Generic advice on beating inflation during retirement?

lordhaldon

Pay a professional.

wotsthat

Pay a professional.

..and don't bother trying to educate yourself beforehand as that would be ridiculous. No, just turn up and let this god-like professional give you his advice and then blindly follow it - don't try to understand the advice as you'll only confuse yourself.

In fact I think these boards should be closed down as we're all too stupid to differentiate between real advice and the opinions of those on a forum.

Linton

wotsthat wrote: »

..and don't bother trying to educate yourself beforehand as that would be ridiculous. No, just turn up and let this god-like professional give you his advice and then blindly follow it - don't try to understand the advice as you'll only confuse yourself.

In fact I think these boards should be closed down as we're all too stupid to differentiate between real advice and the opinions of those on a forum.

That really is a very silly reaction. Noone is saying the OP shouldn't educate himself.

What I am saying is that what the OP is trying to achieve is difficult and potentially risky for someone with apparently no experience in these matters.

The OP can get some guidance from experts on the forum, but that guidance is of limited relevence if it is not based on a more detailed investigation and understanding of his mother's situation and attitudes than can be achieved from forum posts.

This is particularly of concern as he is sorting things out for someone else. Fine, you can try investment portfolio design for yourself with no experience, and if it doesnt work it's your lookout. I note that the OP is using an IFA, to set up someone else's entire worldly wealth without that support seems to me highly irresponsible.

Linton

Ignoramus wrote: »

......

I also have a ratio of bonds to equities at about 3:1 (on my spreadsheet). Is that a sensible ratio for a 67 year old? (am I asking an impossible question?!

I think you are looking at things in the wrong way. What you want to achieve could be a number of different things....

- The maximum steady income for your mother
- Protection against short term market fluctuations
- Protection against long term inflation

To cover all these bases I think you need a number of different portfolios, perhaps something like:

a - short term instant access cash to cover up to 1 year

b - Longer term cash (fixed rate deposit accounts) to cover the following 3 or so years

c - medium term cautious investments (cautious managed fund, gilt funds, corporate bond funds) with say a 4-10 year outlook

d - long term higher risk funds to generate longer term inflation cover in the 10+year timeframe

The split between these could depend on how much income your mother needs, tax position, acceptance of risk etc.

Once this has been worked through you should get an idea of the overall split between types of investment. However I think when looking at portfolios it's simpler if each one is considered separately against a clearly defined single objective.

wotsthat

That really is a very silly reaction. Noone is saying the OP shouldn't educate himself.

Apologies - I wan't responding to your comments but to the poster whose only input was 'pay an advisor'

What we don't know is just how much money the OP's mother has - if it's well in excess of her living costs then maybe a more cautious approach i.e. more cash holdings would be appropriate.

She is also selling her house and is going to hold the cash in a rainy day fund. Maybe keeping the house or buying something smaller but help her in keeping up with inflation - it would probably reduce her personal inflation rate as well as housing costs would be easier to forecast.

Ignoramus

Thanks for all the replies and input as usual. As I said in my original post, we are "using" (by that I mean trying to find someone we can work with) IFAs right now and I have no intention on taking any step without proper and in depth consultation with a good IFA.

Tbh my mother hasn't had much luck with IFAs in the past and still hasn't found someone she can understand and therefore trust. So I'm trying to work out her basic situation, the "basic" approaches etc, so that I can understand it myself, explain it to my mother, be as informed as possible when we meet IFAs so that we can properly analyse their advice and understand their recommendations.

Anyway I'm really grateful to everyone who has posted with advice on these boards, it's been very helpful so far, there will surely be many more questions.

lordhaldon

wotsthat wrote: »

Apologies - I wan't responding to your comments but to the poster whose only input was 'pay an advisor'
.

This poster has a name. He is also educated to a high level in the financial services industry but not quite the god like figure you refer to. I should have elaborated on my response and that way I would not have attracted venomous comments such as yours. The reason that I simply said "pay a professional" is that the OP needed to see a professional adviser. You wouldn't try to do your own conveyancing through these pages would you? No, you would "pay a professional." You wouldn't try to do a divorce through these pages would you? No, you would "pay a professional." You wouldn't try to service your own gas boiler through these pages would you? (Ummmmmm. Perhaps you would.) No, you would "pay a professional." Someone suitably qualified in the area of expertise that you are seeking advice on. I didn't elevate advisers to God like status. I didn't comment that the OP should blindly follow the advice of these God like figures. I didn't say that the OP should not educate themselves. So why did you mention it ? These pages are for COMMENTS and NOT ADVICE. What job do you do? I will try to get advice on the job you do and seek to do it myself without payment to you through the COMMENTS on these pages. I know that I said these pages are for COMMENTS and NOT ADVICE but my advice to you is go back to bed and try to sleep it off.

uk1

Ignoramus

For what it's worth .... let me offer you a possible philosphy rather than packaged solutions.

My approach is to consider all of my assets - in your mothers case the funds she will derive from the sale of her house as a sinking fund that at some distant point should have a zero balance - in a perfect theory the month after the last of us dies. This is an imprecise approach and not suitable for everyone.

In practical terms I have a spread sheet with my current cash available plus at different points in the future cashable assets when my cash is getting low. Each year I plan to deplete the fund with my spending and increase it with interest. In my case this amount enhances an occupational pension, and in the future a state pension for me and for my wife. At some point in the future - say when I'm 90 - in theory there will be nothing left except for the house we're living in then. A key part of my current plan is that all of my liquid'ish assets are in cash accounts or property.

The issue I think most pensioners suffer with is the error of believing that capital has to be protected at all costs and not eaten into. In my view unless a decision has been made to leave assets after death then depleting capital should be a positive part of a thoughtful retirement financial plan.

As an additional thought ..... I think it important that your mother - with your help - decides on the philosphical approach first before getting investment advice. You need to decide for example how much of a risk she can take in her late 60's. My concern would be that IFA advice might often include equities etc and you need to decide beforehand whether risk is a part of your joint philosphy. If it isn't you probably won't need an IFA - just work out how much of the cash can be put into cash ISAs, and bank bonds that mature in a couple or few years. A spread sheet like I described will help.

You said earlier there isn't a guaranteed strategey, but my approach (for me) allows me to adjust my spend all the time and as it avoids equities I believe provides a degree of safety and predictability ... and boredom ... that's right for me. But as I said this plan is not suitable for everyone.

Loughton_Monkey

I have already commented at length. But I would also endorse UK1's comments above. Avoiding equities completely is an individual choice, which your mother may or may not agree with.

IFA's tend (in my personal opinion) to lean naturally towards equity investments - and when presented with cast iron stubbornness about not wanting to risk capital, often go to 'structured products' which are a combination of bonds and 'extreme' (sometimes) equity components that 'may' perform well, but are just as likely to pay back the capital only. They can be very hard to understand so make sure you do understand them if your IFA advises them.

I certainly do very similar regarding use of a spreadsheet. This should contain all her income (state pension etc.) and all financial assets (not just the house proceeds), and should include an intelligent forecast of her spending + inflation over the years. Make assumptions on how long she might live and do iterations with several 'mixes' to see how it all shapes up. Anything in 'liquid cash' will earn up to around 2.9% if you can use Internet accounts and keep moving them. A range of Fixed Rate 'bonds' over 1 year, 3 years, 5 year, say, will pay a bit higher overall. Notice accounts can be good (but good ones not always available). And there could be room for 10%/15% in, say, a S&S ISA which could well provide a more positive result than cash over 6/7 years or more.