Another View of Trying to Get Us Through Retirement Financially

bostonerimus

GSP said:

On another thread (taking the growth when you can), I have mentioned my wife’s pension value rising and falling over the last 5 years and the value is now back at it’s original starting point.

Thinking more, it feels like what’s the point in arriving back at the same point from 5 years ago.

I am not into growing my pension fund which I am drawing down on. In fact mine and my wife’s planner shows a decline every year with expenditure partly offset by modest growth (3% p.a.).
But barring the last eleven months, there’s enough to see us through until we are 100 at least.

Again, I am not looking to grow our pension funds, just have enough money to see us through and wonder in our case if having our money invested in pension funds is right for us.

With above, the large fall in pension funds over the last year has made me think is there an alternative way through to get us through retirement financially?

Annuities only provide a certain amount each month and die with you, and would not be enough to live on.

If we could transfer all our pension out into cash, what may work is a product that pays around 3% p.a. until we die.
The interest on this plus an amount from the pot reducing it’s size each year would see us through.

It would also provide the certainty of our future, if feels like investing in pensions is like entering a casino with so much volatility, and uncertainty. 

A lot of worry in truth!

Any thoughts on this, and probably an absurd idea someone will kill very quickly!
There’s probably no product that exists that will do this for us anyway.

Most people need to grow their pension funds after they retire to account for inflation, but if you have enough in the fund or can limit your personal rate of inflation, which is tough today with the cost of energy and basic food items rising by double digits, then you could get away with it. You will need to plan carefully and know your budget well and have inflation estimates that stress your plan. ie will it work with average annual inflation at 6% with some peaks at 10% etc. It is possible to decouple your self somewhat from the ups and downs of the markets by using annuities, bond and saving account ladders and dividends, and if you start early with this in mind it can make things easier. Right from the start of my investing at age 25 I decided that I didn't want to be reliant on drawdown from volatile assets. So I purchased a deferred annuity (I'm in the US and you can do that), decided to pay into both US and UK SP so that I'd have two index linked monthly retirement cheques, bought a rental property and paid it off before I retired so that the rent can be used for income and in my final job move before retirement I chose a job with a DB pension. I also saved to regular investments accounts and DC workplace pensions. I am now retired and the rental property and DB pension provide me with more than enough inflation linked income. Eventually the US and UK state pensions will start giving me even more index linked income and I won't have to cash in the deferred annuity at all and can use the inheritance option to pass the account value onto my heirs with the rest of my DC accumulation.

I suggest you look at annuities, keeping something in cash, maybe in a saving account ladder to take advantage of interest rates, some income dividend and or bond index funds where you only ever take out the dividend/interest payments. You might also want to look at capital preservation funds, but I think you can do what they do with the items I've mentioned previously. I would not look at rental properties if you don't have previous experience as a landlord or cannot afford to buy the property outright, but even then that ties up a lot of capital so adding a rental to the retirement income mix really needs to be done well before you are approaching retirement age.