Guidance on what to do with funds at point of retirement

LV_426

cfw1994 said:

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....

Possibly, I'll look into that. But I have diversity in different pension plans, as I've joined one in just about every single company I've worked for. I think this actually gives me a nice spread of risk. 
But I have to say I'm really impressed with the growth of that particular fund this year!

QrizB said:

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?

Haha! Some interesting options there, I predict option 1.
Part of the problem is, her Dad retired from the fire service at 55, and the family struggled with barely having enough money.
I do believe I've done a lot more in terms of planning. I certainly have more pension assets. But in some ways it is a leap of faith.
However I've looked at the graph, it's pretty clear how it's going to be funded. But I do admit to being slightly nervous myself about the possibility of retiring at the end of this year! I'm not sure I'd sleep well cutting it that fine.
No, I think a more reasonable option would be 57. Besides I can see whether the predicted values on my report are accurate.

Thrugelmir

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.

The higher the rating , the greater the level of volatility, i.e. the speed at which the value of an asset can both rise and fall. A 12 year bull market has bred increasing levels of complacency. With many more recent investors never having had experience of a full on bear market (sustained 20% fall).  The cliff fall last year is a timely reminder as to fast the markets will move once the sentiment turns negative. Central Banks aren't going to prop up markets indefinitely with loose fiscal policies. 

Albermarle

But I have diversity in different pension plans, as I've joined one in just about every single company I've worked for. I think this actually gives me a nice spread of risk. 

I am sure you know this but of course having multiple pensions does not in itself bring diversity , only being in different types of investments brings diversity.

LV_426

Albermarle said:

But I have diversity in different pension plans, as I've joined one in just about every single company I've worked for. I think this actually gives me a nice spread of risk. 

I am sure you know this but of course having multiple pensions does not in itself bring diversity , only being in different types of investments brings diversity.

Ok maybe diversity wasn't the right word. What I meant to say was, risk spread. Some of my pensions are invested in lower risk funds.
Sorry, I just re-read what I said, which was risk spread.
Diversity is a different thing I suppose.

cfw1994

Thrugelmir said:

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.

The higher the rating , the greater the level of volatility, i.e. the speed at which the value of an asset can both rise and fall. A 12 year bull market has bred increasing levels of complacency. With many more recent investors never having had experience of a full on bear market (sustained 20% fall).  The cliff fall last year is a timely reminder as to fast the markets will move once the sentiment turns negative. Central Banks aren't going to prop up markets indefinitely with loose fiscal policies. 

On the flip side, the past 15 months has also shown me how those 'riskier' funds certainly dropped further, faster.....but equally, how they sprung back stronger. 
Will we get a "full bear market", as you put it?    Of course: the two dips in the past 15 months could be considered bear markets....
For how long?  Who knows.   
The world is a very different place today to how it was even 10 years ago....

In my view, the 10-year horizon monies are best off in the 'risky' bucket.   
Stuff you need access to in the next 1-3 years, less risky - some in cash (or premium bonds).   
The bits in between are up for grabs....place your bets, ladies & gentlemen!

LHW99

Why not suggest to your wife trying to live on your proposed retirement income until the end of the year, and saving / investing the rest?

Obviously you would have to allow for any job-related expenses that wouldn't occur after retiring.

If it works, you may find she is happier about the idea.

LV_426

cfw1994 said:

In my view, the 10-year horizon monies are best off in the 'risky' bucket.   
Stuff you need access to in the next 1-3 years, less risky - some in cash (or premium bonds).   
The bits in between are up for grabs....place your bets, ladies & gentlemen!

I'm not a betting man, so maybe I should consider switching that fund. But a £20k increase in the last 3 months is not to be sniffed at!

LHW99 said:

Why not suggest to your wife trying to live on your proposed retirement income until the end of the year, and saving / investing the rest?

Obviously you would have to allow for any job-related expenses that wouldn't occur after retiring.

If it works, you may find she is happier about the idea.

The thing is, we're not extravagant, and I've taken into account all our living expenses. I do manage to save over £800/month anyway via a combination of cash savings account and ISA contributions. That is additional to pension contributions.
She's just ultra cautious, and tbh it is a bit scary for me too, even though I've carefully studied the burndown graphs.

QrizB

ajfielden said:

She's just ultra cautious, and tbh it is a bit scary for me too, even though I've carefully studied the burndown graphs.

Have you run your numbers through cFIREsim? It lets you input your retirement finances and then stress tests it with actual (albeit US) stock market and inflation numbers for every year since 1871, including the 1920s Depression and 1970s Stagflation.

LV_426

QrizB said:

ajfielden said:

She's just ultra cautious, and tbh it is a bit scary for me too, even though I've carefully studied the burndown graphs.

Have you run your numbers through cFIREsim? It lets you input your retirement finances and then stress tests it with actual (albeit US) stock market and inflation numbers for every year since 1871, including the 1920s Depression and 1970s Stagflation.

No but I will. Thanks for the link!

Thrugelmir

cfw1994 said:

Thrugelmir said:

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.

The higher the rating , the greater the level of volatility, i.e. the speed at which the value of an asset can both rise and fall. A 12 year bull market has bred increasing levels of complacency. With many more recent investors never having had experience of a full on bear market (sustained 20% fall).  The cliff fall last year is a timely reminder as to fast the markets will move once the sentiment turns negative. Central Banks aren't going to prop up markets indefinitely with loose fiscal policies. 

The world is a very different place today to how it was even 10 years ago....

Chimes ring out that previously used methods of valuation no longer apply and that the new situation bears little past disasters. Hence why the most four expensive words in investing are  "This Time is Different".  Said many decades ago but as relevant today as back then.