Retirement lump sum

kidmugsy

short_butt_sweet wrote: »

the harry browne portfolio is a high-conviction portfolio, in the sense that it is very uncomfortable to stick to it.

But experience is that all long term portfolios are hard to stick to, above all heavily equity-based portfolios. Your objection fails.

short_butt_sweet wrote: »

who expresses caution about investments in general

If he doesn't want to invest let him hold cash. Or follow Linton's advice, echoed by me in that post, to keep more of his loot in the pension fund. You did see that "P.S.", did you?

short_butt_sweet wrote: »

you're also fiddling with the harry browne portfolio unnecessarily.

It's necessary to fiddle with it for the non-American, unless you think the OP should hold all his equities in US blue chips and all his bonds in US Treasuries.

short_butt_sweet wrote: »

also, why are you suggesting this when you clearly don't hold it yourself? i'm puzzled

Because his position and mine are different and because he asked the question.

short_butt_sweet

kidmugsy wrote: »

But experience is that all long term portfolios are hard to stick to, above all heavily equity-based portfolios.

however, some portfolios are harder to stick to than others.

the "permanent portfolio" is especially hard. buying yet more gold in the late 1990s, when it had been in a bear market for almost 20 years, would have been very difficult indeed.

a good way to make it somewhat less difficult to stick to a portfolio is to hold a multi-asset fund (which includes multiple assets classes - at a minimum, equities and bonds - in a single fund). because then you don't see the wilder swings in value of individual assets classes, just the less wild swings of the whole portfolio. and because then the rebalancing is done automatically for you.

It's necessary to fiddle with it for the non-American, unless you think the OP should hold all his equities in US blue chips and all his bonds in US Treasuries.

some fiddling/localization is necessary. but IMHO, you've over-complicated it.

e.g. a simple approach might be to substitute a world equity tracker for US equities, and gilts for US treasuries.

Biggus_Dickus

Linton wrote: »

Taking as large a DB pension and as small a lump sum as possible is by far the most lucrative completely safe option there is, assuming you have an average life expectancy.

Therein lies the conundrum when seeking DB pension lump-sum advice.

Obviously the commutation-factor is a major consideration when deciding your course of action;...however, if you do decide to take the lump-sum (or sums) then you have the absolute certainty of getting your hands on that lovely tax-free cash. :beer:

If you leave it in the pot there is absolutely no certainly of how long you’ll live to enjoy your pension benefits,...just an assumption.

When I was young I was convinced I’d live forever,...however, if I’m being really honest, a few doubts are beginning to creep in these days.

Rheumatoid

Its a difficult call. I am having to think about it now as I am 15 months from retiring at age 58. I will have a pretty decent DB pension that even if I take the maximum lump sum I think will still be plenty to support my probably more sedentary lifestyle in my 70's. Having a load up front might mean I am able to have the benefit early on whilst I am still up for and able to enjoy a more expensive lifestyle and do some of the things I want to do. My wife will still take half the full pension if I peg it.
R.

Thrugelmir

short_butt_sweet wrote: »

and gilts for US treasuries.

US Treasuries offer a far better yield than UK Gilts.

Stubod

For me, being risk averse it would be a no brainer to leave the money in the pension and take the highest possible "income" from that, particularly if it's index linked..but that's just me....

planefixer

Life expectancy is obviously a consideration, I'm still leaning towards taking a lump sum. Thanks to Audaxer and others I now understand the commutation factor. Im now researching DIY investing and reading all I can.

Biggus_Dickus

Stubod wrote: »

For me, being risk averse it would be a no brainer to leave the money in the pension and take the highest possible "income" from that, particularly if it's index linked..but that's just me....

If the commutation-factor for your Final Salary DB pension (or pensions) is very high then the decision to take the tax-free lump sum (or sums!) may perhaps be the ‘no-brainer’.

There are other ‘factors’ to consider as well,...we all have different personal circumstances, expectations and aspirations that will have a bearing on any decision to take the (full or partial) lump-sum or not.

Whichever way you choose to swing, it’s a decision that needs careful consideration and is not to be taken lightly.

I have 3 x DB final salary pensions and 2 x DC pensions and I went through all that lump-sum malarkey not long ago;

....talk about “ twisting my melon, man";...I’ve still not fully recovered.

Audaxer

Biggus_Dickus wrote: »

If you leave it in the pot there is absolutely no certainly of how long you’ll live to enjoy your pension benefits,...just an assumption.

But if it's someone's main source of income at least you will have the certainty that you won't run out of money if you do have a long retirement. That does not necessarily apply to the OP in view of the very good commutation factor.

Biggus_Dickus

Audaxer wrote: »

But if it's someone's main source of income at least you will have the certainty that you won't run out of money if you do have a long retirement. That does not necessarily apply to the OP in view of the very good commutation factor.

You are absolutely correct ,... and I certainly wasn’t advocating that everyone should take the lump-sum simply because they’ll have immediate access to a large chunk of cash.

That’s why I was keen to stress (in the section of my post that was snipped) that ”the commutation-factor is a major consideration when deciding your course of action”.

Out of interest,... you say the OP’s commutation factor (22.4) is very good,...but at what level is a ‘ commutation factor’ considered to be poor, good or excellent these days?

My wife’s sister has a Final salary DB pension that at the moment has a predicted commutation factor of 11,....which I reckon is a bit miserly.