Is a DC derisking/"Lifestyle Strategy" worthwhile if I intend to drawdown?

BritishInvestor

jamesd said:

AnotherJoe said:
 unless you are withdrawing the absolute maximum you need to live on then you want as much to be invested as possible and a few years in cash as a guard against falls. 

That's the key consideration. SWRs are based on the bad sequences and a person who has low spending flexibility must have the higher bonds level to survive the worst cases. There's a price: their average spending power over time will be lower because of the reduced equities once they adjust upwards if they live through less challenging times.

A person who can easily cut can go high equities, shrug and say no problem, cutting my non-essential spending is easy.

What do you define as higher bond levels? In terms of worst-case longevity (and putting human behaviour to one side), the sweet spot (in the data that I have) points to a fairly lumpy equity allocation.

jamesd

BritishInvestor said:

jamesd said:"2. A rising equity glidepath as described by Kitces does well. The Guyton-Klinger rules have this property."

Which rule in particular? 

My recollection was Kitces writing so but I haven't found it in a check so I recant for now.

jamesd

BritishInvestor said:

jamesd said: ...

A person who can easily cut can go high equities, shrug and say no problem, cutting my non-essential spending is easy.

What do you define as higher bond levels? In terms of worst-case longevity (and putting human behaviour to one side), the sweet spot (in the data that I have) points to a fairly lumpy equity allocation.

35-50% bonds, particularly the 40 and 50% levels commonly used in US studies with historic sequences..

Ignoring cyclically adjusted price/earnings ratios my personal preference is both high equities and high small cap but I  don't ignore PE10 so my equity cut is lower than usual at the moment.

Risk tolerance issues don't go away in retirement and that can result in lower equity percentages than might seem desirable. One way I often try to address this is state pension deferral because that efficiently derisks some income and can increase volatility tolerance.