Investing during retirement

schiff

I wonder if this would be a useful thread to be available to discuss investments when finally retirement has arrived. Most posters are discussing how to profitably arrive at a good retirement. I'm thinking more of the people who already have a suitable cash fund in TSB, Tesco, etc, an accumulation of ISA's, own their house and want to make investments with a bit of spice, but bearing in mind the usual caveats about Stock Exchange investments needing a 5/10 year life.

For example: I have a £20K cash ISA maturing next month. What sort of funds should the proceeds be invested in?

Rheumatoid

I am retiring next year at 58 and would hope to live another 20 years so have a fair bit invested in VLS 80 and some index trackers that I am comfortable that I will not need in the short term. I am pretty lucky in that I have a good DB pension coming and can live comfortably off that if I need to. I keep a fair bit in cash and lower risk funds for if I need something sooner. I also have a fair bit in Vanguard FTSE UK Equity Income Index which keeps paying for a holiday or two and other big treats each year from a good yield - even though the underlying value of the fund is a bit volatile - particularly lately!

bostonerimus

If you are doing drawdown you are investing during retirement. There are a number of ways to approach this all depending on your attitude to risk and the ratio of the size of your pension pot to the income you need. Some people might be conservative and have enough money to use an annuity, others might emphasize dividend producing stocks and fixed income while and others might take a total return approach and/or concentrate on capital gains. I'm retired and I'm taking a similar approach to the one I took while I was working by using equity and bond index funds. However, I'm allowing my equity percentage to increase over time as a rising equity "glide path" has been show to give a higher probability of retirement funding success. I'm in my late 50s and have 75% equities in my portfolio because I have a DB pension and rental income and so can take a fair amount of risk.

Prism

I do not have a DB pension so will likely need to be fully invested during retirement, which may start in 8 years or so. I intend on using the same model I have for several years, although likely with a lower allocation to equities at least to start. I am aiming for something like 500k-700k in equites by that point so I will need to get it right. My preference is for relatively low volatility and defensive focused funds since I will be selling parts of them at least once a year. That means the high growth risky stuff I have some of at the moment will likely be replaced.

enthusiasticsaver

We retired early at 58 and are currently drawing on our DB pensions which are being subsidised by savings and income from two managed monthly income funds. We are not investing as such in that we are no longer putting money into investments or savings but will be looking to drawdown in as tax efficient way as we can from our DC pension (DH) and SIPP (me). Stocks and shares isas are there as a fallback although when state pensions kick in I don't think they will be needed. I hesitate therefore to put any more money away when we have up to 20 years of active retirement which will need funding and holidays, new cars and home improvements don't come cheap. Does there come a point when you say you have enough put by for the future and maybe we should be spending today instead of saving?

All of our lives we have been saving/investing for the future but are currently taking the view that although we are happy for our house/stocks and shares isas/db pensions to be used to fund care home costs or passed on as an inheritance our cash savings are there for us to enjoy so locking it away for 5-10 years especially when the markets are volatile may not be the best thing for us. Interested in alternative views though.

bostonerimus

enthusiasticsaver wrote: »

We retired early at 58 and are currently drawing on our DB pensions which are being subsidised by savings and income from two managed monthly income funds. We are not investing as such in that we are no longer putting money into investments or savings but will be looking to drawdown in as tax efficient way as we can from our DC pension (DH) and SIPP (me). Stocks and shares isas are there as a fallback although when state pensions kick in I don't think they will be needed. I hesitate therefore to put any more money away when we have up to 20 years of active retirement which will need funding and holidays, new cars and home improvements don't come cheap. Does there come a point when you say you have enough put by for the future and maybe we should be spending today instead of saving?

All of our lives we have been saving/investing for the future but are currently taking the view that although we are happy for our house/stocks and shares isas/db pensions to be used to fund care home costs or passed on as an inheritance our cash savings are there for us to enjoy so locking it away for 5-10 years especially when the markets are volatile may not be the best thing for us. Interested in alternative views though.

You are definitely still investing. Retirement is not the end of investing for anyone with an ISA/SIPP/DC pension, in fact it might be considered as a more difficult period of investing as most people are thinking about spending some capital rather than adding to the capital. You will still have goals and should arrange your investing strategies to meet those goals. You might want to emphasize income over growth and protect your capital, but that's still investing

Linton

I keep enough in cash and very low risk investments for emergencies and at least 4-5 years expenditure. The rest is about 40% dividend paying funds/shares and 60% in 100% equity global higher risk funds(50% small and medium sized companies, 50% large companies).


