Saving v Investing for older people

Prism

Apodemus said:

Millyonare said:

Think some older folks this winter will have to sell assets and de-retire to pay the bills. For example, sell a car, empty an ISA pot, go back to work part-time for John Lewis, etc. Selling, not investing.

Yep!  It's going to play havoc in the FIRE community! 

The current situation won't stress a retirement plan based on investments. It would need to continue for many more years and combined with a stock market crash or two for this to be a long term problem.

Rollinghome

Norman_Castle said:

Is there a good time to start investing? Obviously no one knows the future but are there patterns?

The best time is when you are very young and have years ahead to get over your mistakes. It gets harder as you get older and time isn't on your side.

There may also be times of increased opportunities, but all investors are playing the same game of buying when prices are low and selling when prices are high, many of them better equipped and with better knowledge than you, or I.  That makes life more complicated: if investors generally think the time is right to buy, that sends prices up.

You could try "technical analysis", which is a system that uses charts for finding buy and sell signals and much beloved by many private investors. But that has the same problems: if we all use a similar system, we're likely to get similar answers at the same time  - so that no one benefits.  You make the best returns when you bet against the market consensus, provided you are right and the market is wrong.  That way, you can win big or lose big.  Much safer is to regularly feed into trackers.

That said, there are old theories, or perhaps better called superstitions, about better times to invest that to a limited extent still seem to have some truth. The old adage of "Sell in May and go away, come back on St Leger day" still seems to have some truth, until it doesn't.  There's some data to show that stocks tend to languish during the summer before picking up around October. Similarly, with the "Santa Claus Rally" which may be self-fulfilling.  But then everyone is trying to grab the rally and get out before the fall, usually with the result you'd expect.

One strategy that does work is to buy after market falls, the difficulty being the possibility that prices are going to fall further.  Markets are always looking ahead to what we don't know for sure, what we do know is already in the price. Generally, it's best not to bet too heavily on being smarter than other investors.

Grumpy_chap

This thread is binary - saving v investing.
It really needs to be tertiary - saving v investing v spending.

Far too many senior people have good level of resource yet live excessively humble to the verge of discomfort because they won't spend.  I accept there are many seniors that do not have resources, but those that this thread is aimed at (with the consideration of saving or investing) also need to consider the need to spend. 
It means changing mindset from saving for the future to living for now and, almost inherently, those that have the choice of saving v investing, clearly previously had a saving mindset.
It is a massive change to accept that the total net assets at the end of the year might be lower than total net assets at the start of the year.

RG2015

Grumpy_chap said:

This thread is binary - saving v investing.
It really needs to be tertiary - saving v investing v spending.

Far too many senior people have good level of resource yet live excessively humble to the verge of discomfort because they won't spend.  I accept there are many seniors that do not have resources, but those that this thread is aimed at (with the consideration of saving or investing) also need to consider the need to spend. 
It means changing mindset from saving for the future to living for now and, almost inherently, those that have the choice of saving v investing, clearly previously had a saving mindset.
It is a massive change to accept that the total net assets at the end of the year might be lower than total net assets at the start of the year.

It's a choice. If people avoid spending to the verge of discomfort it is their decision.

I very rarely spend money on items I do not need. My OH used to be the opposite but appears to be acquiring my (bad) habits.

On the other hand, I have occasionally been  bullied encouraged into buying stuff for myself. 

It is a question of balance.

Apodemus

Prism said:

Apodemus said:

Millyonare said:

Think some older folks this winter will have to sell assets and de-retire to pay the bills. For example, sell a car, empty an ISA pot, go back to work part-time for John Lewis, etc. Selling, not investing.

Yep!  It's going to play havoc in the FIRE community! 

The current situation won't stress a retirement plan based on investments. It would need to continue for many more years and combined with a stock market crash or two for this to be a long term problem.

I'm not sure that is correct but perhaps it depends on what you mean by stress.  I'm not sure that many will have factored in double-digit inflation on the spending side and even a flat market could trigger the need to mitigate a sequence-of-returns risk.  Those who increased their bond exposure as retirement approached may be further hit.  And all this is before we take into account the potential risk of a reduction in dividend yields during a recession, which would hit those who are trying to retain capital and live off income or those selling accumulation units.  

