Once you've "won the game"

zagfles

uk1 said:

Audaxer said:

zagfles said:

Audaxer said:

zagfles said:

Audaxer said:

zagfles said:

uk1 said:

zagfles said:

You uk1 said:

zagfles said:

bostonerimus said:

zagfles said:

uk1 said:

michaels said:

Albermarle said:

uk1 said:

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?   

I think a further option for a few that is rarely considered is that it you genuinely have enough and you believe using all reasonable assumptions that you will always have enough it does present the option to take all of your cash out of all speculative harbours and put them into purely safe havens that offer no stress at all. 

I believe that although few in number many might be in this situation without realising it.  A good early indicator of this is if you currently have all your cash in non-speculative places and simply keep an uncomplicated spreadsheet that shows that even with decent spending you have more cash at any point in the current year than you did last year and before then perhaps you can live a stress free life and forget fund management.There are of course loads of "ifs" and "buts" but not having to track and fret about investing might actually extend life.

Good analysis, but I guess plenty of the regulars on here would get stressed knowing they were losing out to inflation and missing potential stock market returns , even though they did not need the money . Old habits die hard and for many investing  is one of their hobbies.

Inflation will be 6% plus by early next year - a few years like that and you must have started with a very big pot it not to be a problem - 6% inflation = a 6% investment loss.  Personally I couldn't live with that level of risk.

But that might not be the right advice for someone who is older than you and wealthier than you.  The point is that one view isn't right for all and the place of advice is to offer thoughts for the widest.  Some mistankly believe that their view is the view that is right for everyone.

You're missing the point. It's not about "advice" or "views", it's about why play the "game" once you've won.

There is no "safe haven" that guarantees your pot will not reduce in value in real terms. So if the "game" is preserving the value of your pot, you have to keep playing. You either take investment risk or inflation risk, or both, whatever you do. Obviously, it may be sensible to reduce risk, people will have views and give advice on that, but you can't eliminate risk. 

If the "game" is getting a guaranteed income for life, you can "win" that with an index linked annuity.

We've got to agree on the rules of this game and whether it involves preserving the value of a pot to pass on. The rules I go by in my plan are to guarantee a comfortable income and simply not worry about any of the remaining "unused" pot and leave it invested aggressively.

How have you achieved that "guaranteed comfortable income"?

By making and storing more than enough cash and assets than you will ever need. 

And how do you guarantee that cash and those assets will hold their real value? Or not drop enough that your "comfortable" income is no longer "comfortable"?

You really aren’t understanding.  

You are obsessed with protecting or increasing the value of the total asset pool.  Some do not need to but haven’t realised it, 

No, you aren't understanding. I'm not "obsessed" with anything. I'm making the point that you can't guarantee to have "more than enough cash and assets than you will ever need" unless you've found some way to guarantee they'll hold their value, or at least not reduce in value by so much that you now no longer have "enough". 

Yes, some people have more than enough cash than they will ever need. Someone could have more than enough income from DB and SPs to more than meet their needs, and also have say, £500k in cash savings, with no relatives that they wish to leave an inheritance to. If they leave it as cash it will lose money to inflation, but that may not bother them if they are unlikely to spend much of it anyway.

Some people in the same situation may invest it, and it may retain or increase it's value, but if they don't spend it or need to leave an inheritance, does it matter that it has retained or increased it's value?

But as you point out, you're still taking a risk with the £500k even if you leave it in cash. It may go down by less than equities, who knows, but in the current environment, it's almost certain to go down in value if in cash. Equities have more chance of keeping value in real terms.

But the whole point is that the risk doesn't matter to the pensioner in that example. If the value of the cash halves in value to £250k due to inflation, it doesn't matter to him as he is more than covered for his income needs by DB and SP pensions. As he is more than covered by his income, in that example he is likely to add excess income to his cash balance. 

The whole point of this thread was basically "why take risk when you don't need to". As you point out, holding cash is a risk. So the answer to "why take risk" (or "play the game") is basically you have to (unless you buy an index linked annuity - and yes obviously you take the different risk that you don't get your money back).

Also, for someone with a DB pension with capped inflation increases, like nearly all private sector DB pensions, there is still a risk as pointed out above - a decade of 1970's inflation would halve its value with a 5% cap, so if that person has a spare half million it might be wise to invest in something that hedges high inflation. I'm not sure what, but almost certainly not cash!

The OP started the thread saying he had read the expression - "once you've won the game why keep playing" in relation to investing. 

If you hold cash, I agree it will lose value over time due to inflation - i.e. it is a fact that it will lose value over time, rather than a risk that it will lose value, as you know it's going to happen. The point I was trying to make in the example in my previous post, is that the retired couple with £500k cash on top of DB and SPs are not worried about the fact that their cash will lose value to inflation, as they have more than they will ever need, so they see no advantage in investing it. In that example I would say they have won the game, as they don't need to invest it.

Let's say in the same example, in addition to the DB and SPs which more than cover their spending, they had £5million in cash - would you still say they hadn't won the game because their DB pensions had a 5% cap? 

Hi,

May I make the well-intentioned observation that you are wasting your time in arguing with a poster that cannot accept that their opinion might not be relevant to everyone.  If you try and patiently explain this you will receive the demand that you disclose full details of your wealth in order to weaponise his reply.  It is simply pointless and a nil return effort.  Take heart in some understand fully our point and push on.

You read the title of the thread exactly as I have done. I simply pointed out as you have done that if you have genuinely "won the game" then you can shrug and not play and move on. It is a very fortunate place to be and my point is that some are in this postion but do not know it and understand their good fortune and have stress they needn't have.

In simple terms, I closed a successful busines and retired before I was 50.  I had an ex tax inspector as my accountant.  At the moment, my spendable cash is more at the end of each year than when I started.  Every year.  So in my very simple world my challenge isn't to increase my pot but to find more self-indulgent ways for my wife to spend faster against the background of a frugal and tough earlier life when she sacrificed to support my efforts.  Yes I have assets to cash if need be and they are fortunately much more than enough.  I needn't convince anyone else of this and I believe that there are a small number of people who may be in a similar situation but may not know it and that was my very simple point.  Hopefully those we genuinely hoped to help understand.

Push on.  Onwards and upwards,

You really have been spectacularly whooshed! I am not the slightest bit interested in anyone here's personal wealth, least of all yours, and I won't be "demanding" anyone disclose it

My point was really simple. Holding cash is a risk. You've not stopped "playing the game" just because you choose cash over other assets.

In fact holding cash is a harder game in some ways. Make sure you don't have more than £85k with any bank. Shop around for the best interest rates every so often and decide how long you're willing to tie it up. Is that 1.7% 3 year fixed rate deal better than 1.5% for 2 years? Which way will interest rates go?

Whereas instead you could shove the whole lot in some multi-asset fund like VLS80 and forget about it!

zagfles

bostonerimus said:

If we define winning as just having to never worry about retirement income again and minimizing risk then the checkered flag is going to be at different places for different people because we have different budgets. If your pot is large and you needs are few then you are closer to the finish line.

Indeed - for some couples the equivalent of the state pension x2 is enough - eg see the "squirreled nuts" thread.

bostonerimus

uk1 said:

Audaxer said:

zagfles said:

Audaxer said:

zagfles said:

Audaxer said:

zagfles said:

uk1 said:

zagfles said:

You uk1 said:

zagfles said:

bostonerimus said:

zagfles said:

uk1 said:

michaels said:

Albermarle said:

uk1 said:

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?   

