My retirement portfolio...11 months from drawdown

GazzaBloom

leosayer said:

Seems to be high risk due to your concentration in US equities considering that you will being drawing on the bulk of your funds for the next 9-12 years before your state pensions start. 

A high risk tolerance is fine during the accumulation phase when you are earning and saving but do you really have the stomach for high volatility when you will almost entirely dependent on the portfolio for your normal living expenses? 

What's your plan for replenishing the cash pot during drawdown? Will you look to maintain a minimum % or £ cash pot?

I've been round all the high US concentration and high risk debates ad infinitum over the years, and don't necessarily agree with some of the arguments against.

As for cash, I will rebalance to a percentage unless there is a serious downturn in equities when I may hold off rebalancing and run the cash for a couple of years.

if my risk appetite shifts in the future, I will simply hold a higher percentage of cash and may consider rolling all the equity funds into a single global equity index fund.

Sea_Shell

I agree about the cash.

You're only ~2.5% in cash, outside your pension.    For comparison, we are at ~20%, with approx £125k of cash.   Albeit, some IS within pension, which is already in Drawdown.    About £90k is external.

I know that some will argue that you're better, being "all in" equities, and the cash is just a drag, or a "comfort blanket", but we like comfortable.   

SouthCoastBoy

I'm around 40% cash just over 600k, currently beating inflation so happy with that, but plan to spend exclusively cash up until state pension age,  7.5 years which will cost about 270k.

GazzaBloom

Sea_Shell said:

I agree about the cash.

You're only ~2.5% in cash, outside your pension.    For comparison, we are at ~20%, with approx £125k of cash.   Albeit, some IS within pension, which is already in Drawdown.    About £90k is external.

I know that some will argue that you're better, being "all in" equities, and the cash is just a drag, or a "comfort blanket", but we like comfortable.   

The cash inside pension is due to the efficiency of salary sacrifice with regards tax etc. We'll be using FAD and strategic use of the TFLS and personal allowances each to drawdown without incurring income tax for as long as we can and any excess with be added to cash outside the pension during that time.

If I had built the cash pile outside the pension I wouldn't be able to accumulate anywhere near as much as quickly.

I agree that the safety of cash in times of turmoil is not to be underestimated and 5.25% interest is a boon, although temporary, it would be good to see rates hold at around 3% fore the risk-off end of the barbell.

GazzaBloom

@Sea_Shell now you are a few years in, looking back to to that last year before you took the leap, is there anything you would have done differently?

GazzaBloom

SouthCoastBoy said:

I'm around 40% cash just over 600k, currently beating inflation so happy with that, but plan to spend exclusively cash up until state pension age,  7.5 years which will cost about 270k.

Sounds good. What does your non cash portfolio look like?

SouthCoastBoy

GazzaBloom said:

SouthCoastBoy said:

I'm around 40% cash just over 600k, currently beating inflation so happy with that, but plan to spend exclusively cash up until state pension age,  7.5 years which will cost about 270k.

Sounds good. What does your non cash portfolio look like?

I'm in a mix of primarily global equity funds, including some trackers and some income funds, no bonds. The fund mix has not drastically changed over many years, I will be staying in similar funds during retirement, topping up the cash buffer during good times. Plan is to have a 70:30 equity to cash ratio post 67

50% is outside pension, when SP kicks in I will only need around 8k (in todays money) per year additional money, as jointly we need 30k per annum, so will take money out of pension up to income tax threshold the rest from isas/savings

cfw1994

I always feel that 2-3 years in “easily accessible cash” is wise as you get close 🤷‍♂️
Ours were mostly premium bonds, but even some cash savings accounts are giving around 4% now (we have Chase with some readies in).

I was only a couple of months into drawing down when markets (& my funds) took a bit of a nosedive 😳

We had a chat over the Christmas break and decided to follow our “plan”, pausing them.  Turned into a long pause: just over 2 years 👀

Funds are doing fine now, plus I am 3 years into retirement, so have started a drawdown again to take out the tax-free element 👍
Perhaps all made easier because I have an interest in money (perhaps why we are all here 😉).

Sea_Shell

GazzaBloom said:

@Sea_Shell now you are a few years in, looking back to to that last year before you took the leap, is there anything you would have done differently?

I can't think of anything off the top of my head.    I did have a (now closed) thread about my pre-retirement, 2 years before I made the leap.    You may have read it at the time.

https://forums.moneysavingexpert.com/discussion/5631875/have-we-got-our-sums-right-appraise-our-plan

There may be some musings within those 24 pages...

Obviously with the benefit of hindsight one can always say "oh, I should have moved my ISA funds to X fund" etc etc, but no actual "regrets" as it were. 

Pat38493

It will be interesting to compare notes in future years regarding the bonds topic, as I am taking a different view on that.

I had virtually nothing in bonds during the last year or so, but I am now starting to build up bond holdings again.  I am trying not to suffer from recency bias there - it's easy to think that bonds are no good after we have had higher bonds volatility for a couple of years, and higher cash returns than bonds, but I think that historically these times are very rare.  Normally bonds will reduce the volatility and provide a different returns pattern to equities whilst at least matching or slightly exceeding inflation.

Therefore I am taking the view that I will use bonds for some of my holdings in the longer term, and rightly or wrongly I have already started switching some of my fund into bonds.  If I'm lucky this will be a good time as bond fund valuations should increase when interest rates start to come down which seems likely in the next 6 months.

It might be worthwhile to keep bonds under advisement rather than exluding them permanently from your thinking.

I have just triggered the crystallisation of my 450K II pension and I will probably invest some of the 25% TFC in ISAs (myself and spouse) in bonds rather than cash, but whatever I can't get into ISAs will stay in cash.  I am doing that partly because we are planning some big capital spends in the first year or two, and my planning to stop work is fluid - not sure yet exactly which month I will stop and whether I will go part time for a while.  

My red line is April 2026 - by that time I will definitely stop working completely.  However I could go as early as August this year if the work annoys me enough!  After August this year I will effectively filling in the last few % of the worst case scenarios which are very unlikely to fully materialise.