Investing during retirement

StellaN

schiff wrote: »

[QUOTE I found out about Terry Smith on here, was smitten with his attitude and started investing into Fundsmith in early 2016 at what turned out to be an opportune time, followed by Smithson recently. The returns have well outstripped anything else I've ever invested in (except my house!)

Yes, Terry Smith/Fundsmith has performed very well. Indeed, it has even managed to escape the recent corrections/downturns in the last year or so and is now more or less at a high share price again. Pity I sold out last year.

bostonerimus

Thrugelmir wrote: »

What's the current yield on UK Government gilts? You need to go back to 2007 to obtain a yield in excess of 4% on any line of stock. Bonds are a very broad generalisation. As has been discussed on many a previous occasion.

Being an index investor any long term UK bond index strategy for me would include gilts...not sexy, but a good foundation. Bonds, like equities is indeed a generalization which is why I buy a bond index with intermediate average duration. I think many people in retirement could do far worse than just sticking with a balanced multi-asset fund and taking a total return approach to drawdown...again this does not need to be complicated when you can get a broadly diversified portfolio in a single fund.

newatc

I'm in the Old Music Guy camp. I keep a large cash bank which ensures I can sleep at night whatever is happening in stock markets and I think makes life easier for those dealing with things after we've departed. Our spending will come from that cash where needed. My intention is keep our share ISAs untouched and their will be left to the children; they have 70/30 split equities and bonds.

Stirfry

Thanks bowlhead99 for the clear explanation. I suppose I was expecting too much from the magic of compounding by leaving my investments to grow for 10 years without taking any yield.

150K shortfall, but great example which tells me we will need to
a/ invest more when fixed rate savings terms expire
and
b/ get used to spending and seeing overall balance reduce.

Plan on leaving house value to children and grandchildren. Whilst it would be great to preserve wealth, we will not be afraid to spend money as needed. Could later on cut our cloth accordingly. At present we have a 12k yearly holiday habit.

bostonerimus I still have a lot to learn about bonds and am currently holding Artemis strategic bond (not great so far) and Royal London extra Yield Bond. I know, not the bonds you are referring to. Would probably be better off holding cash. But thanks for the information.

cloud_dog

I am intrigued by this thread / people's experiences, feelings, and plans.

Whilst I am a number of years away from retirement, I have worked out a number of versions of 'The Number' in order to identify options for early retirement. For me 60 is likely to be the absolute earliest.

I am in the fortunate position whereby the majority of our income initially will be based on my DB scheme (from 65), and ignoring SP the DB scheme will make up over 80% of our number. When SP arrives for both of us we will be well in excess of even my highest number.

My main focus at the moment is in achieving the flexibility I (we) need in order to support early retirement (have told the OH they need to continue working for a couple of years after I retire.... I'm very mean).

But coming back to the topic of many posts on here, I am a little uncertain of how I will structure the capital/investment monies (ISAs, SIPPs) after retirement simply because a significant proportion of our income will come from DB type schemes (OH will have a small S32 with benefits, plus a small LGPS).

The usual and valuable consideration for many is around the asset mix / allocation, and I am probably thinking I will not need to mitigate volatility that much. Obviously no one likes to see their capital diminish but we will have limited (if not no) income requirements on this capital, certainly after SP kicks in.

Having said that a reasonable proportion of the capital will be used up as part of the early retirement. I am planning to take this solely from my additional payments in to my pension (AVC as present, moved to a SIPP later), so I envisage this pot being wiped out (pretty much).

I appreciate the allocation mix is down to people individual risk profile. If my OH had the capital it would all be in cash.

shinytop

I am in the fortunate position whereby the majority of our income initially will be based on my DB scheme (from 65), and ignoring SP the DB scheme will make up over 80% of our number. When SP arrives for both of us we will be well in excess of even my highest number.

Same for me, although my DB NRA is 60. I'll use the DC money as a regular top up of my DB plus a source of emergency/one off funds. I was thinking of keeping a rolling 3 years of this in cash and the rest mostly in equity-based passive funds.

bostonerimus

cloud_dog wrote: »

But coming back to the topic of many posts on here, I am a little uncertain of how I will structure the capital/investment monies (ISAs, SIPPs) after retirement simply because a significant proportion of our income will come from DB type schemes (OH will have a small S32 with benefits, plus a small LGPS).

The usual and valuable consideration for many is around the asset mix / allocation, and I am probably thinking I will not need to mitigate volatility that much. Obviously no one likes to see their capital diminish but we will have limited (if not no) income requirements on this capital, certainly after SP kicks in.

Having said that a reasonable proportion of the capital will be used up as part of the early retirement. I am planning to take this solely from my additional payments in to my pension (AVC as present, moved to a SIPP later), so I envisage this pot being wiped out (pretty much).

I appreciate the allocation mix is down to people individual risk profile. If my OH had the capital it would all be in cash.

I retired 3 years before my DB pension started. Income from a rental property covered half of my spending and being cautious I put enough cash in the bank to cover the other half for the 3 years until I got the pension. The rest of my DC and general account money I've left invested in a 75/25 mix of equity and bonds in mostly passive index funds and I don't do anything to it...I just let the dividends and the capital gains compound and don't even rebalance. I keep a year or so cash in the bank for emergencies and cash flow reasons and just spend the pension and rental income as it comes in. When State Pension begins I'll probably just plough that into my general investment account.

Linton

Our finances are split 3/7 in 100% equity growth, 2/7 in income generation from both dividends and interest, and 2/7 in cash+wealth preservation. The income tranche, together with annuities, SP and a small DB pension, will cover all our day to day expenditure. The Cash/WP provides cover for large one off expenditures, emergencies and enables me to sleep at night despite the higher risk/return strategy of the growth portfolio.



Every year, around this time, the 3 portfolios are rebalanced against each other to maintain the allocation prior to rebalancing the investments within each.


As it happens the overall allocation is about 60% equity and 40% bonds+cash. However arriving at this figure through a logical top down analysis gives me a lot more confidence than would have been achieved had 60/40 been chosen just because it seemed right at the time. As circumstances change and we get older I am sure the overall allocation to equities will change, but it will change because of changes to the 3/2/2 portfolio allocation whioch in turn will arise from changes to objectives..

cloud_dog

Roughly what percentage of your income retirement is covered by annuities / DB schemes etc?

Linton

cloud_dog wrote: »

Roughly what percentage of your income retirement is covered by annuities / DB schemes etc?

In rough figures and ignoring large one-off expences which come directly from capital...

Prior to 2012 - 0%, the annuities/DB/SP have been rising until now its around 50%. It will rise to perhaps 70-80% when I take my long deferred SP. However 40% of the annuities/pensions are not index linked so the % could then steadily decline depending on the relative effect of above inflation increases in the SP (if any).