I think a further option for a few that is rarely considered is that it you genuinely have enough and you believe using all reasonable assumptions that you will always have enough it does present the option to take all of your cash out of all speculative harbours and put them into purely safe havens that offer no stress at all. 

I believe that although few in number many might be in this situation without realising it.  A good early indicator of this is if you currently have all your cash in non-speculative places and simply keep an uncomplicated spreadsheet that shows that even with decent spending you have more cash at any point in the current year than you did last year and before then perhaps you can live a stress free life and forget fund management.There are of course loads of "ifs" and "buts" but not having to track and fret about investing might actually extend life.

Good analysis, but I guess plenty of the regulars on here would get stressed knowing they were losing out to inflation and missing potential stock market returns , even though they did not need the money . Old habits die hard and for many investing  is one of their hobbies.

Inflation will be 6% plus by early next year - a few years like that and you must have started with a very big pot it not to be a problem - 6% inflation = a 6% investment loss.  Personally I couldn't live with that level of risk.

But that might not be the right advice for someone who is older than you and wealthier than you.  The point is that one view isn't right for all and the place of advice is to offer thoughts for the widest.  Some mistankly believe that their view is the view that is right for everyone.

You're missing the point. It's not about "advice" or "views", it's about why play the "game" once you've won.

There is no "safe haven" that guarantees your pot will not reduce in value in real terms. So if the "game" is preserving the value of your pot, you have to keep playing. You either take investment risk or inflation risk, or both, whatever you do. Obviously, it may be sensible to reduce risk, people will have views and give advice on that, but you can't eliminate risk. 

If the "game" is getting a guaranteed income for life, you can "win" that with an index linked annuity.

We've got to agree on the rules of this game and whether it involves preserving the value of a pot to pass on. The rules I go by in my plan are to guarantee a comfortable income and simply not worry about any of the remaining "unused" pot and leave it invested aggressively.

How have you achieved that "guaranteed comfortable income"?

By making and storing more than enough cash and assets than you will ever need. 

And how do you guarantee that cash and those assets will hold their real value? Or not drop enough that your "comfortable" income is no longer "comfortable"?

You really aren’t understanding.  

You are obsessed with protecting or increasing the value of the total asset pool.  Some do not need to but haven’t realised it, 

No, you aren't understanding. I'm not "obsessed" with anything. I'm making the point that you can't guarantee to have "more than enough cash and assets than you will ever need" unless you've found some way to guarantee they'll hold their value, or at least not reduce in value by so much that you now no longer have "enough". 

Yes, some people have more than enough cash than they will ever need. Someone could have more than enough income from DB and SPs to more than meet their needs, and also have say, £500k in cash savings, with no relatives that they wish to leave an inheritance to. If they leave it as cash it will lose money to inflation, but that may not bother them if they are unlikely to spend much of it anyway.

Some people in the same situation may invest it, and it may retain or increase it's value, but if they don't spend it or need to leave an inheritance, does it matter that it has retained or increased it's value?

But as you point out, you're still taking a risk with the £500k even if you leave it in cash. It may go down by less than equities, who knows, but in the current environment, it's almost certain to go down in value if in cash. Equities have more chance of keeping value in real terms.

But the whole point is that the risk doesn't matter to the pensioner in that example. If the value of the cash halves in value to £250k due to inflation, it doesn't matter to him as he is more than covered for his income needs by DB and SP pensions. As he is more than covered by his income, in that example he is likely to add excess income to his cash balance. 

The whole point of this thread was basically "why take risk when you don't need to". As you point out, holding cash is a risk. So the answer to "why take risk" (or "play the game") is basically you have to (unless you buy an index linked annuity - and yes obviously you take the different risk that you don't get your money back).

Also, for someone with a DB pension with capped inflation increases, like nearly all private sector DB pensions, there is still a risk as pointed out above - a decade of 1970's inflation would halve its value with a 5% cap, so if that person has a spare half million it might be wise to invest in something that hedges high inflation. I'm not sure what, but almost certainly not cash!

The OP started the thread saying he had read the expression - "once you've won the game why keep playing" in relation to investing. 

If you hold cash, I agree it will lose value over time due to inflation - i.e. it is a fact that it will lose value over time, rather than a risk that it will lose value, as you know it's going to happen. The point I was trying to make in the example in my previous post, is that the retired couple with £500k cash on top of DB and SPs are not worried about the fact that their cash will lose value to inflation, as they have more than they will ever need, so they see no advantage in investing it. In that example I would say they have won the game, as they don't need to invest it.

Let's say in the same example, in addition to the DB and SPs which more than cover their spending, they had £5million in cash - would you still say they hadn't won the game because their DB pensions had a 5% cap? 

Hi,

May I make the well-intentioned observation that you are wasting your time in arguing with a poster that cannot accept that their opinion might not be relevant to everyone.  If you try and patiently explain this you will receive the demand that you disclose full details of your wealth in order to weaponise his reply.  It is simply pointless and a nil return effort.  Take heart in some understand fully our point and push on.

You read the title of the thread exactly as I have done. I simply pointed out as you have done that if you have genuinely "won the game" then you can shrug and not play and move on. It is a very fortunate place to be and my point is that some are in this postion but do not know it and understand their good fortune and have stress they needn't have.

In simple terms, I closed a successful busines and retired before I was 50.  I had an ex tax inspector as my accountant.  At the moment, my spendable cash is more at the end of each year than when I started.  Every year.  So in my very simple world my challenge isn't to increase my pot but to find more self-indulgent ways for my wife to spend faster against the background of a frugal and tough earlier life when she sacrificed to support my efforts.  Yes I have assets to cash if need be and they are fortunately much more than enough.  I needn't convince anyone else of this and I believe that there are a small number of people who may be in a similar situation but may not know it and that was my very simple point.  Hopefully those we genuinely hoped to help understand.

Push on.  Onwards and upwards,

There may well be people who are in a similarly enviable position to you, but the majority will find themselves a fair way short. With the demise of the traditional DB plan with it's forced lifetime of contributions from either employer, employee or a combination, many people just don't save enough to retire at SPA particularly in a low interest environment. So they look to the higher returns of the stock market with all the associated risk. I don't worry about the "winners", I worry about the vast majority who can maybe see the finish line up there ahead and must take on risk in an effort to get there. This last year and the current issues with gas prices and looming inflation should convince everyone that a plan needs to be robust...and it needs to be affordable too. I don't think that will be true for a lot of people and that maybe we will need to rethink retirement and change some current expectations or increase the SP so that it replaces more wage income as it does in most other developed nations (I won't hold my breath for that).

My Dad worked a blue collar job for ICI for 35 years and left with a good DB pension back in the 1970s. He and my Mum "won" just by working and paying the mortgage down and I think they were not out of the ordinary. Looking back from our DC world where retirement risk and cost have been largely shifted to the individual they were the "good ol'days".

uk1

bostonerimus said:

uk1 said:

Audaxer said:

zagfles said:

Audaxer said:

zagfles said:

Audaxer said:

zagfles said:

uk1 said:

zagfles said:

You uk1 said:

zagfles said:

bostonerimus said:

zagfles said:

uk1 said:

michaels said:

Albermarle said:

uk1 said:

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?   