Beddie

Grumpy_chap said:

This thread is binary - saving v investing.
It really needs to be tertiary - saving v investing v spending.

Far too many senior people have good level of resource yet live excessively humble to the verge of discomfort because they won't spend.  I accept there are many seniors that do not have resources, but those that this thread is aimed at (with the consideration of saving or investing) also need to consider the need to spend. 
It means changing mindset from saving for the future to living for now and, almost inherently, those that have the choice of saving v investing, clearly previously had a saving mindset.
It is a massive change to accept that the total net assets at the end of the year might be lower than total net assets at the start of the year.

I agree with you, for some people (me included) it does take a change of mindset to say it's okay to spend, there's no need to save so much or worry about the future. It's not easy. And of course one should not go too far the other way and spend the lot!

Rollinghome

Grumpy_chap said:

This thread is binary - saving v investing.
It really needs to be tertiary - saving v investing v spending.

Far too many senior people have good level of resource yet live excessively humble to the verge of discomfort because they won't spend.  I accept there are many seniors that do not have resources, but those that this thread is aimed at (with the consideration of saving or investing) also need to consider the need to spend. 
It means changing mindset from saving for the future to living for now and, almost inherently, those that have the choice of saving v investing, clearly previously had a saving mindset.
It is a massive change to accept that the total net assets at the end of the year might be lower than total net assets at the start of the year.

In times of financial uncertainty, people, young and old, will understandably tend to spend less, and high inflation creates that uncertainty. That feeds into recession to create further uncertainty.

coastline

Hard to answer really if you've already got enough invested why add more especially if you've already passed retirement age. I've got cash and investments . Things can go wrong in the equity route in 10 years . Need more time than that in my opinion . 1987 crash, 1998 currency crisis, 2000-2003 dot com crash, 2008 GFC, 2020 pandemic, now another crisis. Maybe a multi asset fund to smooth things out a bit ?
A couple of illustrations I've set up below using a 100% US equity fund. 1972-1980 and 2000-2010. In both cases you're withdrawing 3% annually . Interesting when you select the inflation adjusted tab under the Portfolio Growth chart. Where we get around 3 years of difficulty it can become a worry. ?

 Backtest Portfolio Asset Class Allocation (portfoliovisualizer.com)

Backtest Portfolio Asset Class Allocation (portfoliovisualizer.com)

If I had to do something with cash then I'd probably split it between cash savings accounts and Capital Gearing Trust which has a good track record of preserving capital.

Prism

Apodemus said:

Prism said:

Apodemus said:

Millyonare said:

Think some older folks this winter will have to sell assets and de-retire to pay the bills. For example, sell a car, empty an ISA pot, go back to work part-time for John Lewis, etc. Selling, not investing.

Yep!  It's going to play havoc in the FIRE community! 

The current situation won't stress a retirement plan based on investments. It would need to continue for many more years and combined with a stock market crash or two for this to be a long term problem.

I'm not sure that is correct but perhaps it depends on what you mean by stress.  I'm not sure that many will have factored in double-digit inflation on the spending side and even a flat market could trigger the need to mitigate a sequence-of-returns risk.  Those who increased their bond exposure as retirement approached may be further hit.  And all this is before we take into account the potential risk of a reduction in dividend yields during a recession, which would hit those who are trying to retain capital and live off income or those selling accumulation units.  

I would be surprised if someone who had been following FIRE principles to get them to the point of retirement would not have factored something like this into their plans. The mid 1970s to 1980s had high inflation for over 10 years while the equity and bond markets dropped heavily and the FIRE model survived that with the 4% rule. It would need to be worse than that over the next 10 years or so to create a bigger issue. 

Inflation is a worry but returns have so far held up with global equities down just a bit this year and the standard intermediate bond element also down just a few percent. So far so good but it could always get much worse and for longer.

Daliah

RG2015 said:

I also understand the dichotomy of investment concerns versus cost of living fears, but this is an investment board.

It's actually the Savings and Investments board, and your thread is specifically about savings vs investments. Obviously, with the cost of living crisis, most people will require more cash, and might therefore not be able to put as much into investments as they would otherwise like to. The need for more cash isn't a choice but is forced on most of us, whether we like it or not. If you are unaffected by the cost of living crisis, call yourself lucky. The vast majority of people, specifically older people, will be affected by it, and thereby their choices for savings and investments.