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

westv

Currently, it appears to be a "correction".

gadgetmind

I'm kind of retired now and greet this volatility with a yawn. Well TBH 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.

westv

I laugh in the face of my portfolio's £20k loss this week!

Thrugelmir

westv wrote: »

I laugh in the face of my portfolio's £20k loss this week!

Given the past couple of years returns. I'm happy if it simply trades +/- 10%. As still well up in a 3 year period on an average basis. No point in being greedy. When the causes of the markets rise are simply down to Central Banks intervention.

bostonerimus

westv wrote: »

I laugh in the face of my portfolio's £20k loss this week!

My accounts will be $100ks less than they were a couple of weeks ago. But you can only spend cash so until you sell it isn't real. Keeping these losses "theoretical" is why a retiree should have a cash buffer and get some income from things like dividends, spare time job, rent, annuities or a define benefit pension.

DairyQueen

Good topic for discussion OP. No offence to the zillionaire and comfortably-DB'd contributors but this post seems aimed at others - i.e, those that that can't rely on those kinds of financial cushions but whose essential retirement income is entirely exposed to the vagaries of cash returns and the markets.

I'm a relative newbie too so others have far more expert views than I but (bar a few bits and bobs) my entire retirement portfolio is now self-managed.

I will probably begin decummulation in around four years and, over the last 18 months, guided by this site and other research, I have chosen and implemented a retirement strategy that I hope will stand-up to most market conditions. The current volatility is an opportunity to test that strategy and learn from it.

Others have mentioned the cash buffer and that's the foundation of my strategy. I have around three years income in cash. That allows me to sleep comfortably. Without that buffer I would not feel comfortable with such a high equity exposure (79/21) in my SIPP. I also have the equivalent of another year's income in a short-term bond fund. This is my defence against a protracted bear market, or an unforeseen, sudden call on a sizeable chunk of capital when the bears are ascendant.

My core investments are three trackers with different timescales and each has equity/bond allocations relative to those timescales. The longer the timescale, the higher the equity allocation. I have adopted a three-period approach to retirement: short-term (drawdown in 4-10 years), medium-term (ditto in 10-20 years) and long-term (ditto in 20+ years). The amount invested in each tracker is pretty arbitrary and will be revised annually.

I also have about one third of my SIPP invested in actively-managed, satellite funds. These investments are directed at sectors or regions that I either favour or that I feel are under-represented in my trackers. They tend to be more volatile (e.g. smaller companies) but are quite well-diversified. These are the assets that I will review first when annually rebalancing the portfolio.

I am currently holding 4% of my SIPP portfolio in cash but am unlikely to invest that until the markets settle. I would prefer to miss any opportunistic gains( losses?) than try and guess the markets.

I'm very sensitive to inflation as I have seen how it's ravaged the non-index-linked pensions of people I know. Thinking about it, I am so heavily invested in the markets because it's impossible to match inflation with cash and I suspect that I will invest more in cash if rates begin to exceed inflation.

Right now my stress level is fine and I have no intention of changing anything in my portfolio. If I was in drawdown now I would have made a single withdrawal (of 3.45%) at the end of last year and that's the scenario I will be testing.

I will be reviewing each fund's performance during this volatile period and may make some tweaks at the end of this year. Right now it's steady as s/he goes.

Thrugelmir

DairyQueen wrote: »

No offence to the zillionaire and comfortably-DB'd contributors but this post seems aimed at others - i.e, those that that can't rely on those kinds of financial cushions but whose essential retirement income is entirely exposed to the vagaries of cash returns and the markets.

Annuities come in various guises. They should not be disregarded out of hand. As provide a guaranteed income stream. That combined with the state pension at least provides a solid base level.

Foolish to leave ones entire pension invested at the whim of the markets. No amount of hindsight can predict the future. More so given the past decade. Where the aim of the Central Banks is actually to maintain financial stability. Not provide investors with a bumper return. That in fact has come about as there is no where else to invest/save money with any hope of a positive return. When there's only one game in town. Can only end one way.

gadgetmind

This book looks at the merits of using capital to buy guaranteed income. My take away was at age 55 in low return times you'd have to be bonkers.

https://www.amazon.co.uk/Living-Off-Your-Money-Retirement/dp/0997403403

Of course, if you can get a DB pension off the magic money tree, then great, make it someone else's problem regards how the hell to fund it.

gadgetmind

BTW, dunno if I was the "zillionaire", but we pulled down heavily on our ISAs to lend rellies £400k as a bridging loan when a house sale fell through. We've managed to bang £150k back in during the intervening months as other funds have come through, and now they've paid us back hence me saying drop is nice as silly rises were doing my head in.

Future income is likely to be zero unless NV comes good so it's "living off money" from now on.

Thrugelmir

gadgetmind wrote: »

This book looks at the merits of using capital to buy guaranteed income. My take away was at age 55 in low return times you'd have to be bonkers.

I know a few people that have taken their NHS pension at 55 only to regret it a few years later. As their compatriots continue to grow their benefits to an even higher level.

55 is a young age to retire. Worked with many people over the years that kept their hand in. Well into the 70' and 80's. Sharp minds never deaden.