I think a further option for a few that is rarely considered is that it you genuinely have enough and you believe using all reasonable assumptions that you will always have enough it does present the option to take all of your cash out of all speculative harbours and put them into purely safe havens that offer no stress at all. 

I believe that although few in number many might be in this situation without realising it.  A good early indicator of this is if you currently have all your cash in non-speculative places and simply keep an uncomplicated spreadsheet that shows that even with decent spending you have more cash at any point in the current year than you did last year and before then perhaps you can live a stress free life and forget fund management.There are of course loads of "ifs" and "buts" but not having to track and fret about investing might actually extend life.

Good analysis, but I guess plenty of the regulars on here would get stressed knowing they were losing out to inflation and missing potential stock market returns , even though they did not need the money . Old habits die hard and for many investing  is one of their hobbies.

Inflation will be 6% plus by early next year - a few years like that and you must have started with a very big pot it not to be a problem - 6% inflation = a 6% investment loss.  Personally I couldn't live with that level of risk.

But that might not be the right advice for someone who is older than you and wealthier than you.  The point is that one view isn't right for all and the place of advice is to offer thoughts for the widest.  Some mistankly believe that their view is the view that is right for everyone.

You're missing the point. It's not about "advice" or "views", it's about why play the "game" once you've won.

There is no "safe haven" that guarantees your pot will not reduce in value in real terms. So if the "game" is preserving the value of your pot, you have to keep playing. You either take investment risk or inflation risk, or both, whatever you do. Obviously, it may be sensible to reduce risk, people will have views and give advice on that, but you can't eliminate risk. 

If the "game" is getting a guaranteed income for life, you can "win" that with an index linked annuity.

We've got to agree on the rules of this game and whether it involves preserving the value of a pot to pass on. The rules I go by in my plan are to guarantee a comfortable income and simply not worry about any of the remaining "unused" pot and leave it invested aggressively.

How have you achieved that "guaranteed comfortable income"?

By making and storing more than enough cash and assets than you will ever need. 

And how do you guarantee that cash and those assets will hold their real value? Or not drop enough that your "comfortable" income is no longer "comfortable"?

You really aren’t understanding.  

You are obsessed with protecting or increasing the value of the total asset pool.  Some do not need to but haven’t realised it, 

No, you aren't understanding. I'm not "obsessed" with anything. I'm making the point that you can't guarantee to have "more than enough cash and assets than you will ever need" unless you've found some way to guarantee they'll hold their value, or at least not reduce in value by so much that you now no longer have "enough". 

Yes, some people have more than enough cash than they will ever need. Someone could have more than enough income from DB and SPs to more than meet their needs, and also have say, £500k in cash savings, with no relatives that they wish to leave an inheritance to. If they leave it as cash it will lose money to inflation, but that may not bother them if they are unlikely to spend much of it anyway.

Some people in the same situation may invest it, and it may retain or increase it's value, but if they don't spend it or need to leave an inheritance, does it matter that it has retained or increased it's value?

But as you point out, you're still taking a risk with the £500k even if you leave it in cash. It may go down by less than equities, who knows, but in the current environment, it's almost certain to go down in value if in cash. Equities have more chance of keeping value in real terms.

But the whole point is that the risk doesn't matter to the pensioner in that example. If the value of the cash halves in value to £250k due to inflation, it doesn't matter to him as he is more than covered for his income needs by DB and SP pensions. As he is more than covered by his income, in that example he is likely to add excess income to his cash balance. 

The whole point of this thread was basically "why take risk when you don't need to". As you point out, holding cash is a risk. So the answer to "why take risk" (or "play the game") is basically you have to (unless you buy an index linked annuity - and yes obviously you take the different risk that you don't get your money back).

Also, for someone with a DB pension with capped inflation increases, like nearly all private sector DB pensions, there is still a risk as pointed out above - a decade of 1970's inflation would halve its value with a 5% cap, so if that person has a spare half million it might be wise to invest in something that hedges high inflation. I'm not sure what, but almost certainly not cash!

The OP started the thread saying he had read the expression - "once you've won the game why keep playing" in relation to investing. 

If you hold cash, I agree it will lose value over time due to inflation - i.e. it is a fact that it will lose value over time, rather than a risk that it will lose value, as you know it's going to happen. The point I was trying to make in the example in my previous post, is that the retired couple with £500k cash on top of DB and SPs are not worried about the fact that their cash will lose value to inflation, as they have more than they will ever need, so they see no advantage in investing it. In that example I would say they have won the game, as they don't need to invest it.

Let's say in the same example, in addition to the DB and SPs which more than cover their spending, they had £5million in cash - would you still say they hadn't won the game because their DB pensions had a 5% cap? 

Hi,

May I make the well-intentioned observation that you are wasting your time in arguing with a poster that cannot accept that their opinion might not be relevant to everyone.  If you try and patiently explain this you will receive the demand that you disclose full details of your wealth in order to weaponise his reply.  It is simply pointless and a nil return effort.  Take heart in some understand fully our point and push on.

You read the title of the thread exactly as I have done. I simply pointed out as you have done that if you have genuinely "won the game" then you can shrug and not play and move on. It is a very fortunate place to be and my point is that some are in this postion but do not know it and understand their good fortune and have stress they needn't have.

In simple terms, I closed a successful busines and retired before I was 50.  I had an ex tax inspector as my accountant.  At the moment, my spendable cash is more at the end of each year than when I started.  Every year.  So in my very simple world my challenge isn't to increase my pot but to find more self-indulgent ways for my wife to spend faster against the background of a frugal and tough earlier life when she sacrificed to support my efforts.  Yes I have assets to cash if need be and they are fortunately much more than enough.  I needn't convince anyone else of this and I believe that there are a small number of people who may be in a similar situation but may not know it and that was my very simple point.  Hopefully those we genuinely hoped to help understand.

Push on.  Onwards and upwards,

There may well be people who are in a similarly enviable position to you, but the majority will find themselves a fair way short. With the demise of the traditional DB plan with it's forced lifetime of contributions from either employer, employee or a combination, many people just don't save enough to retire at SPA particularly in a low interest environment. So they look to the higher returns of the stock market with all the associated risk. I don't worry about the "winners", I worry about the vast majority who can maybe see the finish line up there ahead and must take on risk in an effort to get there. This last year and the current issues with gas prices and looming inflation should convince everyone that a plan needs to be robust...and it needs to be affordable too. I don't think that will be true for a lot of people and that maybe we will need to rethink retirement and change some current expectations or increase the SP so that it replaces more wage income as it does in most other developed nations (I won't hold my breath for that).

My Dad worked a blue collar job for ICI for 35 years and left with a good DB pension back in the 1970s. He and my Mum "won" just by working and paying the mortgage down and I think they were not out of the ordinary. Looking back from our DC world where retirement risk and cost have been largely shifted to the individual they were the "good ol'days".

Good post.  I very much share all of your concerns. 

Before I started my business I had a decent job in a large corporation.  Some years ago I made a rough calculation as to how much I'd contributed to my DB pension and how much it was worth.  It was nuts.  This opportunity will never happen again.

