Drawdown and movement to 'safer' funds

cfw1994

232607 wrote: »

thus hopefully garnishing descent returns.

I prefer my returns to ascend!

kidmugsy wrote: »

Our TFLS money is in high interest cash accounts (regular savers and current accounts) and annuities (by deferring State Pensions).

The money still in pensions has been tilted in the direction of gold and commodities. We hold no bonds. Other than our owner-occupied house we hold no property.

We'd happily use Premium Bonds if we were in any danger of using up our savings interest allowances.

Gold? Interesting....
Where are these “high interest cash accounts”, that’s what I want to know! Dew & far between!

Prism

I plan on moving some of my pension into lower risk funds before retirement and then continue with that risk level during. I am currently thinking about 60/40 equities/bonds with a cash buffer. Things may change by that point though

kidmugsy

cfw1994 wrote: »

.Where are these “high interest cash accounts”, that’s what I want to know! Few & far between!

You list half a dozen high interest regular savers. You open the current accounts that are necessary to let you open the RSs. You are a couple so you can have a dozen RSs between you. You then open one RS per month. After a year you have a lovely money merry-go-round; as one account matures it provides that month's input money for the other 11, plus its own replacement. You skim the interest off as profit.

Easy peasy.

Linton

Making a major change to your drawdown portfolio when you reach or come near to retirement does not make much sense to me as much of your wealth will continue to be invested for at least a 10-15 year time frame, not very different to the 10 or more years leading up to retirement.
So I believe that the only necessary financial preparation for your retirement date should be to build up a cash or close to cash buffer of several years drawdown requirement to tide you over a major crash.

Thrugelmir

kidmugsy wrote: »

You list half a dozen high interest regular savers. You open the current accounts that are necessary to let you open the RSs. You are a couple so you can have a dozen RSs between you. You then open one RS per month. After a year you have a lovely money merry-go-round; as one account matures it provides that month's input money for the other 11, plus its own replacement. You skim the interest off as profit.

Meanwhile your capital loses it's value as is eroded by inflation. Likewise the future year's interest.

kidmugsy

Thrugelmir wrote: »

Meanwhile your capital loses it's value as is eroded by inflation. Likewise the future year's interest.

CPI inflation 2.5% or so.
RS interest 5%.

What erosion? You're winning, and without any investment risk.

westv

Some may want to switch part of their portfolio to lower risk funds if, say, they wanted to use that part to cover the gap from retirement to SP age.

bostonerimus

kidmugsy wrote: »

You list half a dozen high interest regular savers. You open the current accounts that are necessary to let you open the RSs. You are a couple so you can have a dozen RSs between you. You then open one RS per month. After a year you have a lovely money merry-go-round; as one account matures it provides that month's input money for the other 11, plus its own replacement. You skim the interest off as profit.

Easy peasy.

This is laddering....in a way ie using one maturing account to invest in another. Doing this for the short term teaser rates that some accounts offer is a way to juice investment return, but there are usually limits on the amount that can be invested. It might be a good way to make a cash allocation work for you, but it isn't a complete way to fund retirement. If you could get 5% on a 5 year saving bond then a 5 year ladder of those would be an attractive way for many to invest without much risk. Just think of your entire pot in such a ladder and after 5 years it's throwing off 5%. Of course you're at the mercy of interest rates, but that's nothing new.

Spidernick

Linton wrote: »

Making a major change to your drawdown portfolio when you reach or come near to retirement does not make much sense to me as much of your wealth will continue to be invested for at least a 10-15 year time frame, not very different to the 10 or more years leading up to retirement.
So I believe that the only necessary financial preparation for your retirement date should be to build up a cash or close to cash buffer of several years drawdown requirement to tide you over a major crash.

Thanks for all your replies. I particularly agree with the above sentiment. Yes, I am talking about workplace pensions and will look to stop the automatic transfer to safer funds.

OldMusicGuy

For anyone's info, if you want an incredibly detailed analysis of retirement portfolios of different mixes of equities and bonds, and also safe withdrawal rates, you should buy "Living Off Your Money: The Modern Mechanics of Investing During Retirement with Stocks and Bonds". It is primarily US-focused, but Clung (the author) does analyze the impact of markets outside the US and gives a global perspective. It is a complex read but the summarized advice on different portfolios and different equity/bond mixes during retirement, and how these should change.