I be;lieve one needs a significant % in long term equity to handle inflation. If one retires at 65, half ones income needs could be 15 years away - plenty of time for a high % of equity

bostonerimus

Prism wrote: »

I do not have a DB pension so will likely need to be fully invested during retirement, which may start in 8 years or so. I intend on using the same model I have for several years, although likely with a lower allocation to equities at least to start. I am aiming for something like 500k-700k in equites by that point so I will need to get it right. My preference is for relatively low volatility and defensive focused funds since I will be selling parts of them at least once a year. That means the high growth risky stuff I have some of at the moment will likely be replaced.

A number of studies in the US have shown that moving to lower volatility portfolios actually reduces the success rate in funding retirement. There is a natural inclination to want to protect your capital when you retire and that's certainly a big factor early on to mitigate sequence of returns risk and also for people who don't have a significant pension pot surplus. But being too conservative is a danger that is often missed. Hence, a strategy of slowly increasing your equity percentage after retirement is worth looking at as it might increase the probability of you not running out of money and also increase the potential size of your ending pot.

enthusiasticsaver

bostonerimus wrote: »

You are definitely still investing. Retirement is not the end of investing for anyone with an ISA/SIPP/DC pension, in fact it might be considered as a more difficult period of investing as most people are thinking about spending some capital rather than adding to the capital. You will still have goals and should arrange your investing strategies to meet those goals. You might want to emphasize income over growth and protect your capital, but that's still investing

Yes point taken. I think I meant I am not putting any new money in but obviously still managing our existing investments. Having spent a good few decades thinking investing is putting some of our current income away for the future it has been a learning curve to not do that any more and in fact look to drawdown instead.

The problem we find is that we are not in a position to say this is definitely going to happen at a certain time as so much depends on health, family situations etc etc. We could be in a position to do lots of long haul holidays for the next 10-15 years but equally we have friends of our age who have been struck down with health issues which have curtailed their plans massively.

When we were investing for an early retirement everything was more definite. We knew how much we needed to live off and we knew roughly when we wanted to retire and the only unknown was how long our retirement will last.

OldMusicGuy

schiff wrote: »

I wonder if this would be a useful thread to be available to discuss investments when finally retirement has arrived. Most posters are discussing how to profitably arrive at a good retirement. I'm thinking more of the people who already have a suitable cash fund in TSB, Tesco, etc, an accumulation of ISA's, own their house and want to make investments with a bit of spice, but bearing in mind the usual caveats about Stock Exchange investments needing a 5/10 year life.

For example: I have a £20K cash ISA maturing next month. What sort of funds should the proceeds be invested in?

You should invest the 20K in the sort of fund that meets your long term objectives. Do you need growth or are you protecting against volatility?

IMO you should have at least a 30 year financial plan that shows your expenditure needs over the next 30 years and then matches those against any guaranteed income streams you have, like DB pensions, state pensions, money from downsizing etc. The difference is what you need your investments to fund.

Investing in retirement should not be about a "bit of spice" IMO. It's about ensuring you meet your financial objectives to fund a long and happy retirement.

I use what's called a bucket strategy where I have a lot of cash, much of which is in a bond ladder. This is to avoid pound cost ravaging in the early years of retirement. I also have a lot of cash in my DC pot and I am using UFPLS up to personal allowance to take some of this out over the next 5 years up to SP age. The remainder of the DC pot is invested in three of the popular multi-asset funds with about a 50/50 equity/bond split. This will not be touched for at least 10 years. We are currently downsizing which should free up a chunk of equity which will go into ISAs, more bond ladders and also investments depending on how things are shaping up in terms of our spending needs.

I have a very conservative investment strategy because I am risk averse and my financial plan shows that all my investments need to do is match inflation to provide all we need. Hence I am guarding against downside and volatility (at the expense of upside, which I don't really need).

schiff

enthusiasticsaver wrote: »

The problem we find is that we are not in a position to say this is definitely going to happen at a certain time as so much depends on health, family situations etc etc. We could be in a position to do lots of long haul holidays for the next 10-15 years but equally we have friends of our age who have been struck down with health issues which have curtailed their plans massively.

When we were investing for an early retirement everything was more definite. We knew how much we needed to live off and we knew roughly when we wanted to retire and the only unknown was how long our retirement will last.

This I think is the issue, where to strike the balance. I have family though I wouldn't expect to be involved in 'family issues' that could have an impact on my savings, financially they would cope. It's the concerns about the cost of my care should that necessity arise.