Normally all of us have been able to see some sort of way through things.  But I'd don't see it now. I do not see options that will cure this. Obviously people working until they drop is going to be an unavoidable part of the solution but it isn't a good one.  People taking on speculative risk another.  I am as glum as you are for subsequent generations and do not find their outlook for retirement attractive.

MK62

zagfles said:

bostonerimus said:

If we define winning as just having to never worry about retirement income again and minimizing risk then the checkered flag is going to be at different places for different people because we have different budgets. If your pot is large and you needs are few then you are closer to the finish line.

Indeed - for some couples the equivalent of the state pension x2 is enough - eg see the "squirreled nuts" thread.

Fair enough......but they won't stay a couple forever. While it's always possible they might check out together, the vast majority do not.......and while two people might get by with 18k, one getting by on 9k would be difficult......a fact sometimes overlooked.

bostonerimus

uk1 said:

bostonerimus said:

uk1 said:

Audaxer said:

zagfles said:

Audaxer said:

zagfles said:

Audaxer said:

zagfles said:

uk1 said:

zagfles said:

You uk1 said:

zagfles said:

bostonerimus said:

zagfles said:

uk1 said:

michaels said:

Albermarle said:

uk1 said:

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?   

I think a further option for a few that is rarely considered is that it you genuinely have enough and you believe using all reasonable assumptions that you will always have enough it does present the option to take all of your cash out of all speculative harbours and put them into purely safe havens that offer no stress at all. 

I believe that although few in number many might be in this situation without realising it.  A good early indicator of this is if you currently have all your cash in non-speculative places and simply keep an uncomplicated spreadsheet that shows that even with decent spending you have more cash at any point in the current year than you did last year and before then perhaps you can live a stress free life and forget fund management.There are of course loads of "ifs" and "buts" but not having to track and fret about investing might actually extend life.

Good analysis, but I guess plenty of the regulars on here would get stressed knowing they were losing out to inflation and missing potential stock market returns , even though they did not need the money . Old habits die hard and for many investing  is one of their hobbies.

Inflation will be 6% plus by early next year - a few years like that and you must have started with a very big pot it not to be a problem - 6% inflation = a 6% investment loss.  Personally I couldn't live with that level of risk.

But that might not be the right advice for someone who is older than you and wealthier than you.  The point is that one view isn't right for all and the place of advice is to offer thoughts for the widest.  Some mistankly believe that their view is the view that is right for everyone.

You're missing the point. It's not about "advice" or "views", it's about why play the "game" once you've won.

There is no "safe haven" that guarantees your pot will not reduce in value in real terms. So if the "game" is preserving the value of your pot, you have to keep playing. You either take investment risk or inflation risk, or both, whatever you do. Obviously, it may be sensible to reduce risk, people will have views and give advice on that, but you can't eliminate risk. 

If the "game" is getting a guaranteed income for life, you can "win" that with an index linked annuity.

We've got to agree on the rules of this game and whether it involves preserving the value of a pot to pass on. The rules I go by in my plan are to guarantee a comfortable income and simply not worry about any of the remaining "unused" pot and leave it invested aggressively.

How have you achieved that "guaranteed comfortable income"?

By making and storing more than enough cash and assets than you will ever need. 

And how do you guarantee that cash and those assets will hold their real value? Or not drop enough that your "comfortable" income is no longer "comfortable"?

You really aren’t understanding.  

You are obsessed with protecting or increasing the value of the total asset pool.  Some do not need to but haven’t realised it, 

No, you aren't understanding. I'm not "obsessed" with anything. I'm making the point that you can't guarantee to have "more than enough cash and assets than you will ever need" unless you've found some way to guarantee they'll hold their value, or at least not reduce in value by so much that you now no longer have "enough". 

Yes, some people have more than enough cash than they will ever need. Someone could have more than enough income from DB and SPs to more than meet their needs, and also have say, £500k in cash savings, with no relatives that they wish to leave an inheritance to. If they leave it as cash it will lose money to inflation, but that may not bother them if they are unlikely to spend much of it anyway.

Some people in the same situation may invest it, and it may retain or increase it's value, but if they don't spend it or need to leave an inheritance, does it matter that it has retained or increased it's value?

But as you point out, you're still taking a risk with the £500k even if you leave it in cash. It may go down by less than equities, who knows, but in the current environment, it's almost certain to go down in value if in cash. Equities have more chance of keeping value in real terms.

But the whole point is that the risk doesn't matter to the pensioner in that example. If the value of the cash halves in value to £250k due to inflation, it doesn't matter to him as he is more than covered for his income needs by DB and SP pensions. As he is more than covered by his income, in that example he is likely to add excess income to his cash balance. 

The whole point of this thread was basically "why take risk when you don't need to". As you point out, holding cash is a risk. So the answer to "why take risk" (or "play the game") is basically you have to (unless you buy an index linked annuity - and yes obviously you take the different risk that you don't get your money back).

Also, for someone with a DB pension with capped inflation increases, like nearly all private sector DB pensions, there is still a risk as pointed out above - a decade of 1970's inflation would halve its value with a 5% cap, so if that person has a spare half million it might be wise to invest in something that hedges high inflation. I'm not sure what, but almost certainly not cash!

The OP started the thread saying he had read the expression - "once you've won the game why keep playing" in relation to investing. 

If you hold cash, I agree it will lose value over time due to inflation - i.e. it is a fact that it will lose value over time, rather than a risk that it will lose value, as you know it's going to happen. The point I was trying to make in the example in my previous post, is that the retired couple with £500k cash on top of DB and SPs are not worried about the fact that their cash will lose value to inflation, as they have more than they will ever need, so they see no advantage in investing it. In that example I would say they have won the game, as they don't need to invest it.

Let's say in the same example, in addition to the DB and SPs which more than cover their spending, they had £5million in cash - would you still say they hadn't won the game because their DB pensions had a 5% cap? 

Hi,

May I make the well-intentioned observation that you are wasting your time in arguing with a poster that cannot accept that their opinion might not be relevant to everyone.  If you try and patiently explain this you will receive the demand that you disclose full details of your wealth in order to weaponise his reply.  It is simply pointless and a nil return effort.  Take heart in some understand fully our point and push on.

You read the title of the thread exactly as I have done. I simply pointed out as you have done that if you have genuinely "won the game" then you can shrug and not play and move on. It is a very fortunate place to be and my point is that some are in this postion but do not know it and understand their good fortune and have stress they needn't have.

In simple terms, I closed a successful busines and retired before I was 50.  I had an ex tax inspector as my accountant.  At the moment, my spendable cash is more at the end of each year than when I started.  Every year.  So in my very simple world my challenge isn't to increase my pot but to find more self-indulgent ways for my wife to spend faster against the background of a frugal and tough earlier life when she sacrificed to support my efforts.  Yes I have assets to cash if need be and they are fortunately much more than enough.  I needn't convince anyone else of this and I believe that there are a small number of people who may be in a similar situation but may not know it and that was my very simple point.  Hopefully those we genuinely hoped to help understand.

