One for the experts( you know who you are!)

Audaxer

Amateurretiree said:

Thanks everyone for your replies, I just really wanted general advice nothing specific so that’s been great( I’m not looking for free advice from the IFA ‘s on here, just wondered what other people do approaching or in early retirement.)
We feel quite comfortable with our financial position, we don’t care about increasing our money, just don’t want to lose a lot of it!

DH s SIPP consists of 35% cash( so that equates to about 6 yrs potential expenditure if we ever get to travel again)
20% global bonds
7% uk credit bonds
5 % global inflation linked bonds
10% US Stocks 
5% uk government bonds
 and then a mixture of some emerging market bonds,global high yield bonds,Pacific stocks.
Thanks again for those who have responded, appreciate the expertise .

I hadn't seen your further update response when I posted above. As you have enough cash to cover expensive holidays until the first State Pension starts, that seems to cover your income requirements. The rest of your portfolio is very cautious with all of the bond funds, so you do not need to de-risk more. If you have no plans to access the rest of the portfolio, you could put more into equities if you want to leave it to grow more, or keep it fairly cautious if you think you may want to access it within the next 6 years.

OldMusicGuy

I'm highly risk averse with no DB pension to rely on and pretty much everything resting on my SIPP. Even I am not as defensive as you! I do hold a high proportion of cash at the moment to avoid sequence of returns risk, but a bit lower than you. The rest is invested in three multi-asset funds to give a 50-50 equity/bonds split. 

HarryGray

Well, technically the most optimal asset allocation at a 4% withdrawal rate is 100% equity. That has the highest success rate out of any asset allocation throughout retirement. Obviously sequencing risk is a big risk, so long as take no large withdrawals you would be pretty much set. 

You do NOT want to be in a cautious asset allocation throughout retirement. 

Amateurretiree

Thanks all, so now I’m in a quandary. Tempted to stay as we are til first SP kicks in then maybe up the equity portion of the SIPP. My reason being no one knows how the next few years will play out, and if I die my DB is halved, so DH will need more of the SIPP for living expenses.

Albermarle

Although everybody talks about the risk/reward being directly linked to % equity , this is not the full story.
The non equity side can also have its ups and downs, although normally it is less volatile than the equities,
So being too low in equities and too high in bonds is not guaranteed as very low risk . In certain market conditions it may be in fact safer to have at least a better balance . A typical conservative portfolio ( one step up from cautious ) would have something like 40% equity; 30 % bonds ; 10% other : 20% cash or some variation on that . 
Many posters on here would say that is still far too cautious but at least it is better balanced than what you have now. 

BritishInvestor

HarryGray said:

Well, technically the most optimal asset allocation at a 4% withdrawal rate is 100% equity. 

I'm not sure it's as clear cut as that.

HarryGray

BritishInvestor said:

HarryGray said:

Well, technically the most optimal asset allocation at a 4% withdrawal rate is 100% equity. 

I'm not sure it's as clear cut as that.

Nothing is clear cut, simply stating that statistically the best retirement drawdown ignoring a clients Attitude to Risk is 100% equity at a constant withdrawal rate. There is no evidence anywhere to suggest that 'lifestyling' works 

Audaxer

HarryGray said:

BritishInvestor said:

HarryGray said:

Well, technically the most optimal asset allocation at a 4% withdrawal rate is 100% equity. 

I'm not sure it's as clear cut as that.

Nothing is clear cut, simply stating that statistically the best retirement drawdown ignoring a clients Attitude to Risk is 100% equity at a constant withdrawal rate. There is no evidence anywhere to suggest that 'lifestyling' works 

I would have thought that if you have a portfolio of 100% equity and there is a poor sequence of returns, especially in the first decade of retirement, there would be more risk of running out of money than with a balanced portfolio?

Mistermeaner

Audaxer said:

HarryGray said:

BritishInvestor said:

HarryGray said:

Well, technically the most optimal asset allocation at a 4% withdrawal rate is 100% equity. 

I'm not sure it's as clear cut as that.

Nothing is clear cut, simply stating that statistically the best retirement drawdown ignoring a clients Attitude to Risk is 100% equity at a constant withdrawal rate. There is no evidence anywhere to suggest that 'lifestyling' works 

I would have thought that if you have a portfolio of 100% equity and there is a poor sequence of returns, especially in the first decade of retirement, there would be more risk of running out of money than with a balanced portfolio?

There was a great thread somewhere recently (that I can't find) that covered this in some detail referencing various studies 

The somewhat surprising conclusion was that you are generally better off 100% in equities - or at least no worse off 

There has only been something like 2 or 3 starting years of retirement in the last 100+ years when this would have depleted your pot in 30years

AnotherJoe

What Linton said.
You can de risk too early and if you will remain invested  for 20 or so years after retiring it may  be counterproductive to go defensive en you retire, or be as heavily defensive as you are, though I'm not convinced you are,  you just have a lot of bonds. 

What happened to them in the recent fall and then rise?  Did the they track your equities ? If so you aren't actually defensive at all. 

I am at the oppposite end of the risk spectrum to you, but I have taken the following approach. I am retired, SP starts next year DB next month. 
1. My DB/SP covers day to day spending so I can be more adventurous with my other funds. The ones I use for "fun"
2. I have 5 or 6 years "fun" spending in cash outside my pensions and other investments. There at least I can get a small amount of return on it unlike in a pension. 

3. Rest of my money is invested close to 100% in equities. No bonds. Why would I need them,  that's what 1 & 2 cater for. 

From what you've said you could do something similar though With more cautious Investments than I have. Maybe products that include bonds To possibly smooth volatility if you find that unnerving and would sell up in a crash. Did you sell any equities in the recent crash?