Retirement plan not going to plan.

NedS

Audaxer said:

NedS said:

dunstonh said:

The plan is failing in that the 7iM pension has made no gains in the last two years.

That doesn't make it a failure as you know that not every year can be profitable.  It is more likely that 2020 and 2021 were both positive years and 2022 is a negative year that has taken you back to 2020/21 prices.

Exactly - the last 4 weeks of Truss-Tantrums have simply taken my portfolio back to where it was at the start of the year, in Jan 2022.

Just to clarify @NedS - was your portfolio well up this from January to mid-September? If so, it's performing pretty well as I think most portfolios were already down for the year to mid-September, and a lot further down after the last 4 weeks. 

Yes, 4 weeks ago, on 17/9/2022, I was up 11.65% on the year (from 31st Dec 2021). I'm now down 0.5% so have given back those gains and back where I was at the start of the year. Mine is an income portfolio though (with income reinvested), not your average global equity / bonds.

MEM62

wjr4 said:

Which funds are you invested in within both pensions? 

Just looked at the 7iM app and the fund name is not mentioned. However, it is 100% global equities. The Aviva is in the Pension Global S6.  

dunstonh said:

The plan is failing in that the 7iM pension has made no gains in the last two years.

That doesn't make it a failure as you know that not every year can be profitable.  It is more likely that 2020 and 2021 were both positive years and 2022 is a negative year that has taken you back to 2020/21 prices.

As negative years are always coming and going to occur many times in the remainder of your life, you plan shouldn't have a problem accommodating these.

With respect to the pensions, the market may recover in four years, but I think I will still be short of the £460+ target I set for the pot.a couple of years ago.

Do you plan to be drawing out the whole £460k in 4 years time?  if so, then the plan has a problem. If not, the plan doesn't have a problem as money will be invested for longer than 4 years.

What was your planned draw rate for the DC pensions?

@dunstonh I am not looking at either plan as a failure.  The market is what the market is.  It is just that it is likely to fall short of where I targeted to be in four years or so.  As you rightly point out, I will not be withdrawing the pot at retirement, and I will be invested long after retirement so how much difference will that actually make?  

When I reach SPA I will have £14k of income between the state and my DB pensions.  This more than covers day to day expenses and I was looking at taking circa £13k per year in drawdown on top of that so around 3%.  I have two years between stopping work and receiving the state pension.  I was finding that and establishing a cash buffer with proceeds from the flat sale but that will fall short .      

michaels

I think the OP does highlight the risk around having a large part of the pot in a single asset (the BTL)

Kim1965

Do you need to do much to your flat to bring it up to the required energy efficiency rating, think this comes in 2025? 

[Deleted User]

Helpful post for anyone considering leveraging and putting a large chunk of net worth into an illiquid asset on top of the family house.  

Bad news: your target at the age of 65 should reflect inflation, assuming you want a certain level of life.

Good news: your liquid investments will grow nicely over the next 5 years. An internationally diversified balanced portfolio went up over any 5-year period in our life time.  Even in 1970s. And given most countries are in a bear market, good 5-year return is even more likely. Returns are usually great when the markets are fearful and poor when people feel overconfident. 

bownyboy

OP me and my wife found it useful to write an Investor Policy Statement (IPS) which is a single page document outlining your objectives, investing philosophy, asset allocation, risk tolerance, timeframe etc

This is useful to come back to once a year to review but also in times of market turmoil to remind yourself why you are invested the way you are. You then may need to adjust it if you feel that your allocation is not in line with your actual risk tolerance. 

There are many templates online for this. We have also written on for our Withdrawal Strategy; again it's good to write it down and come back to it regularly to see if it still makes sense. 

MEM62

michaels said:

I think the OP does highlight the risk around having a large part of the pot in a single asset (the BTL)

The flat was not originally a BTL.  I was my home for 29 years.  When my OH and I bought our house, my circumstances were changing from living on my own for 20 years to moving in with a woman and two teenagers.  Now we all plan things with the best of intent but both my OH and I were worldly wise enough to know that things do not always work out as you would like.  We therefore kept the flat as plan B in case things didn't work out.    

The decision to sell was taken as the costs and regulations surrounding being a landlord are now onerous.  As an investment, it is far from tax-efficient and comes with more issues than we want to deal with.  It is also the case that the flat has fallen in value, yet my CGT liability is growing.  Has we sold when we bought this house, we would be in a better financial position now but, as I indicated, keeping it at the time was not a financial decision.      

Kim1965 said:

Do you need to do much to your flat to bring it up to the required energy efficiency rating, think this comes in 2025? 

I doubt that is relevant as I would hope that the legal process would have evicted the tenants long before that.

Do got get me wrong, we are not in a bad position.  My wife's retirement position will be broadly similar to mine although she will have maybe five years between giving up work and SPA.  My original post was highlighting the fact that, in a relatively short space of time, my plan is not going to be where I wanted it to be.  

MEM62

bostonerimus said:

OP you don't mention anything about your budget. There are two major components to a retirement plan: your sources of retirement income and how much you intend to spend. Right now things look bleak on the investment side for many people, but remember you probably have at least 20 years for your money to remain invested, so there could be some recovery. Also if going into retirement your pot is not as big as you hoped then you need to cut spending or find more income like taking a part time job. I would do a detailed budget and see where you can save some money to reduce your initial withdrawals. A retirement plan is not a straight road and you need to adapt to the twists and turns of the economy and your circumstances.

I am sure that there will be some recovery.  Likewise, over the period of my retirement there will be the usual market gains and losses - and statistically even a crash.  The budget is a bit simplistic in that we currently need £1K a month to cover all the basics.  As our income will be around four times that between the OH and I we haven't made a spending plan down to the last penny.  Our margin over the necessities is sufficient that working, unless I choose to, or cutting back on spending is not something we need to factor in.     

dean350

Thank you for sharing. A salutary tale that nothing in life is guaranteed and asset values can be volatile. That volatility can really hurt if you are close to retirement. These days the only solution seems to be keeping a decent slug of cash on hand as an insurance policy. It dents your returns a bit but all insurance comes at a price. To the OP, its always darkest before dawn. If the recession is not quite as bad as feared there could be some pull up starting this time next year. 

Albermarle

If the recession is not quite as bad as feared there could be some pull up starting this time next year. 

Markets are always looking ahead. Even a hint that any recession may be shallow and short lived, could send markets upwards well before this time next year. On the other hand if recession is deeper than expected then....