Have we got our sums right?? Appraise our plan.

Marine_life

Sea_Shell wrote: »

Our current 'Pots' are as follows:
My Pension pots - £107,000 (plus potential widows pension from OH)
OH's pension pots - £130,000, plus 2 Final Salary pots expected to pay £12,000 p.a between them (or reduced Wid Pen)
Shares/Investments - £86,000
Cash (across various types of accounts) - £140,000

Based on the overall mix of your savings you have way too much in cash. How much interest are you earning on that on average?

The general rule of thumb would be to say keep 3 years expenses in readily accessible money.

That doesn't mean you need to take your hard earned money and throw it at the stock market, there are other ways of saving.

justme111

namely? would appreciate you going into more detail on alternatives that have no cash or stock market downsides

crv1963

Our plan or idea gleaned from others threads is to keep 6 months outgoings as cash savings and then the rest in National Savings Certificates and Premium Bonds, maybe not a high return but better than current account returns and able to relatively quickly be turned back to ready cash.


If something major (ie boiler) needed replacing, use credit card, have the ready cash by the time the bill needs paying in full.

Marine_life

justme111 wrote: »

namely? would appreciate you going into more detail on alternatives that have no cash or stock market downsides

Well...first of all....investing in "funds" is not just about the stock market, there are plenty of fixed income and bond funds which are lower risk and / or tend to move counter to the stock market.

But even amongst shares there are those which are much lower risk. This of it this way - if you are investing for income and you need 100,000 to generate 5,000 of income. That 5%. Now if the value of your holdings falls to 80,000 but still with 5,000 income then your yield increased to 6.25% but do you really care if you still have your 5,000 of income? If you've invested sensibly then the capital value will eventually recover. Of course you are always subject to the risk that in a downturn a company may cut its dividends so you need to spend a little time finding those sectors or companies which tend not to.

In addition to investing in funds, there are (especially in the UK) a whole load of crowd investing platforms which are not zero risk but which have a good spread of risk (some of which even have an element of protection). One of my investments I have help for 2 years now, has not lost a penny and currently yields 11.5%. To put that in perpective lets say I had 10,000 invested, that would mean an income of 1,150 per year. compare that to a typical fully protected UK savings account and I would need close to 50,000 to generate the same income.

The important thing (as has been said again and again) is that diversity is your friend.

k6chris

Marine_life wrote: »

This of it this way - if you are investing for income and you need 100,000 to generate 5,000 of income. That 5%. Now if the value of your holdings falls to 80,000 but still with 5,000 income then your yield increased to 6.25% but do you really care if you still have your 5,000 of income?

Or to put it another way, don't think about / focus on the value of your investment pot, think of it as a black box source of income that pays you (say) £5k a year. As long as it keeps paying, you are happy. Once a year you can peek into the black box and give it a service (rebalance) - in line with the servicing manual (a pre defined set of logical rules). The manual says that the pot will go up and down in value, but this is normal and you will still get you £5k. Focus on that one outcome. Well it works for me!!

Sea_Shell

Yes we do hold a large cash pot, but we've decided on worst case scenario of investments taking 5-10 years to fully recover from a crash. We're comfortable with this balance at the moment. Plus out of this cash float, we're still funding our pensions by approx. £10k per year.

Currently we're roughly getting average interest of 2.3% across the whole. Mixture of high interest C/As, Regular savers and fixed term bonds. Skewed a bit by 4 of the 5% regular savers having just matured, so their balances are low again for the moment.

We've got some room left in our ISA allowance still for this year, so we may make additional investments at some stage, but that would only take approx £10k out of the cash pot.

atush

Silvertabby wrote: »

I'm afraid so! We don't waste £3K+ a year on expensive holidays, but we do enjoy our new cars! That said, this year is an exception. The car we like has a new model out, but the engine we want isn't available yet - so we will wait for a year or so.

P.S. If it wasn't for us, there wouldn't be as many nice nearly new second hand cars for you to buy !

Thank you. We always buy late model used when we can lol.

kidmugsy

Marine_life wrote: »

Based on the overall mix of your savings you have way too much in cash

Not at all obvious. If the pensions are all in S&S then they have equities of £323k plus their equity-like house. For bonds they have the DB pensions: you can use annuity rates to put a rough capital value on them; ditto State Pensions.

If you do the sums then £140k of liquidity is not mad. True you might fancy a punt on P2P. I'd fancy a bit of gold and FX in my liquidity. But given how illiquid the pensions are until one is 55, how illiquid DB pensions and State Pensions are, and that a house also lacks liquidity, flexibility, and divisibility, then I'd happily have lots of those desirable abstractions elsewhere.


I go further: any cash that yields more than inflation - say, CPI inflation - I look on as an attractive investment in its own right. It gives you "optionality" - it lets you invest in shares or bonds in a market trough, it acts as insurance against emergency expenditures, and it encourages sound sleep. Marvellous stuff, cash.

Marine_life

kidmugsy wrote: »

True you might fancy a punt on P2P.

I think asset-backed P2P it a bit better than a punt ;-) Especially with LTV's less than 70%.

I agree though that if all your pension eggs are in the S&S basket you would want a bigger cash safety net.

Silvertabby

atush wrote: »

Thank you. We always buy late model used when we can lol.

You'd love our cars - low mileage, no kids, no dogs and no smoking!