Push on.  Onwards and upwards,

There may well be people who are in a similarly enviable position to you, but the majority will find themselves a fair way short. With the demise of the traditional DB plan with it's forced lifetime of contributions from either employer, employee or a combination, many people just don't save enough to retire at SPA particularly in a low interest environment. So they look to the higher returns of the stock market with all the associated risk. I don't worry about the "winners", I worry about the vast majority who can maybe see the finish line up there ahead and must take on risk in an effort to get there. This last year and the current issues with gas prices and looming inflation should convince everyone that a plan needs to be robust...and it needs to be affordable too. I don't think that will be true for a lot of people and that maybe we will need to rethink retirement and change some current expectations or increase the SP so that it replaces more wage income as it does in most other developed nations (I won't hold my breath for that).

My Dad worked a blue collar job for ICI for 35 years and left with a good DB pension back in the 1970s. He and my Mum "won" just by working and paying the mortgage down and I think they were not out of the ordinary. Looking back from our DC world where retirement risk and cost have been largely shifted to the individual they were the "good ol'days".

Good post.  I very much share all of your concerns. 

Before I started my business I had a decent job in a large corporation.  Some years ago I made a rough calculation as to how much I'd contributed to my DB pension and how much it was worth.  It was nuts.  This opportunity will never happen again.

Normally all of us have been able to see some sort of way through things.  But I'd don't see it now. I do not see options that will cure this. Obviously people working until they drop is going to be an unavoidable part of the solution but it isn't a good one.  People taking on speculative risk another.  I am as glum as you are for subsequent generations and do not find their outlook for retirement attractive.

Your last paragraph is why I want to help my grand nieces and nephews. My nieces are all married and own houses...you can do that in Hull and Nelson...and they have two incomes coming in from good jobs, but they find it hard some months, especially now that they have the kids. The last year was a big wake up call because they were both looking at layoffs. If I do one thing I want to help my grand nieces and nephews pay for any further education they do and get out with zero debt so they don't have to worry about ever having to pay that back. 

zagfles

MK62 said:

zagfles said:

bostonerimus said:

If we define winning as just having to never worry about retirement income again and minimizing risk then the checkered flag is going to be at different places for different people because we have different budgets. If your pot is large and you needs are few then you are closer to the finish line.

Indeed - for some couples the equivalent of the state pension x2 is enough - eg see the "squirreled nuts" thread.

Fair enough......but they won't stay a couple forever. While it's always possible they might check out together, the vast majority do not.......and while two people might get by with 18k, one getting by on 9k would be difficult......a fact sometimes overlooked.

Indeed, which is why I said the equivalent of.

zagfles

bostonerimus said:

uk1 said:

bostonerimus said:

uk1 said:

Audaxer said:

zagfles said:

Audaxer said:

zagfles said:

Audaxer said:

zagfles said:

uk1 said:

zagfles said:

You uk1 said:

zagfles said:

bostonerimus said:

zagfles said:

uk1 said:

michaels said:

Albermarle said:

uk1 said:

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?   

I think a further option for a few that is rarely considered is that it you genuinely have enough and you believe using all reasonable assumptions that you will always have enough it does present the option to take all of your cash out of all speculative harbours and put them into purely safe havens that offer no stress at all. 

I believe that although few in number many might be in this situation without realising it.  A good early indicator of this is if you currently have all your cash in non-speculative places and simply keep an uncomplicated spreadsheet that shows that even with decent spending you have more cash at any point in the current year than you did last year and before then perhaps you can live a stress free life and forget fund management.There are of course loads of "ifs" and "buts" but not having to track and fret about investing might actually extend life.

Good analysis, but I guess plenty of the regulars on here would get stressed knowing they were losing out to inflation and missing potential stock market returns , even though they did not need the money . Old habits die hard and for many investing  is one of their hobbies.

Inflation will be 6% plus by early next year - a few years like that and you must have started with a very big pot it not to be a problem - 6% inflation = a 6% investment loss.  Personally I couldn't live with that level of risk.

But that might not be the right advice for someone who is older than you and wealthier than you.  The point is that one view isn't right for all and the place of advice is to offer thoughts for the widest.  Some mistankly believe that their view is the view that is right for everyone.

You're missing the point. It's not about "advice" or "views", it's about why play the "game" once you've won.

There is no "safe haven" that guarantees your pot will not reduce in value in real terms. So if the "game" is preserving the value of your pot, you have to keep playing. You either take investment risk or inflation risk, or both, whatever you do. Obviously, it may be sensible to reduce risk, people will have views and give advice on that, but you can't eliminate risk. 

If the "game" is getting a guaranteed income for life, you can "win" that with an index linked annuity.

We've got to agree on the rules of this game and whether it involves preserving the value of a pot to pass on. The rules I go by in my plan are to guarantee a comfortable income and simply not worry about any of the remaining "unused" pot and leave it invested aggressively.

How have you achieved that "guaranteed comfortable income"?

By making and storing more than enough cash and assets than you will ever need. 

And how do you guarantee that cash and those assets will hold their real value? Or not drop enough that your "comfortable" income is no longer "comfortable"?

You really aren’t understanding.  

You are obsessed with protecting or increasing the value of the total asset pool.  Some do not need to but haven’t realised it, 

No, you aren't understanding. I'm not "obsessed" with anything. I'm making the point that you can't guarantee to have "more than enough cash and assets than you will ever need" unless you've found some way to guarantee they'll hold their value, or at least not reduce in value by so much that you now no longer have "enough". 

Yes, some people have more than enough cash than they will ever need. Someone could have more than enough income from DB and SPs to more than meet their needs, and also have say, £500k in cash savings, with no relatives that they wish to leave an inheritance to. If they leave it as cash it will lose money to inflation, but that may not bother them if they are unlikely to spend much of it anyway.

Some people in the same situation may invest it, and it may retain or increase it's value, but if they don't spend it or need to leave an inheritance, does it matter that it has retained or increased it's value?

But as you point out, you're still taking a risk with the £500k even if you leave it in cash. It may go down by less than equities, who knows, but in the current environment, it's almost certain to go down in value if in cash. Equities have more chance of keeping value in real terms.

But the whole point is that the risk doesn't matter to the pensioner in that example. If the value of the cash halves in value to £250k due to inflation, it doesn't matter to him as he is more than covered for his income needs by DB and SP pensions. As he is more than covered by his income, in that example he is likely to add excess income to his cash balance. 

The whole point of this thread was basically "why take risk when you don't need to". As you point out, holding cash is a risk. So the answer to "why take risk" (or "play the game") is basically you have to (unless you buy an index linked annuity - and yes obviously you take the different risk that you don't get your money back).

Also, for someone with a DB pension with capped inflation increases, like nearly all private sector DB pensions, there is still a risk as pointed out above - a decade of 1970's inflation would halve its value with a 5% cap, so if that person has a spare half million it might be wise to invest in something that hedges high inflation. I'm not sure what, but almost certainly not cash!

The OP started the thread saying he had read the expression - "once you've won the game why keep playing" in relation to investing. 

If you hold cash, I agree it will lose value over time due to inflation - i.e. it is a fact that it will lose value over time, rather than a risk that it will lose value, as you know it's going to happen. The point I was trying to make in the example in my previous post, is that the retired couple with £500k cash on top of DB and SPs are not worried about the fact that their cash will lose value to inflation, as they have more than they will ever need, so they see no advantage in investing it. In that example I would say they have won the game, as they don't need to invest it.

Let's say in the same example, in addition to the DB and SPs which more than cover their spending, they had £5million in cash - would you still say they hadn't won the game because their DB pensions had a 5% cap? 

