It's time to start digging up those Squirrelled Nuts!!!!

Sea_Shell

Joking aside, we have some very serious decisions to make during September, as basically we need to decide on a home for £77,700.

We have a maturing cash account (£60,200), and DH is cashing in one of his pensions in full (to make max use of his PA this tax year), of £17,500.

We haven't made any ISA contributions so far this tax year, so £40,000 can go straight in there (which funds have yet to be decided).  So this is basically 51% of the money.

We'll keep about £15,700 in instant access cash (Club Lloyds/Marcus) as our annual spends, and put the rest in Premium Bonds. (£22k)

So by keeping effectively £37,700 in cash, should we be looking at putting the ISA into 100% equities, or still hedging our bets by putting into a lower equity allocation fund.  Or keeping even more in cash and upping the Premium Bonds rather than maxing out the ISAs.

Decisions decisions!!!

At the end of the day we only "need" to make a 3% overall gain on our entire pot, net of inflation, to meet our needs.   So don't feel like we have to chase returns, especially when we already have £115k in a 100% equities fund.

Maybe only put £20k in the ISA, but in the equity fund, and keep a further £20k in Premium Bonds.

My head's going to explode!!   Anyone got a crystal ball I can borrow!?!

Ibrahim5

Cash is underrated. It doesn't half in value when you least expect it.

savingmore

if it encourages you, dh won £1,000 on one pb this month!   very nice indeed.

cfw1994

My past self would have benefited from being told to not lock cash up in ISAs, but to always use S&S ISA instead.
In your shoes, with plenty of cash available, I would certainly go S&S ISA.  

My personal preference is to always drip it in over several months, even though history shows that around 2/3rds of the time you are better dumping it all in.  I prefer to apply “pounds-cost averaging” to avoid the risk of a sudden dip after a single investment.  I know that my logic is flawed, but that is okay!

Sea_Shell

cfw1994 said:

My past self would have benefited from being told to not lock cash up in ISAs, but to always use S&S ISA instead.
In your shoes, with plenty of cash available, I would certainly go S&S ISA.  

My personal preference is to always drip it in over several months, even though history shows that around 2/3rds of the time you are better dumping it all in.  I prefer to apply “pounds-cost averaging” to avoid the risk of a sudden dip after a single investment.  I know that my logic is flawed, but that is okay!

Yes, any money that we put in the ISA's would be in S&S, not cash.   Just debating which class of fund to use.   Cash would be in bank/savings/PB's.

I suppose the question comes back to how much cash in case of a downturn should we keep "handy".

We'd originally saved the £60k (£54k plus interest), in a 5 year account, to mature and provide us with 4 years spends, if markets had plummeted. (I was still working at that point)   I guess that potential risk hasn't changed, but, we do have an overall pot that is now nearly £200k larger than when we opened that account in 2016!!!

Keeping £60k cash would equate to approx. 10% of our overall portfolio.   Equities would be 60% and the other 30% would be "other" (bonds and stuff), which is pretty much where we are now....so we'd just be maintaining our current position.

DT2001

Sea_Shell said:

Joking aside, we have some very serious decisions to make during September, as basically we need to decide on a home for £77,700.

Decisions decisions!!!

At the end of the day we only "need" to make a 3% overall gain on our entire pot, net of inflation, to meet our needs.   

Do you “need” 3% gain? Unless part of your plan is capital preservation you can use those savings to help fund retirement.

I think I understand the thought process. I am trying to come up with a plan for drawing on our ‘pots’ when they have suffered an inevitable fall at some time. A retired friend who was an IFA takes natural income and ignores capital fluctuations. He is drawing about 2.5% p.a.
If you have over £37k in cash and PB’s which cover 2 years expenditure and you topped up by natural income you would be less affected by market fluctuations. If you have a good year within the next 3 to 4 you could switch capital gains to top up your ‘peace of mind’ cash pots.

Having said that, having briefly reread parts of your thread again I do not think it makes a lot of difference which way you flow,  a higher % of cash or equities your overall plan still looks A OK!

cfw1994

Sea_Shell said:

cfw1994 said:

My past self would have benefited from being told to not lock cash up in ISAs, but to always use S&S ISA instead.
In your shoes, with plenty of cash available, I would certainly go S&S ISA.  

My personal preference is to always drip it in over several months, even though history shows that around 2/3rds of the time you are better dumping it all in.  I prefer to apply “pounds-cost averaging” to avoid the risk of a sudden dip after a single investment.  I know that my logic is flawed, but that is okay!

