Retirement planning dilemma

ader42

I would say your plan is reasonable, maybe a little high on cash for some but that should mean less stress in return for a little less reward. I wouldn’t try to pick stocks or accumulate cash at the moment - I would stick to the indexes and then sell some when you start to drawdown (if the markets have recovered) - but then I am a mid-term bull.

If markets go back to “normal” (such as S&P500 long term average) then you will probably end up have a larger pot when your SP kicks in than when you start to drawdown, but no guarantees as 2022 could be another 1966 - so the cash buffer is a good idea. Let’s hope we get growth on the route to your 67th  

You must spend a lot though - especially if the house is paid off - my family lives happily on £24k gross - so I’d look at where you are potentially wasting money too.

zagfles

GazzaBloom said:

zagfles said:

GazzaBloom said:

But, with markets down, and in all possibility set to continue down into next year and maybe for some time, the golden opportunity of continuing to buy more stock fund units at reduced prices is really tempting. Opportunity's like this don't come round every year.

Why do you think markets are "down"? Which markets and what timescale?

Not sure if you are being serious or not but I mean this year and funds such as global equity index funds such as VWRL, Vanguard LifeStrategy, the S&P500, Nasdaq, Europe, Japan, pretty much all tech stock funds, small cap funds, bond funds, gilt funds and pension multi asset default funds etc.

Pretty much everywhere except the UK trackers which are holding up in single digits due to dividends and energy stocks.

So you're looking at just one year to reach the conclusion the market is now "down" and it's a "golden opportunity"? Most global index trackers are up around 30% over 3 years and 50% over 5 years. VLS has lagged a bit due to its UK bias.

If they'd risen 8-10% a year steadily over the last 5 years they'd be at about the same level as now. Would you still think they were "down" and a good buying opportunity? But because they rose a bit faster than that in the previous 4 years then fell back a bit in the last year they're now "down"? Perhaps they were just "up" a bit too much a year ago?

If now is such a "golden opportunity" why is it still there, surely all the professionals and major investors would have realised this too, bought stocks, and pushed prices back up? Perhaps you know something they don't?

GazzaBloom

ader42 said:

I would say your plan is reasonable, maybe a little high on cash for some but that should mean less stress in return for a little less reward. I wouldn’t try to pick stocks or accumulate cash at the moment - I would stick to the indexes and then sell some when you start to drawdown (if the markets have recovered) - but then I am a mid-term bull.

If markets go back to “normal” (such as S&P500 long term average) then you will probably end up have a larger pot when your SP kicks in than when you start to drawdown, but no guarantees as 2022 could be another 1966 - so the cash buffer is a good idea. Let’s hope we get growth on the route to your 67th  

You must spend a lot though - especially if the house is paid off - my family lives happily on £24k gross - so I’d look at where you are potentially wasting money too.

Thanks, food for thought. Regarding the retirement spending, we are looking at wanting around £32K after tax a year but that includes £12K discretionary fun money for days out, weekends away, shows, events, luxury items, hobbies, treating the kids/grandkids (if there ever are any) etc, so there is plenty of flex for adjusting drawdown in period of negative returns, base living costs are £20K which covers everything, car servicing, birthdays, all bills etc.

GazzaBloom

zagfles said:

GazzaBloom said:

zagfles said:

GazzaBloom said:

But, with markets down, and in all possibility set to continue down into next year and maybe for some time, the golden opportunity of continuing to buy more stock fund units at reduced prices is really tempting. Opportunity's like this don't come round every year.

Why do you think markets are "down"? Which markets and what timescale?

Not sure if you are being serious or not but I mean this year and funds such as global equity index funds such as VWRL, Vanguard LifeStrategy, the S&P500, Nasdaq, Europe, Japan, pretty much all tech stock funds, small cap funds, bond funds, gilt funds and pension multi asset default funds etc.

Pretty much everywhere except the UK trackers which are holding up in single digits due to dividends and energy stocks.

So you're looking at just one year to reach the conclusion the market is now "down" and it's a "golden opportunity"? Most global index trackers are up around 30% over 3 years and 50% over 5 years. VLS has lagged a bit due to its UK bias.

If they'd risen 8-10% a year steadily over the last 5 years they'd be at about the same level as now. Would you still think they were "down" and a good buying opportunity? But because they rose a bit faster than that in the previous 4 years then fell back a bit in the last year they're now "down"? Perhaps they were just "up" a bit too much a year ago?

If now is such a "golden opportunity" why is it still there, surely all the professionals and major investors would have realised this too, bought stocks, and pushed prices back up? Perhaps you know something they don't?

Thanks and fair point for the argument that the market is fairly priced and perhaps the jolt I needed, so...

GazzaBloom

I have decided that I am going to keep ploughing contributions into the 100% stock index funds and deal with any adjustments to portfolio mix at the point of retirement whenever that may be. So in effect not start “lifestyling” my portfolio.