Hi,

May I make the well-intentioned observation that you are wasting your time in arguing with a poster that cannot accept that their opinion might not be relevant to everyone.  If you try and patiently explain this you will receive the demand that you disclose full details of your wealth in order to weaponise his reply.  It is simply pointless and a nil return effort.  Take heart in some understand fully our point and push on.

You read the title of the thread exactly as I have done. I simply pointed out as you have done that if you have genuinely "won the game" then you can shrug and not play and move on. It is a very fortunate place to be and my point is that some are in this postion but do not know it and understand their good fortune and have stress they needn't have.

In simple terms, I closed a successful busines and retired before I was 50.  I had an ex tax inspector as my accountant.  At the moment, my spendable cash is more at the end of each year than when I started.  Every year.  So in my very simple world my challenge isn't to increase my pot but to find more self-indulgent ways for my wife to spend faster against the background of a frugal and tough earlier life when she sacrificed to support my efforts.  Yes I have assets to cash if need be and they are fortunately much more than enough.  I needn't convince anyone else of this and I believe that there are a small number of people who may be in a similar situation but may not know it and that was my very simple point.  Hopefully those we genuinely hoped to help understand.

Push on.  Onwards and upwards,

There may well be people who are in a similarly enviable position to you, but the majority will find themselves a fair way short. With the demise of the traditional DB plan with it's forced lifetime of contributions from either employer, employee or a combination, many people just don't save enough to retire at SPA particularly in a low interest environment. So they look to the higher returns of the stock market with all the associated risk. I don't worry about the "winners", I worry about the vast majority who can maybe see the finish line up there ahead and must take on risk in an effort to get there. This last year and the current issues with gas prices and looming inflation should convince everyone that a plan needs to be robust...and it needs to be affordable too. I don't think that will be true for a lot of people and that maybe we will need to rethink retirement and change some current expectations or increase the SP so that it replaces more wage income as it does in most other developed nations (I won't hold my breath for that).

My Dad worked a blue collar job for ICI for 35 years and left with a good DB pension back in the 1970s. He and my Mum "won" just by working and paying the mortgage down and I think they were not out of the ordinary. Looking back from our DC world where retirement risk and cost have been largely shifted to the individual they were the "good ol'days".

Good post.  I very much share all of your concerns. 

Before I started my business I had a decent job in a large corporation.  Some years ago I made a rough calculation as to how much I'd contributed to my DB pension and how much it was worth.  It was nuts.  This opportunity will never happen again.

Normally all of us have been able to see some sort of way through things.  But I'd don't see it now. I do not see options that will cure this. Obviously people working until they drop is going to be an unavoidable part of the solution but it isn't a good one.  People taking on speculative risk another.  I am as glum as you are for subsequent generations and do not find their outlook for retirement attractive.

Your last paragraph is why I want to help my grand nieces and nephews. My nieces are all married and own houses...you can do that in Hull and Nelson...and they have two incomes coming in from good jobs, but they find it hard some months, especially now that they have the kids. The last year was a big wake up call because they were both looking at layoffs. If I do one thing I want to help my grand nieces and nephews pay for any further education they do and get out with zero debt so they don't have to worry about ever having to pay that back. 

Student debt isn't real debt, it basically works as a graduate tax for the vast majority. IMO it's far better financially to help them with a house deposit when the time comes, so reducing their mortgage as they'd get better rates with a lower LTV, plus obviously a smaller mortgage. Freeing up income which they could use towards pension contributions, lowering the repayment of student debt if sal sac! Obviously only works if they're good with money...

bostonerimus

zagfles said:

bostonerimus said:

uk1 said:

bostonerimus said:

uk1 said:

Audaxer said:

zagfles said:

Audaxer said:

zagfles said:

Audaxer said:

zagfles said:

uk1 said:

zagfles said:

You uk1 said:

zagfles said:

bostonerimus said:

zagfles said:

uk1 said:

michaels said:

Albermarle said:

uk1 said:

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?   

I think a further option for a few that is rarely considered is that it you genuinely have enough and you believe using all reasonable assumptions that you will always have enough it does present the option to take all of your cash out of all speculative harbours and put them into purely safe havens that offer no stress at all. 

I believe that although few in number many might be in this situation without realising it.  A good early indicator of this is if you currently have all your cash in non-speculative places and simply keep an uncomplicated spreadsheet that shows that even with decent spending you have more cash at any point in the current year than you did last year and before then perhaps you can live a stress free life and forget fund management.There are of course loads of "ifs" and "buts" but not having to track and fret about investing might actually extend life.

Good analysis, but I guess plenty of the regulars on here would get stressed knowing they were losing out to inflation and missing potential stock market returns , even though they did not need the money . Old habits die hard and for many investing  is one of their hobbies.

Inflation will be 6% plus by early next year - a few years like that and you must have started with a very big pot it not to be a problem - 6% inflation = a 6% investment loss.  Personally I couldn't live with that level of risk.

But that might not be the right advice for someone who is older than you and wealthier than you.  The point is that one view isn't right for all and the place of advice is to offer thoughts for the widest.  Some mistankly believe that their view is the view that is right for everyone.

You're missing the point. It's not about "advice" or "views", it's about why play the "game" once you've won.

There is no "safe haven" that guarantees your pot will not reduce in value in real terms. So if the "game" is preserving the value of your pot, you have to keep playing. You either take investment risk or inflation risk, or both, whatever you do. Obviously, it may be sensible to reduce risk, people will have views and give advice on that, but you can't eliminate risk. 

If the "game" is getting a guaranteed income for life, you can "win" that with an index linked annuity.

We've got to agree on the rules of this game and whether it involves preserving the value of a pot to pass on. The rules I go by in my plan are to guarantee a comfortable income and simply not worry about any of the remaining "unused" pot and leave it invested aggressively.

How have you achieved that "guaranteed comfortable income"?

By making and storing more than enough cash and assets than you will ever need. 

And how do you guarantee that cash and those assets will hold their real value? Or not drop enough that your "comfortable" income is no longer "comfortable"?

You really aren’t understanding.  

You are obsessed with protecting or increasing the value of the total asset pool.  Some do not need to but haven’t realised it, 

No, you aren't understanding. I'm not "obsessed" with anything. I'm making the point that you can't guarantee to have "more than enough cash and assets than you will ever need" unless you've found some way to guarantee they'll hold their value, or at least not reduce in value by so much that you now no longer have "enough". 

Yes, some people have more than enough cash than they will ever need. Someone could have more than enough income from DB and SPs to more than meet their needs, and also have say, £500k in cash savings, with no relatives that they wish to leave an inheritance to. If they leave it as cash it will lose money to inflation, but that may not bother them if they are unlikely to spend much of it anyway.

Some people in the same situation may invest it, and it may retain or increase it's value, but if they don't spend it or need to leave an inheritance, does it matter that it has retained or increased it's value?

But as you point out, you're still taking a risk with the £500k even if you leave it in cash. It may go down by less than equities, who knows, but in the current environment, it's almost certain to go down in value if in cash. Equities have more chance of keeping value in real terms.

But the whole point is that the risk doesn't matter to the pensioner in that example. If the value of the cash halves in value to £250k due to inflation, it doesn't matter to him as he is more than covered for his income needs by DB and SP pensions. As he is more than covered by his income, in that example he is likely to add excess income to his cash balance. 