Yes, any money that we put in the ISA's would be in S&S, not cash.   Just debating which class of fund to use.   Cash would be in bank/savings/PB's.

I suppose the question comes back to how much cash in case of a downturn should we keep "handy".

We'd originally saved the £60k (£54k plus interest), in a 5 year account, to mature and provide us with 4 years spends, if markets had plummeted. (I was still working at that point)   I guess that potential risk hasn't changed, but, we do have an overall pot that is now nearly £200k larger than when we opened that account in 2016!!!

Keeping £60k cash would equate to approx. 10% of our overall portfolio.   Equities would be 60% and the other 30% would be "other" (bonds and stuff), which is pretty much where we are now....so we'd just be maintaining our current position.

I think £60k (10%) in your case remains reasonable.   
Never going to be any perfect answer to these sort of questions: it is opinions and what feels right for you.

I do, however, think you should seriously adjust your lifestyle that to make it only 3 years worth of cash though.....perhaps a new car, camper, or luxurious holidays in 2022 beckon 😂🍾😎

Our goal is for us to keep around 2-3 years worth of funds in cash accounts.  Currently this is in PBs, but the aforementioned cash ISAs mature next May, so we will be looking for ways to re-invest at that point.

michaels

DT2001 said:

Sea_Shell said:

Joking aside, we have some very serious decisions to make during September, as basically we need to decide on a home for £77,700.

Decisions decisions!!!

At the end of the day we only "need" to make a 3% overall gain on our entire pot, net of inflation, to meet our needs.   

Do you “need” 3% gain? Unless part of your plan is capital preservation you can use those savings to help fund retirement.

I think I understand the thought process. I am trying to come up with a plan for drawing on our ‘pots’ when they have suffered an inevitable fall at some time. A retired friend who was an IFA takes natural income and ignores capital fluctuations. He is drawing about 2.5% p.a.
If you have over £37k in cash and PB’s which cover 2 years expenditure and you topped up by natural income you would be less affected by market fluctuations. If you have a good year within the next 3 to 4 you could switch capital gains to top up your ‘peace of mind’ cash pots.

Having said that, having briefly reread parts of your thread again I do not think it makes a lot of difference which way you flow,  a higher % of cash or equities your overall plan still looks A OK!

Unless the underlying assets are going up by at least inflation then this 'natural yield' strategy seems doomed to failure?

Sea_Shell

We don't "need" 3% gain...that would just be to preserve capital, which we don't really need to do.

Our pots need to only cover 100% of our spends for 10 years.

Notepad_Phil

michaels said:

DT2001 said:

Sea_Shell said:

Joking aside, we have some very serious decisions to make during September, as basically we need to decide on a home for £77,700.

Decisions decisions!!!

At the end of the day we only "need" to make a 3% overall gain on our entire pot, net of inflation, to meet our needs.   

Do you “need” 3% gain? Unless part of your plan is capital preservation you can use those savings to help fund retirement.

I think I understand the thought process. I am trying to come up with a plan for drawing on our ‘pots’ when they have suffered an inevitable fall at some time. A retired friend who was an IFA takes natural income and ignores capital fluctuations. He is drawing about 2.5% p.a.
If you have over £37k in cash and PB’s which cover 2 years expenditure and you topped up by natural income you would be less affected by market fluctuations. If you have a good year within the next 3 to 4 you could switch capital gains to top up your ‘peace of mind’ cash pots.

Having said that, having briefly reread parts of your thread again I do not think it makes a lot of difference which way you flow,  a higher % of cash or equities your overall plan still looks A OK!

Unless the underlying assets are going up by at least inflation then this 'natural yield' strategy seems doomed to failure?

I've been using 'natural yield' and yes it does depend on what assets you're using, but the same 'doomed to failure' could be said for drawing down using 'total return' when you've started off with an unsafe SWR, especially if the market crashes in the early days of retirement.

Of the two methods I much prefer 'natural yield', but then I'm invested in a globally diverse set of tracker and active funds and I'm not worried that the yield (less than 3%) is going to doom my retirement - however I wouldn't be so happy if I'd invested in a bunch of very high yielding equities to take advantage of a high 'natural yield' as I'd consider that an 'unnatural yield', but then I'd be just as unhappy if I was using 'total return' on such a portfolio.