Once you've "won the game"

Diplodicus

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?   

 

Imo "winning the game" is an outmoded concept. Mostly, the decumulation proposition is legacy: for most of our lives, we thought our pensions would cushion our glidepath to the cemetery, with nothing left over. The financial services industry were very happy to furnish this expectation, for obvious reason.  Now "pension p*o*r*n" is all the rage as a vehicle for handing down a legacy. For many, it vies with their house as their principal asset.

It's funny, nobody told Warren Buffet to get ready for the rocking chair twenty years ago.
In our modest way, many of us feel the same way now. And, statistically, although we are all headed for the same health outcome, fortune favours the brave.

Audaxer

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?

The title says you haven't started playing the game, but in a way you have already won the game thanks to your savings and inheritance, if it means that you can already have a comfortable retirement for over 35 years without investing. However I do think you are right to consider investing rather than keep it all in savings. I would try and learn as much as you can about investing on these forums and sites like Monevator, so that you at least know the right questions to ask your IFA and you don't get charged excessive fees.  

Daniel54

bostonerimus said:

Audaxer said:

bostonerimus said:

That then argues that you have enough money and income sources that you don't have to worry about the stock market and rather than de-risking you can invest aggressively.

That's true, and some people will invest more aggressively in these circumstances, but I would ask what the point is unless the aim is to try to build a bigger and bigger pot to leave as inheritance? 

"What's the point"...that's an existential question that everyone needs to think about. For me it is to live a simple and enjoyable life and to leave money to my heirs and some charities. I've chosen to take more risk than most retirees in an effort to maximize the money I can either give away or leave to my heirs. In a way my heirs are taking the risk, not me.

My DBs and SP give me more than enough to live off ,with a healthy cash buffer and S&S ISAs on top..Whether that would be enough for others is a question for them.

Whilst I would not say I am investing aggressively,I am certainly investing further up the risk scale than if I did not have the fixed inflation linked income

"What's the point" - well,I am giving more to charity ,more to my children both from IHT free monthly out of income and in annual cash dollops, with fingers crossed I live for a further seven years.

So not dissimilar to you.

Winning the game means nothing more to me than meaning I don't have to worry about income and can see no way of exhausting my savings other than giving them away - and even then I have the value of the house !

bostonerimus

Thrugelmir said:

bostonerimus said:

Thrugelmir said:

bostonerimus said:

"Winning the game" can mean different things to different people. Is it having 1M in the stock market and needing 30k or 40k each year or retiring with a DB pension? If you can genuinely not worry about having enough income for your entire retirement then I think you have "won the game" on your terms. That then argues that you have enough money and income sources that you don't have to worry about the stock market and rather than de-risking you can invest aggressively.

Investors that are aggressive are more likely to gamblers by nature. Very easy to lose money on the markets. As it is elsewhere. 

I'm only comfortable being so aggressive with my DC funds and other investments because it's no risk to my retirement. I was conservative going into retirement, ie paying off the mortgage and making sure I had stable sources of income. If I did not have that in place I would be de-risking.

Be interesting to see which strategies best ride the choppy waters that lie ahead. 

If you've "won" then the choppy waters and the result are of no interest. Some people will be in small boats and will be frantically adjusting the sales and others will be in big ships calmly gliding through the same waters...let's hope those folks aren't in the Titanic.

MK62

Malthusian said:

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.

The problem is of course that an inflation linked annuity is not actually guaranteed......if you check out after say 10 years, you've only got back a fraction of what you put in.....not really a guaranteed way of inflation protecting a pot of money, at least imho.

[Deleted User]

MK62 said:

Malthusian said:

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.

The problem is of course that an inflation linked annuity is not actually guaranteed......if you check out after say 10 years, you've only got back a fraction of what you put in.....not really a guaranteed way of inflation protecting a pot of money, at least imho.

It all depends on the objective for the game.  If you care about the number of golden coins in your chest or zeros in a bank account, then you are right. If the objective is to assure a certain level of life then you are wrong

MK62

Deleted_User said:

MK62 said:

Malthusian said:

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.

The problem is of course that an inflation linked annuity is not actually guaranteed......if you check out after say 10 years, you've only got back a fraction of what you put in.....not really a guaranteed way of inflation protecting a pot of money, at least imho.

It all depends on the objective for the game.  If you care about the number of golden coins in your chest or zeros in a bank account, then you are right. If the objective is to assure a certain level of life then you are wrong

Not sure how any annuity assures a certain level of life....😉......I assume you mean a certain level of income for life.
If the question is "Is there a guaranteed way to inflation protect a pot of money?", as it was here, then an inflation linked annuity is not such a way.....you can argue whether it's a sensible course of action....thats another debate.....but there is no way you can claim that such an annuity represents a guaranteed way to protect a pot of money from inflation, as it clearly does not.
If the question is "Is there a way to generate an inflation protected income stream for life, from a pot of money?" then an inflation linked annuity does that, as long as you can accept the level of income offered and the loss of ownership of your pot of money.

MK62

Interesting mathematical game.....

Assume a 60yo had access to an index linked savings account, into which he pays £100k (pot 1).

At the same time, he/she also buys an index linked annuity for £100k, at current levels, and pays the income from that (assume tax free) into another pot (pot 2) in the same savings account. How many years would it take before pot 2 overtakes pot 1?

In the above, pot 1 would represent a guaranteed way to protect £100k from inflation.....pot 2 represents the "buy an index linked annuity" approach.......

[Deleted User]

Protecting a pot of money is good for the pot.  Protecting a standard of living is good for retiree. All depends on priorities. 

Aside from that, index linked annuities are not competitively priced. You can buy a flat annuity or an annuity which escalates at a fixed rate.  And you would never start receiving payments at 60, even if you buy an annuity at that age. 

MK62

Deleted_User said:

Protecting a pot of money is good for the pot.  Protecting a standard of living is good for retiree. All depends on priorities.

That rather depends on how you define "protecting a standard of living"........If you are currently drawing say £15k from a pot, and are worried about the effects of inflation on your standard of living, then swapping that pot for annuity paying £10k a year, even if index linked, is a rather strange way of going about it imho.

Deleted_User said:

Aside from that, index linked annuities are not competitively priced. You can buy a flat annuity or an annuity which escalates at a fixed rate.  And you would never start receiving payments at 60, even if you buy an annuity at that age. 

I agree, RPI linked annuities aren't competitively priced, at the moment at least, unless the worst case scenario comes to pass, which the annuity provider has planned against and then priced such annuities accordingly.However, those are what were being talked about.......

As for flat rate annuities......there is no inflation protection in those at all - in the above scenario, that £15k might become £20k at the start......but assuming the purchaser makes 70, he/she might be regretting such a purchase by then.

Deferred annuities?.......perhaps, as long as you have alternative means to live off in the meantime......though I'm still not sure what inflation guarantees such an annuity would offer......

This all started with my post stating that there is currently no guaranteed way to protect a pot of money from the effects of inflation - that's not the same as saying there are no ways of doing it at all - they just aren't guaranteed, which is what the OP was asking. Equities are one possibility but nobody needs telling that this approach is not guaranteed....gilts...no....linker gilts...no....gold no....corporate bonds...no....retail savings...no...commodities....no.....lottery tickets, premium bonds et al...only if you win.... .

I'm happy to be corrected if someone knows of a guaranteed way of course.........if so it might well mean I've "won the game" too.....