Approaching Retirement - Managing Sequence of Returns Risk

Thrugelmir

DairyQueen said:

quirkydeptless said:

DairyQueen said:

We are holding sufficient wrapped cash to cover front loaded drawdown for the first 5 years of retirement (from April 2021).

How are you holding the wrapped cash? Are you getting any interest on it?

SIPP-wrapped and they have cut interests rates from paltry AJB (0.15%) to 0% (from 10 April) and already 0% (HL). We decided to take the inflation hit rather than risk money market funds or (gulp) bonds.

What's wrong with Gilt funds? If the UK becomes bust. The £ will crash anyway. 

kuratowski

Genuine question, do you think the returns on gilt funds will outweigh the AMC + platform fees?  Because there are no fees to pay on cash.

DairyQueen

kuratowski said:

Genuine question, do you think the returns on gilt funds will outweigh the AMC + platform fees?  Because there are no fees to pay on cash.

+ transaction fees and capital is still at (very slight) risk. We intend drawing down the cash within 5 years. I sleep better knowing that we are covered come what may.

Thrugelmir

kuratowski said:

Genuine question, do you think the returns on gilt funds will outweigh the AMC + platform fees?  Because there are no fees to pay on cash.

Depends where the "cash" is held. 

kuratowski

OP (DQ) said they (the couple) are holding cash in SIPPs with AJB/HL, where uninvested cash carries no charges.  So in this specific situation they are probably better off with the money in cash rather than invested!  Slightly more generally, there must come a point when interest rates are so low that you're better off in cash than in very low risk funds such as money market funds or government bonds.  I think we have currently reached that point?

DairyQueen

kuratowski said:

OP (DQ) said they (the couple) are holding cash in SIPPs with AJB/HL, where uninvested cash carries no charges.  So in this specific situation they are probably better off with the money in cash rather than invested!  Slightly more generally, there must come a point when interest rates are so low that you're better off in cash than in very low risk funds such as money market funds or government bonds.  I think we have currently reached that point?

No regrets with respect to the decisions I made before the black swan appeared on the horizon. We are sleeping soundly.

[Deleted User]

kuratowski said:

OP (DQ) said they (the couple) are holding cash in SIPPs with AJB/HL, where uninvested cash carries no charges.  So in this specific situation they are probably better off with the money in cash rather than invested!  Slightly more generally, there must come a point when interest rates are so low that you're better off in cash than in very low risk funds such as money market funds or government bonds.  I think we have currently reached that point?

We don’t know the future. For all we know government bonds could outperform cash by some margin. I’ve seen similar sentiments in early January. My government bonds provided a return of 10% since. Sadly, the rest of the portfolio did not. 

Stay diversified