I dislike any form of lifestyling and am remembering Warren Buffets wise words "be greedy when others are fearful" stop succumbing to doubt and worry less about the future and focus on the now and keep buying through thick and thin.

Onwards...

zagfles

GazzaBloom said:

zagfles said:

GazzaBloom said:

zagfles said:

GazzaBloom said:

But, with markets down, and in all possibility set to continue down into next year and maybe for some time, the golden opportunity of continuing to buy more stock fund units at reduced prices is really tempting. Opportunity's like this don't come round every year.

Why do you think markets are "down"? Which markets and what timescale?

Not sure if you are being serious or not but I mean this year and funds such as global equity index funds such as VWRL, Vanguard LifeStrategy, the S&P500, Nasdaq, Europe, Japan, pretty much all tech stock funds, small cap funds, bond funds, gilt funds and pension multi asset default funds etc.

Pretty much everywhere except the UK trackers which are holding up in single digits due to dividends and energy stocks.

So you're looking at just one year to reach the conclusion the market is now "down" and it's a "golden opportunity"? Most global index trackers are up around 30% over 3 years and 50% over 5 years. VLS has lagged a bit due to its UK bias.

If they'd risen 8-10% a year steadily over the last 5 years they'd be at about the same level as now. Would you still think they were "down" and a good buying opportunity? But because they rose a bit faster than that in the previous 4 years then fell back a bit in the last year they're now "down"? Perhaps they were just "up" a bit too much a year ago?

If now is such a "golden opportunity" why is it still there, surely all the professionals and major investors would have realised this too, bought stocks, and pushed prices back up? Perhaps you know something they don't?

Thanks and fair point for the argument that the market is fairly priced and perhaps the jolt I needed, so...

No problem! It's easy to give in to short term market timing temptation, and I think a lot of people check their investments too frequently eg once a week and so lose sight of the mid/longer term picture. IMO it's particularly a problem in drawdown where people are making sell decisions every month, or every year, for instance if you're selling investments for your monthly income it's easy to give in to the temptation of "market is high - I'll sell more equities than I would normally", or "market is low, I'll use more cash this month". That's no different to trying to buy the dips and sell the peaks, but most people never tried to do that, so why do it with your drawdown pot? But as you're trading anyway, it's easy to give into the temptation of second guessing shortt term market movements. Anyone who can do that successfully should already be a billionaire!!

Pat38493

zagfles said:

 Most global index trackers are up around 30% over 3 years and 50% over 5 years. 

This makes me wonder then if my current employer pension is poorly invested then.  My 2 DC funds - legacy one is showing 95% growth over 10 years and 17.23% over 5 years which seems ok but not 50% as you say (November factsheet).   The other one which is my current default employer fund has only been going less than 10 years but is showing only 2.4% per year over 5 years (September factsheet). (Aegon MI Savings (H) )

Maybe I am not looking at the right numbers and need to look somewhere else or maybe I am in the wrong funds if trackers could have achieved 50% over 5 years.

If that is a valid comparison I guess I need to look at changing out of the default funds.

Mutton_Geoff

Pat38493 said:

This makes me wonder then if my current employer pension is poorly invested then

Awareness is the first step to enlightenment. My guess is the vast majority of people are invested in company default schemes with default investments that may or may not match their own attitudes (to risk) and goals (level of investment). The lightbulb moment is a good feeling and you'll look around and wonder why none of your colleagues "get" this.

Albermarle

Pat38493 said:

zagfles said:

 Most global index trackers are up around 30% over 3 years and 50% over 5 years. 

This makes me wonder then if my current employer pension is poorly invested then.  My 2 DC funds - legacy one is showing 95% growth over 10 years and 17.23% over 5 years which seems ok but not 50% as you say (November factsheet).   The other one which is my current default employer fund has only been going less than 10 years but is showing only 2.4% per year over 5 years (September factsheet). (Aegon MI Savings (H) )

Maybe I am not looking at the right numbers and need to look somewhere else or maybe I am in the wrong funds if trackers could have achieved 50% over 5 years.

If that is a valid comparison I guess I need to look at changing out of the default funds.

The issue is that if a pension default fund was 100% equities and it lost 40% in a month, then some employees would be very unhappy and saying, 'why is my money invested like that??'
So they are normally more middle of the road, with a % of bonds (that have been hit unusually hard recently) and a relatively high UK %. In normal times they just tick along.
Also a tracker being up 50% in 5 years, is not typical, and unlikely to be repeated soon, but nobody knows for sure.

Albermarle

You must spend a lot though - especially if the house is paid off - my family lives happily on £24k gross - so I’d look at where you are potentially wasting money too.

The subject of expenditure in retirement has been discussed on this forum many times.

The opposite argument is by limiting spending to a minimum, when you can afford more is also a waste ( of your life).

Some households can live happily on two state pensions, whilst for others it would seem like a lot of scrimping and saving, especially after a lifetime of work. Each to their own.

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