The whole point of this thread was basically "why take risk when you don't need to". As you point out, holding cash is a risk. So the answer to "why take risk" (or "play the game") is basically you have to (unless you buy an index linked annuity - and yes obviously you take the different risk that you don't get your money back).

Also, for someone with a DB pension with capped inflation increases, like nearly all private sector DB pensions, there is still a risk as pointed out above - a decade of 1970's inflation would halve its value with a 5% cap, so if that person has a spare half million it might be wise to invest in something that hedges high inflation. I'm not sure what, but almost certainly not cash!

The OP started the thread saying he had read the expression - "once you've won the game why keep playing" in relation to investing. 

If you hold cash, I agree it will lose value over time due to inflation - i.e. it is a fact that it will lose value over time, rather than a risk that it will lose value, as you know it's going to happen. The point I was trying to make in the example in my previous post, is that the retired couple with £500k cash on top of DB and SPs are not worried about the fact that their cash will lose value to inflation, as they have more than they will ever need, so they see no advantage in investing it. In that example I would say they have won the game, as they don't need to invest it.

Let's say in the same example, in addition to the DB and SPs which more than cover their spending, they had £5million in cash - would you still say they hadn't won the game because their DB pensions had a 5% cap? 

Hi,

May I make the well-intentioned observation that you are wasting your time in arguing with a poster that cannot accept that their opinion might not be relevant to everyone.  If you try and patiently explain this you will receive the demand that you disclose full details of your wealth in order to weaponise his reply.  It is simply pointless and a nil return effort.  Take heart in some understand fully our point and push on.

You read the title of the thread exactly as I have done. I simply pointed out as you have done that if you have genuinely "won the game" then you can shrug and not play and move on. It is a very fortunate place to be and my point is that some are in this postion but do not know it and understand their good fortune and have stress they needn't have.

In simple terms, I closed a successful busines and retired before I was 50.  I had an ex tax inspector as my accountant.  At the moment, my spendable cash is more at the end of each year than when I started.  Every year.  So in my very simple world my challenge isn't to increase my pot but to find more self-indulgent ways for my wife to spend faster against the background of a frugal and tough earlier life when she sacrificed to support my efforts.  Yes I have assets to cash if need be and they are fortunately much more than enough.  I needn't convince anyone else of this and I believe that there are a small number of people who may be in a similar situation but may not know it and that was my very simple point.  Hopefully those we genuinely hoped to help understand.

Push on.  Onwards and upwards,

There may well be people who are in a similarly enviable position to you, but the majority will find themselves a fair way short. With the demise of the traditional DB plan with it's forced lifetime of contributions from either employer, employee or a combination, many people just don't save enough to retire at SPA particularly in a low interest environment. So they look to the higher returns of the stock market with all the associated risk. I don't worry about the "winners", I worry about the vast majority who can maybe see the finish line up there ahead and must take on risk in an effort to get there. This last year and the current issues with gas prices and looming inflation should convince everyone that a plan needs to be robust...and it needs to be affordable too. I don't think that will be true for a lot of people and that maybe we will need to rethink retirement and change some current expectations or increase the SP so that it replaces more wage income as it does in most other developed nations (I won't hold my breath for that).

My Dad worked a blue collar job for ICI for 35 years and left with a good DB pension back in the 1970s. He and my Mum "won" just by working and paying the mortgage down and I think they were not out of the ordinary. Looking back from our DC world where retirement risk and cost have been largely shifted to the individual they were the "good ol'days".

Good post.  I very much share all of your concerns. 

Before I started my business I had a decent job in a large corporation.  Some years ago I made a rough calculation as to how much I'd contributed to my DB pension and how much it was worth.  It was nuts.  This opportunity will never happen again.

Normally all of us have been able to see some sort of way through things.  But I'd don't see it now. I do not see options that will cure this. Obviously people working until they drop is going to be an unavoidable part of the solution but it isn't a good one.  People taking on speculative risk another.  I am as glum as you are for subsequent generations and do not find their outlook for retirement attractive.

Your last paragraph is why I want to help my grand nieces and nephews. My nieces are all married and own houses...you can do that in Hull and Nelson...and they have two incomes coming in from good jobs, but they find it hard some months, especially now that they have the kids. The last year was a big wake up call because they were both looking at layoffs. If I do one thing I want to help my grand nieces and nephews pay for any further education they do and get out with zero debt so they don't have to worry about ever having to pay that back. 

Student debt isn't real debt, it basically works as a graduate tax for the vast majority. IMO it's far better financially to help them with a house deposit when the time comes, so reducing their mortgage as they'd get better rates with a lower LTV, plus obviously a smaller mortgage. Freeing up income which they could use towards pension contributions, lowering the repayment of student debt if sal sac! Obviously only works if they're good with money...

I don't want them ever to limit the amount they earn to avoid payments or live on low wages for 30 years to get out of the obligation. Debt or tax I don't want them to worry. I'll also help with house deposits, I'll probably match what they can come up with.

zagfles

bostonerimus said:

zagfles said:

bostonerimus said:

uk1 said:

bostonerimus said:

uk1 said:

Audaxer said:

zagfles said:

Audaxer said:

zagfles said:

Audaxer said:

zagfles said:

uk1 said:

zagfles said:

You uk1 said:

zagfles said:

bostonerimus said:

zagfles said:

uk1 said:

michaels said:

Albermarle said:

uk1 said:

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?   

I think a further option for a few that is rarely considered is that it you genuinely have enough and you believe using all reasonable assumptions that you will always have enough it does present the option to take all of your cash out of all speculative harbours and put them into purely safe havens that offer no stress at all. 

I believe that although few in number many might be in this situation without realising it.  A good early indicator of this is if you currently have all your cash in non-speculative places and simply keep an uncomplicated spreadsheet that shows that even with decent spending you have more cash at any point in the current year than you did last year and before then perhaps you can live a stress free life and forget fund management.There are of course loads of "ifs" and "buts" but not having to track and fret about investing might actually extend life.

Good analysis, but I guess plenty of the regulars on here would get stressed knowing they were losing out to inflation and missing potential stock market returns , even though they did not need the money . Old habits die hard and for many investing  is one of their hobbies.

Inflation will be 6% plus by early next year - a few years like that and you must have started with a very big pot it not to be a problem - 6% inflation = a 6% investment loss.  Personally I couldn't live with that level of risk.

But that might not be the right advice for someone who is older than you and wealthier than you.  The point is that one view isn't right for all and the place of advice is to offer thoughts for the widest.  Some mistankly believe that their view is the view that is right for everyone.

You're missing the point. It's not about "advice" or "views", it's about why play the "game" once you've won.

There is no "safe haven" that guarantees your pot will not reduce in value in real terms. So if the "game" is preserving the value of your pot, you have to keep playing. You either take investment risk or inflation risk, or both, whatever you do. Obviously, it may be sensible to reduce risk, people will have views and give advice on that, but you can't eliminate risk. 

If the "game" is getting a guaranteed income for life, you can "win" that with an index linked annuity.

We've got to agree on the rules of this game and whether it involves preserving the value of a pot to pass on. The rules I go by in my plan are to guarantee a comfortable income and simply not worry about any of the remaining "unused" pot and leave it invested aggressively.

