Bear Market/Crashes: how do Retirees Deal with it?

gadgetmind

TBC15 wrote: »

Steady on, there are certain dress/posting standards that verge on why not/trolling.

I'm OK as long as he's not typing with one hand.

jamesd

gadgetmind wrote: »

Ah yes, market timing.

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 It’s 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

gadgetmind wrote: »

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!

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

jamesd wrote: »

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.

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).

gadgetmind

jamesd wrote: »

You know better than to claim that PE10 is what market timing means

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?

Thrugelmir

gadgetmind wrote: »

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.

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.

gadgetmind

Thrugelmir wrote: »

May well be a period of history that rewrites the books.

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.

k6chris

gadgetmind wrote: »

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

There are always good reasons to not invest.

..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..... :rotfl:

chucknorris

k6chris wrote: »

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.

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

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?

economic

ProDave wrote: »

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?

This is MSE. The policy is buy more as stocks fall. Much like a vanguard life strategy fund. A strategy that is inferior to a sell as stocks fall strategy ie stop loss.