dual life annuity paying 5.1% at 65 with 66% survivor payment as the comparator. Current level dual life at 50% spousal pay only 4.75% at 65, 5.35% at 70 and 6.23% at 75 so to try to be consistent in time when that was written I'll scale the 70 and 75 rates up by 5.1/4.75 to 5.74% and 6.69%.

    After 5 years at age 70 the remaining pot is given as £83,305 and at 5.74% that would buy £4,781 a year of annuity income. At 75 the pot is given as £60,961 and at 75 that'd buy an annuity of £4,078. Unfortunately this suggests that my attempted correction is inadequate because mortality effects should be causing the possible annuity income to increase with age, not decrease. Needs to be recalculated wholly at current rates and preferably for 80 and 85 years old because 75 is still quite young. Also increased chance of an enhanced annuity paying more as you get older.

    2. The couple could buy "annuity" income by deferring the state pension. That pays more per Pound than the annuity and matching drawdown assumption and provides good longevity insurance. The existing comparison shows some pot left at 990 so there's time to break even and get ahead, though using 50% spousal is what both deferring delivers.

    Really needs full reworking using current rates and deferral rules to see the effects.
    Originally posted by jamesd
    Yes, I did note that on his website he seems to be promoting annuities. I think that I will just move up to a 40% (from 20%) contract in a couple of years when I can buy more additional TPS pension (it is approx twice the value of an annuity).
    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, 9:20 PM
    • 10,758 Posts
    • 8,650 Thanks
    gadgetmind
    You know better than to claim that PE10 is what market timing means
    Originally posted by jamesd
    Market timing is market timing no matter what metric you choose to do the timing.

    If PE10 were perfect, wouldn't everyone in the market be using it, and would't the recent froth simply not have happened?
    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.
    • Thrugelmir
    • By Thrugelmir 11th Feb 18, 11:32 PM
    • 57,539 Posts
    • 50,851 Thanks
    Thrugelmir

    I'm finding it hard to justify our (inadvertent!) current high cash position and intend to unwind it, but I need to read LOYM again, and do some more thinking about tax and much more.
    Originally posted by gadgetmind
    Looking at the summary of market movements last week. There was no where for investors to hide. Equities, Property, Corporate Bonds , Gold, Oil, Gilts were all red for UK investors. Only black was in US Treasuries that was down to exchange rate movement. With a high correlation between asset classes (thanks to QE and other financial stimulus). May well be a period of history that rewrites the books.

    Sometimes simply doing nothing and biding ones time is the best policy.
    Financial disasters happen when the last person who can remember what went wrong last time has left the building.
    • gadgetmind
    • By gadgetmind 12th Feb 18, 8:19 AM
    • 10,758 Posts
    • 8,650 Thanks
    gadgetmind
    May well be a period of history that rewrites the books.
    Originally posted by Thrugelmir
    It was just like the "Taper Tantrum" a few years back, which passed quickly enough.

    Sometimes simply doing nothing and biding ones time is the best policy.
    I know people who've sat on cash from 2010 and are still sitting on it.

    There are always good reasons to not invest.
    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.
    • k6chris
    • By k6chris 12th Feb 18, 8:43 AM
    • 206 Posts
    • 353 Thanks
    k6chris

    I know people who've sat on cash from 2010 and are still sitting on it.

    There are always good reasons to not invest.
    Originally posted by gadgetmind
    ..if they can afford the lifestyle they want with cash and they sleep well at night, good for them! Actually in 2010 the FTSE 100 peaked at 5800 and it would only take another 20% correction from here to reach that level again. Assuming their cash is paying interest, then that narrows the gap to the approx 3.5% yield of a FTSE100 tracker. OK I'm squinting to justify the position but not the worst decision in the world......now if they had bought BitCoin in 2010.....
    EatingSoup
    • chucknorris
    • By chucknorris 12th Feb 18, 8:58 AM
    • 9,476 Posts
    • 14,223 Thanks
    chucknorris
    Actually in 2010 the FTSE 100 peaked at 5800 and it would only take another 20% correction from here to reach that level again. Assuming their cash is paying interest, then that narrows the gap to the approx 3.5% yield of a FTSE100 tracker.
    Originally posted by k6chris
    20% plus 8 years of low savings rates versus higher dividend income return (which was also much more favourably taxed).

    I really don't see the argument for being 100% in cash, this is my target ( a fair bit of re balancing needs doing over the next 6 years to get there) retirement portfolio:

    34% equities
    30% bonds/cash (mainly bonds)
    23% fixed pension
    13% investment property
    Last edited by chucknorris; 12-02-2018 at 9:20 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.
    • ProDave
    • By ProDave 12th Feb 18, 9:29 AM
    • 646 Posts
    • 690 Thanks
    ProDave
    So do none of you have a stop loss policy to bale out of equities when the market falls? or do you just sit there and watch it all go down?
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