Stress Testing your Retirement plan....have you??

Sea_Shell

Thanks for all the replies everyone. It's all food for thought. But whatever happens, we (on this thread) mostly, at least have pensions to worry about stress testing in the first place.

Many of the wider public don't have that luxury, either through bad planning, necessity, education or bad luck, so I know whose shoes I'd rather be in.

Novice_investor101

kidmugsy wrote: »

Why do you expect that?

Because I don't trust the Gov to not have upped SP age by the time I get nearer to it.
I'm planning on the basis of it being 70, then if is still 68 that's a bonus.

Apodemus

Interesting discussion!

One aspect that hasn’t been mentioned is stress-testing the future user-inputs required to manage the payments. Once dementia sets in you need a robust, automated system that doesn’t need the spreadsheets to be maintained or the payments to be instigated manually. It probably also needs to be resistant to ill-considered tinkering during the early phase, before diagnosis. Clear notes in the POA file would help, or better still bringing the off-spring up to speed on pension plans early.

GunJack

Apodemus wrote: »

Interesting discussion!

One aspect that hasn’t been mentioned is stress-testing the future user-inputs required to manage the payments. Once dementia sets in you need a robust, automated system that doesn’t need the spreadsheets to be maintained or the payments to be instigated manually. It probably also needs to be resistant to ill-considered tinkering during the early phase, before diagnosis. Clear notes in the POA file would help, or better still bringing the off-spring up to speed on pension plans early.

I think this is a very overlooked aspect to investment-based pension plans...thankfully I've got 2x DB (with spouse's provision) plus SP so won't need to worry about this aspect - I'll be able to grow old disgracefully as planned with minimum fuss

Malthusian

Apodemus wrote: »

One aspect that hasn’t been mentioned is stress-testing the future user-inputs required to manage the payments. Once dementia sets in you need a robust, automated system that doesn’t need the spreadsheets to be maintained or the payments to be instigated manually. It probably also needs to be resistant to ill-considered tinkering during the early phase, before diagnosis. Clear notes in the POA file would help, or better still bringing the off-spring up to speed on pension plans early.

Attorneys should be able to press the same buttons you did to instigate payments - that's what the POA's for. If you have a bank or investment provider that doesn't work well with Attorneys, they can move your funds to a more suitable one.

When your attorney takes over they will throw out your spreadsheets. Either they will consult an adviser or, if they have the confidence to DIY on someone else's stuff, they will use their own spreadsheets.

In general when you appoint an attorney you should leave them to get on with it when the time comes. Notes, instructions and preferences in the Power of Attorney are largely pointless at best and obstructive at worst (except for things that the POA may find difficult without an instruction, e.g. "I want my attorneys to keep giving my grandchildren £1,000 every Christmas"). You don't know what the correct decision is going to be when the POA is needed, potentially 20-30 years' time or longer, when the economic world and the legislative and tax framework will be completely different.

Thrugelmir

OldMusicGuy wrote: »

Yes if you're a stock/fund picker. Not if you're a long term investor using low-cost passive multi-asset funds. That's probably the worst thing to do...... Fire and forget is the way to go.

For the decade between 2000-2010 an investor would have been better off holding US Treasuries than a S&P500 tracker. In fact the S&P tracker would have lost money after inflation. Dangerous to be a complacent investor.

Malthusian

Thrugelmir wrote: »

For the decade between 2000-2010 an investor would have been better off holding US Treasuries than a S&P500 tracker. In fact the S&P tracker would have lost money after inflation. Dangerous to be a complacent investor.

Your reply has very little to do with the post you quoted. OldMusicGuy was talking about low-cost passive multi-asset funds. The "multi-asset" part means the performance of the S&P 500 is irrelevant.

The average Mixed 40-85% Shares sector fund (not a great proxy but I can't think of a better one for multi-asset over that period) would have returned 34.1% from 2000-2010, more than US inflation at 27%.

Thrugelmir

Malthusian wrote: »

Your reply has very little to do with the post you quoted. OldMusicGuy was talking about low-cost passive multi-asset funds. The "multi-asset" part means the performance of the S&P 500 is irrelevant.

My post was in the context of invest and forget. On a side note, difficult to hold global equity funds without a correlation to the performance of the S&P 500.

michaels

Thrugelmir wrote: »

My post was in the context of invest and forget. On a side note, difficult to hold global equity funds without a correlation to the performance of the S&P 500.

I guess you could have some fixed rules on asset classes based on valuations but it is all just a matter of lucky or unlucky guesses. If any market were priced 'wrong' then there would be a way to lock in profits and thus the wrong pricing would be arbitraged away.

Ie it is never possible to say the risk adjusted returns from sector A will exceed those in sector B over timescale T.

Thrugelmir

michaels wrote: »

I guess you could have some fixed rules on asset classes based on valuations but it is all just a matter of lucky or unlucky guesses. If any market were priced 'wrong' then there would be a way to lock in profits and thus the wrong pricing would be arbitraged away.

Ie it is never possible to say the risk adjusted returns from sector A will exceed those in sector B over timescale T.

I'm merely musing. As fads come and go over time. As Sir John Templeton famously said.

"“Bull markets are born in pessimism, grow on scepticism, mature on optimism and die on euphoria. The time of maximum pessimism is the best time to buy, and the time of maximum optimism is the best time to sell.” “If you want to have a better performance than the crowd, you must do things differently from the crowd.”