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Should I change to a lower risk fund with 16 years left to retire?

maz_hartley
Posts: 122 Forumite

Currently 50 and only started a work pension at 40 and a few years ago started a private pension. I currently save in total between them about £250 a month. Both pensions are in a high risk fund but with 17 years left till retirement would I be wise to change them to a lower risk fund? Any help appreciated?
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Why do you think you have 17 years to retirement? Do you really want to work till 67? State pension age. You can “retire” when you like.If you have 17 years to go i don’t think that is a time frame that should cause you to reduce risk. Remember you’re not aiming at one date but saving for money to spend in 30 or 40 years time. Money you intend to spend in the next 5 to 7 years probably should not be in a high risk fund. You’re not looking for money to spend in that timeframe.But do you have the discipline to ride out the roller coaster of a high risk fund in the next 10 years plus? Now your pot is presumably getting a bit bigger £1000 turning out to be £500 feel a lot different from £100k becoming £50k.0
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maz_hartley said:Currently 50 and only started a work pension at 40 and a few years ago started a private pension. I currently save in total between them about £250 a month. Both pensions are in a high risk fund but with 17 years left till retirement would I be wise to change them to a lower risk fund? Any help appreciated?Googling on your question might have been both quicker and easier, if you're only after simple facts rather than opinions!0
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Here’s a chart to see what others do: https://www.bogleheads.org/forum/viewtopic.php?p=7079273&sid=234f1f91af0299ef77ce290691faab52#p7079273. It would have you at about 70% stock-type risk assets and 30% bond/cash type, but there's a wide range of 'acceptable'.
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maz_hartley said:Currently 50 and only started a work pension at 40 and a few years ago started a private pension. I currently save in total between them about £250 a month. Both pensions are in a high risk fund but with 17 years left till retirement would I be wise to change them to a lower risk fund? Any help appreciated?
At the moment, saving £3k a year into your pension isn't going to make a huge impact on your retirement income and thus worth doing calculations now to see if this will provide what you want in your retirement."No likey no need to hit thanks button!":pHowever its always nice to be thanked if you feel mine and other people's posts here offer great advice:D So hit the button if you likey:rotfl:1 -
maz_hartley said:Currently 50 and only started a work pension at 40 and a few years ago started a private pension. I currently save in total between them about £250 a month. Both pensions are in a high risk fund but with 17 years left till retirement would I be wise to change them to a lower risk fund? Any help appreciated?0
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Albermarle said:maz_hartley said:Currently 50 and only started a work pension at 40 and a few years ago started a private pension. I currently save in total between them about £250 a month. Both pensions are in a high risk fund but with 17 years left till retirement would I be wise to change them to a lower risk fund? Any help appreciated?
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You have 17 years to retirement. If you do drawdown at that point. You will be running this investment for 57+ years. Do you have a long enough investment horizon to be invested in volatile but high potential return assets. Like equities. Genuine question. Leading but genuine.
At some point near actual retirement you need to get asset allocation from whatever it is while saving to the selling assets and spending config. The impact of sequence of return reverses in de-accumulation. Instead of being good - more units bought this month cheaper - yay - it becomes more units sold this month for same income - boo.
That adjustment in asset allocation can be done gradually. Or lumpily. But few would do it more than 10 years out or ahead of retirement. A lot of derisking approaching retirement discussion is folklore held over from annuity purchase where the value of the investments on *one particular day* was critical to the income obtained by annuity purchase. So derisking - completely and progressively made a lot of sense. Or a short term wobble could take 20% or 40% off your pension. Forever. So lock it in.
I would say the "during deaccumulation" drawdown range as practical guidance is 40-80% growth assets (ignoring outliers with specialised needs for a 10 year bridge to DB or with so much money they don't need to take any risk or can go all in without caring).
And the during accumulation range is "up to 100% growth assets to taste.
A braver investor would go 100% while saving (your volatility hedge for losses is time to retirement and ability to work) and then down to 70-80% near retirement (working hedge gone, sorr reverses)
A very brave investor would stay "all in" in retirement - perhaps best left to people with other assets as well like property.
A more cautious investor would perhaps use <100% while saving - let's call that 60% and then move down to 40% at retirement
All these are valid choices for different people with different loss aversion and family circumstances
If it was me and I had started late and was catching up - I'd seek to maximise my returns in the accumulation phase and dial up the risk. But that is me and me now at that. I didn't really understand when I did 100% equities in my youth that it would spring a >50% loss of value surprise (it did that and the recovery did come but it was an unwelcome shock at the time). And if the shock is badly timed then you are moving into retirement in the middle of the crash sat on undervalued equities (below long term trend line) instead of gilts and cash.
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