How have you achieved that "guaranteed comfortable income"?

By making and storing more than enough cash and assets than you will ever need. 

And how do you guarantee that cash and those assets will hold their real value? Or not drop enough that your "comfortable" income is no longer "comfortable"?

You really aren’t understanding.  

You are obsessed with protecting or increasing the value of the total asset pool.  Some do not need to but haven’t realised it, 

No, you aren't understanding. I'm not "obsessed" with anything. I'm making the point that you can't guarantee to have "more than enough cash and assets than you will ever need" unless you've found some way to guarantee they'll hold their value, or at least not reduce in value by so much that you now no longer have "enough". 

Yes, some people have more than enough cash than they will ever need. Someone could have more than enough income from DB and SPs to more than meet their needs, and also have say, £500k in cash savings, with no relatives that they wish to leave an inheritance to. If they leave it as cash it will lose money to inflation, but that may not bother them if they are unlikely to spend much of it anyway.

Some people in the same situation may invest it, and it may retain or increase it's value, but if they don't spend it or need to leave an inheritance, does it matter that it has retained or increased it's value?

But as you point out, you're still taking a risk with the £500k even if you leave it in cash. It may go down by less than equities, who knows, but in the current environment, it's almost certain to go down in value if in cash. Equities have more chance of keeping value in real terms.

But the whole point is that the risk doesn't matter to the pensioner in that example. If the value of the cash halves in value to £250k due to inflation, it doesn't matter to him as he is more than covered for his income needs by DB and SP pensions. As he is more than covered by his income, in that example he is likely to add excess income to his cash balance. 

The whole point of this thread was basically "why take risk when you don't need to". As you point out, holding cash is a risk. So the answer to "why take risk" (or "play the game") is basically you have to (unless you buy an index linked annuity - and yes obviously you take the different risk that you don't get your money back).

Also, for someone with a DB pension with capped inflation increases, like nearly all private sector DB pensions, there is still a risk as pointed out above - a decade of 1970's inflation would halve its value with a 5% cap, so if that person has a spare half million it might be wise to invest in something that hedges high inflation. I'm not sure what, but almost certainly not cash!

The OP started the thread saying he had read the expression - "once you've won the game why keep playing" in relation to investing. 

If you hold cash, I agree it will lose value over time due to inflation - i.e. it is a fact that it will lose value over time, rather than a risk that it will lose value, as you know it's going to happen. The point I was trying to make in the example in my previous post, is that the retired couple with £500k cash on top of DB and SPs are not worried about the fact that their cash will lose value to inflation, as they have more than they will ever need, so they see no advantage in investing it. In that example I would say they have won the game, as they don't need to invest it.

Let's say in the same example, in addition to the DB and SPs which more than cover their spending, they had £5million in cash - would you still say they hadn't won the game because their DB pensions had a 5% cap? 

Hi,

May I make the well-intentioned observation that you are wasting your time in arguing with a poster that cannot accept that their opinion might not be relevant to everyone.  If you try and patiently explain this you will receive the demand that you disclose full details of your wealth in order to weaponise his reply.  It is simply pointless and a nil return effort.  Take heart in some understand fully our point and push on.

You read the title of the thread exactly as I have done. I simply pointed out as you have done that if you have genuinely "won the game" then you can shrug and not play and move on. It is a very fortunate place to be and my point is that some are in this postion but do not know it and understand their good fortune and have stress they needn't have.

In simple terms, I closed a successful busines and retired before I was 50.  I had an ex tax inspector as my accountant.  At the moment, my spendable cash is more at the end of each year than when I started.  Every year.  So in my very simple world my challenge isn't to increase my pot but to find more self-indulgent ways for my wife to spend faster against the background of a frugal and tough earlier life when she sacrificed to support my efforts.  Yes I have assets to cash if need be and they are fortunately much more than enough.  I needn't convince anyone else of this and I believe that there are a small number of people who may be in a similar situation but may not know it and that was my very simple point.  Hopefully those we genuinely hoped to help understand.

Push on.  Onwards and upwards,

There may well be people who are in a similarly enviable position to you, but the majority will find themselves a fair way short. With the demise of the traditional DB plan with it's forced lifetime of contributions from either employer, employee or a combination, many people just don't save enough to retire at SPA particularly in a low interest environment. So they look to the higher returns of the stock market with all the associated risk. I don't worry about the "winners", I worry about the vast majority who can maybe see the finish line up there ahead and must take on risk in an effort to get there. This last year and the current issues with gas prices and looming inflation should convince everyone that a plan needs to be robust...and it needs to be affordable too. I don't think that will be true for a lot of people and that maybe we will need to rethink retirement and change some current expectations or increase the SP so that it replaces more wage income as it does in most other developed nations (I won't hold my breath for that).

My Dad worked a blue collar job for ICI for 35 years and left with a good DB pension back in the 1970s. He and my Mum "won" just by working and paying the mortgage down and I think they were not out of the ordinary. Looking back from our DC world where retirement risk and cost have been largely shifted to the individual they were the "good ol'days".

Good post.  I very much share all of your concerns. 

Before I started my business I had a decent job in a large corporation.  Some years ago I made a rough calculation as to how much I'd contributed to my DB pension and how much it was worth.  It was nuts.  This opportunity will never happen again.

Normally all of us have been able to see some sort of way through things.  But I'd don't see it now. I do not see options that will cure this. Obviously people working until they drop is going to be an unavoidable part of the solution but it isn't a good one.  People taking on speculative risk another.  I am as glum as you are for subsequent generations and do not find their outlook for retirement attractive.

Your last paragraph is why I want to help my grand nieces and nephews. My nieces are all married and own houses...you can do that in Hull and Nelson...and they have two incomes coming in from good jobs, but they find it hard some months, especially now that they have the kids. The last year was a big wake up call because they were both looking at layoffs. If I do one thing I want to help my grand nieces and nephews pay for any further education they do and get out with zero debt so they don't have to worry about ever having to pay that back. 

Student debt isn't real debt, it basically works as a graduate tax for the vast majority. IMO it's far better financially to help them with a house deposit when the time comes, so reducing their mortgage as they'd get better rates with a lower LTV, plus obviously a smaller mortgage. Freeing up income which they could use towards pension contributions, lowering the repayment of student debt if sal sac! Obviously only works if they're good with money...

I don't want them ever to limit the amount they earn to avoid payments or live on low wages for 30 years to get out of the obligation. Debt or tax I don't want them to worry. I'll also help with house deposits, I'll probably match what they can come up with.

You think someone is going to deliberately "limit the amount they earn" to avoid paying back student loan?? Do you think paying income tax causes people to "limit the amount they earn"?

"No boss, don't give me that £1000 payrise, I'll have to pay £90 more on my student loan"

The vast majority won't pay the full loan back, not because they're reluctant to earn a lot, because it requires a very high paid job to do so. See https://www.moneysavingexpert.com/students/repay-post-2012-student-loan/

But if they can divert money from paying their mortgage to paying into a pension, because they've had help with the deposit and so have a smaller mortgage, they'll lower not only their tax but their student loan repayments, so I think it's usually more beneficial to help them with a house deposit than to pay their uni fees and living costs. Of course you could do both but why not go 100% for the more efficient method (whichever one you happen to think it is).