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

kidmugsy

Novice_investor101 wrote: »

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.

In short, for no reason at all.

OldMusicGuy

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.

Well I hold US treasuries and various equity index trackers in my multi-asset funds. I wouldn't say I am complacent, I have developed a strategy that is investing for the long term and it's based on quite a lot of learning and research. My original point was that as a long-term passive investor, the worst thing I can do is keep fiddling with investments based on the way the market turns. I've fallen foul of that trap as I have been learning - reacting to past events.

You seemed to imply that fiddling with spreadsheets was a waste of time and I should be monitoring my investments more frequently than fiddling with spreadsheets. In my case, fiddling with spreadsheets is actually better for managing expenses and short term cash, while the worst thing I can do is keep switching investments given my strategy.

I actually "monitor" my investments pretty much every few days but I am trying to stop doing that because it could just encourage me to make unnecessary changes.

Thrugelmir

OldMusicGuy wrote: »

You seemed to imply that fiddling with spreadsheets was a waste of time and I should be monitoring my investments more frequently than fiddling with spreadsheets. In my case, fiddling with spreadsheets is actually better for managing expenses and short term cash, while the worst thing I can do is keep switching investments given my strategy.

I actually "monitor" my investments pretty much every few days but I am trying to stop doing that because it could just encourage me to make unnecessary changes.

Monitor macro events and future opportunities. Rather than focus on monitoring existing investments per se. Fund managers can handle that aspect.

Do what ever works best for you. :beer:

Malthusian

kidmugsy wrote: »

In short, for no reason at all.

Healthy pessimism is a very good reason. Better to have modest expectations and be happy when they're exceeded than to have unrealistic expectations and be unhappy when they're not met.

It only becomes a problem when your expectations become so unrealistic that they force you into bad decisions that make you unhappy when you are proven wrong. An example would be assuming that there will be no State Pension whatsoever, and saving an excessive amount of income in your pensions and denying yourself in the present. Then, when you inevitably do get to collect your State Pension, kicking yourself that you didn't see a bit more of the world when you were younger and healthier.

Adding a mere couple of years on to your assumed State Pension Age won't make you unhappy in the present (if it does you're too close to the edge to be financially content anyway) so this problem doesn't arise.

Novice Investor didn't state their age but large numbers of the population have seen their State Pension Ages rise by two years to counter rising life expectancy so I don't think it's unreasonable to imagine the same happening again. (Or five years to counter sex discrimination, but in theory that won't need to be repeated.)

kidmugsy

Malthusian wrote: »

large numbers of the population have seen their State Pension Ages rise by two years to counter rising life expectancy so I don't think it's unreasonable to imagine the same happening again.

It could happen again, of course, but Life Expectancy has declined a little lately. So a new excuse would perhaps be necessary.

OldMusicGuy

Thrugelmir wrote: »

Monitor macro events and future opportunities. Rather than focus on monitoring existing investments per se.

Which is exactly what I am doing, and why the spreadsheet (and stress testing) is important. I have a lot of cash (more than most would hold) to avoid pound cost ravaging in the first few years of retirement. Depending how our spending needs go and depending how the markets go, I may move some of that cash into investments in the next 3 to 5 years. Or I may annuitize it (less likely until I am older but we'll see). Or I may leave it where it is (in Marcus style accounts and a bond ladder).

JoeEngland

Thrugelmir wrote: »

Is your spreadsheet an oracle?

If only! But it does allow me to plan an early retirement based on savings and DC drawdown, whereas with an annuity I'd have to retire later to get a sufficient figure to get me through to SP.

Thrugelmir

JoeEngland wrote: »

If only! But it does allow me to plan an early retirement based on savings and DC drawdown, whereas with an annuity I'd have to retire later to get a sufficient figure to get me through to SP.

I wouldn't personally recommend buying an annuity at an early age.

Having spent 4 decades modelling spreadsheets for financial outputs. The one certainty that I have. Is that no sooner than you've finished an exercise. The data will already out of date. As the variable what if's will have changed.

DairyQueen

Thrugelmir wrote: »

Having spent 4 decades modelling spreadsheets for financial outputs. The one certainty that I have. Is that no sooner than you've finished an exercise. The data will already out of date. As the variable what if's will have changed.

True, but at least it gives an indication of a train wreck further down the track. Or, on the positive side, a hint that you may be able to spend more than you thought.

JoeEngland

Thrugelmir wrote: »

I wouldn't personally recommend buying an annuity at an early age.

Having spent 4 decades modelling spreadsheets for financial outputs. The one certainty that I have. Is that no sooner than you've finished an exercise. The data will already out of date. As the variable what if's will have changed.

I certainly have no plans to buy an annuity.