Guidance on what to do with funds at point of retirement

Linton

ajfielden said:

OldMusicGuy said:

dunstonh said:

She's concerned about my plans to burn through the DC pension until DB + SP becomes available. She said what if the market crashed. The value of your investments isn't guaranteed.

You adjust your risk to meet your objectives and timescale.  Therefore reducing the impact of a market crash.

What dunstonh said. I retired 3 years ago and am wholly reliant on savings and a DC pot (no DB pensions). I have set my DC portfolio up on a lower risk basis than I would have done when accumulating (pre-retirement) so that the impact of any market crash is reduced (this worked well during the short Covid drop). I also hold a large chunk of cash in my SIPP to provide drawdown funds in the early years of retirement and to reduce sequence of returns risk.

This strategy works for me as I am risk averse. If you (and/or your wife) are very risk averse, you could just convert your DC pot to cash if you plan to burn through it in a few years (note that not all DC schemes may offer this capability). The only risk you face then is inflation, which won't be a massive risk IMO over a short time scale.    

I guess converting to cash is safe, but you'd then lose the potential growth you would have had?

Yes, when you are happy you have the wealth to meet your needs for the rest of your life with a bit left over there is no point in risking that on the chance that you will die richer.  At the Pearly Gates, St Peter wont be checking your bank balance.

HeyYeah

I'm probably in a similar state to you i.e. trying to understand options and thinking through possible strategies. I found the following book useful: Your Retirement Salary - Richard Dyson & Richard Evens. I'm not sure I'd follow the actual fund recommendations, but the approach is interesting.

zagfles

Worth a free chat with pensionwise http://www.pensionwise.gov.uk to get you started

Albermarle

we have an ISA worth about £100k. But I was planning to leave that cash as an emergency fund.

For a true emergency fund that is quite a high amount ( for broken boilers , new roof needed etc) . So you could maybe consider some of it more as a contingency to help fund any gaps that appear in your retirement plan due to particularly adverse market conditions.

OldMusicGuy

Linton said:

I guess converting to cash is safe, but you'd then lose the potential growth you would have had?

Yes, when you are happy you have the wealth to meet your needs for the rest of your life with a bit left over there is no point in risking that on the chance that you will die richer.  At the Pearly Gates, St Peter wont be checking your bank balance.

This. I have accumulated enough in my SIPP to fund a 35 year retirement (and still have funds for care home fees if needed). I don't have any DB income so having a good chunk of cash available helps me sleep at night because I am risk averse (less risk averse folks may not do it this way). I still have a lot more invested for the long term than I have as cash, and as long as this just stays ahead of inflation then I will be fine. I don't want to end my life with too much money in the bank.

LV_426

I've seen the graphs and calculations, and it looks like I can retire at the end of the year.
But my wife just isn't happy with it.

cfw1994

ajfielden said:

Where to put your money? Does it stay in the currently running plans, or something else? Do you combine them all into one fund?

I suspect this is the trickiest to fathom....& frankly there are no right & wrong answers, or we would all be doing precisely the same thing in the same funds!

Combining can make for easier management, provided you are not losing any benefits and the one you remain with has a suitable choice of funds at a suitably low charge.   You might add perhaps that is easy to monitor and manage, with a company that is easy to contact.

For my part, my DC will form the majority of our income for perhaps 20-25+ years (smaller DB pots filtering in over time).  We have a chunk (several years) in easy-to-access cash assets - we may start on those to postpone access to the DC pot, but will likely take at least the personal allowance out.   The timing of this tbc - perhaps a chunk at the end of the tax year, or maybe a smaller monthly amount.

My view is that the funds have done well for around 20 years.....so there is no reason to make major changes.
I may scour the funds available to my Aviva plan to see if there are any more interesting ones over time (as I have done for the past 20 years, with perhaps a handful of tweaks over that time).

LV_426

Is fund choice just down to risk attitude? I notice that all the funds available for me to choose from in my various pension plans are risk rated. I consider myself middle of the road in terms of risk.
Just checked my Aviva plan, and I'm in a fund rated 6, which is quite high for me. Although looking at the performance, it's been spectacular, despite falling off a cliff last year, as most funds did.
I'll probably leave that one where it is.

cfw1994

ajfielden said:

Is fund choice just down to risk attitude? I notice that all the funds available for me to choose from in my various pension plans are risk rated. I consider myself middle of the road in terms of risk.
Just checked my Aviva plan, and I'm in a fund rated 6, which is quite high for me. Although looking at the performance, it's been spectacular, despite falling off a cliff last year, as most funds did.
I'll probably leave that one where it is.

Herein lies the challenge!

Wonder how that fund has done over the longer term (think you only see a max of 10 years).  

Mine is across 4 funds...with risks at 4, 5, 7 and 7 

Frankly, I'd be far wealthier if the whole lot were in the two 7 funds....even over 3/5/10 year periods.....
....but as we know, those are ones that could collapse, & the other two did illustrate their lower volatility through last year's shenanigans.   Then again, I may ditch the 4 and go for thirds with the others.   Maybe 

Can you spread yours across more than one fund?   I prefer to 'spread my risk' across a few buckets....

QrizB

If things go to plan I'll spend as long retired as I did working. I'll want my money to keep working, not retire with me.

ajfielden said:

I've seen the graphs and calculations, and it looks like I can retire at the end of the year.
But my wife just isn't happy with it.

@ajfielden in that case it looks like you have three options, in ascending order of difficulty:

1. Change the plan
2. Change your wife's mind
3. Change your wife ...
   

Or I guess you could retire and just not tell her?