Once you've "won the game"

waveydavey48

I've read the expression "once you've won the game why keep playing" in relation to investing and it seems to refer to the situation where someone has invested long and well enough to be in the position where they have enough money to achieve their objectives, and the advice is that they should now de-risk. In other words why keep exposing your money to the vagaries of the market when you don't need to.
What happens next?
Is there a way to ensure your money just keeps pace with inflation so that it doesn't decrease in real terms, or maybe increases by 1 or 2% per annum?   

JohnWinder

What happens next is exactly what you said, but not exactly.

You put your money in the safest possible place which will allow it to keep up with inflation, but nowadays as the yield on such securities is negative you will lose a bit of money along the way. Doesn't matter, you've won the game so it's fine. If you don't have enough money to allow you to lose some with such safe investments, then you haven't won the game yet.

To know if you've won the game, you need to know how much you'll need to spend each year, how many years you'll have to keep spending, and what the yield on the safest, inflation protected investments are. Too easy, unless I've left something out. Just plug it all in to a NPV formula, or the like.

https://www.bogleheads.org/forum/viewtopic.php?t=205824

dunstonh

What happens next?

Is there a way to ensure your money just keeps pace with inflation so that it doesn't decrease in real terms, or maybe increases by 1 or 2% per annum?   

The most common thing that happens is that when retired, the person drops a notch or two on the risk scale.  Not too low that inflation erodes their savings but not too high that they suffer major volatility.

Linton

1) Have a very comfortable though not over-extravagent lifestyle - if you want something affordable within sustainable long term expenditure then buy it.
2) keep sufficient money in cash and safe-ish Wealth Preservation funds to cover any conceivable economic event short  of Armageddon and all major expenditure for the next 10 years.
3) ensure all required ongoing expenditure is covered by ongoing income
4) Keep the rest in 100% equity for fun, intellectual challenge and inflation.

If there is insufficient money for all this then as John WInder says "you haven't won the game yet".

Sadly with the current state of the bond market there are limited investment opportunities between cash and equity, so it is more important to get the balance right.

Thrugelmir

Money remains invested in the stock market. The investments themselves are less volatile. Though unlikely to ever be star performers either. 

MK62

waveydavey48 said:

I've read the expression "once you've won the game why keep playing" in relation to investing and it seems to refer to the situation where someone has invested long and well enough to be in the position where they have enough money to achieve their objectives, and the advice is that they should now de-risk. In other words why keep exposing your money to the vagaries of the market when you don't need to.
What happens next?
Is there a way to ensure your money just keeps pace with inflation so that it doesn't decrease in real terms, or maybe increases by 1 or 2% per annum?   

There is no guaranteed way unfortunately......not at the moment anyway.
The problem with inflation is the compounding effect over many years, which can lead to serious value erosion.

Albermarle

The general consensus is that a medium risk portfolio ( say 50% equities ) should give a 1 or 2 % real return over the next ten years. Although nobody knows really of course .
The difference to the past ( as mentioned above ) is that 50% bonds for the non equity part , is not seen as sensible and probably better to hold significantly less bonds that this and instead have more cash and/or other diversifiers like gold, infrastructure, property etc . Or let one of the so called Wealth Preservation funds do something similar for you .

Malthusian

There is one guaranteed way actually - buy an inflation-linked annuity. "Money" can mean "income" as well as "capital". If you buy an inflation-linked annuity then you will have the same amount of money to spend month-to-month for the rest of your life and that money will keep pace with inflation.

You have to forfeit a very large amount of potential income as well as the option of passing on (most of) the capital on your death, but the option's there.

Langtang

Following on from this post: https://forums.moneysavingexpert.com/discussion/6301953/once-youve-won-the-game

We're fortunate to have just received an inheritance which, along with our own savings, will lead to a comfortable retirement for the next 35 years (very basic: savings / 35 years = comfortable+)

We've never invested (except ISA's) , but are in the process of (potentially) doing so with the help of an IFA.

We're not adverse to investing, but worry about "corrections" more than I think we'd worry about inflation depreciation. I say "we" but my wife scored higher than me in the risk profile we completed with the IFA, which surprised me.

I wonder if it is worth starting to "invest" or if it's better to just keep the money "ticking over" with enough to cover inflation?

michaels

waveydavey48 said:

I've read the expression "once you've won the game why keep playing" in relation to investing and it seems to refer to the situation where someone has invested long and well enough to be in the position where they have enough money to achieve their objectives, and the advice is that they should now de-risk. In other words why keep exposing your money to the vagaries of the market when you don't need to.
What happens next?
Is there a way to ensure your money just keeps pace with inflation so that it doesn't decrease in real terms, or maybe increases by 1 or 2% per annum?   

Buy an annuity using the most secure provider you can find or even diversified over different providers or construct your own using index linked govt bonds.

michaels

Langtang said:

Following on from this post: https://forums.moneysavingexpert.com/discussion/6301953/once-youve-won-the-game

We're fortunate to have just received an inheritance which, along with our own savings, will lead to a comfortable retirement for the next 35 years (very basic: savings / 35 years = comfortable+)

We've never invested (except ISA's) , but are in the process of (potentially) doing so with the help of an IFA.

We're not adverse to investing, but worry about "corrections" more than I think we'd worry about inflation depreciation. I say "we" but my wife scored higher than me in the risk profile we completed with the IFA, which surprised me.

I wonder if it is worth starting to "invest" or if it's better to just keep the money "ticking over" with enough to cover inflation?

Ticking over if you are actually protected form inflation means accepting a 1-2% real terms loss every year forever which soon mounts up.