advice on regular payments into a SIPP please

sadexpunk

In my view a retiree using their investments to help provide an acceptable standard of living should always be holding 3-5 years worth of withdrawals in safe investments and a further 5 years in something with a low/moderate level of risk. Beyond that I would go 100% equity.

Like @Linton I think keeping absolute amounts of a couple of years or so in spending and a rolling gilt ladder of fiveish years is enough safety for me to have the majority of the rest of my retirement provision in equities.

so reading between the lines then, and looking to retire in 2 years time (maybe even 1 with a good wind), that suggests a recommendation for putting my next few years shortfall into a low risk STMMF NOW then rather than drip feeding yes? ive understood you correctly there?

my shortfall would be tapered, needing more when i retire in a couple of years, up to a minimal amount at 67 when SP kicks in. but i was umming and ahhing about drip feeding or going all in now for peace of mind.

thank you

kempiejon

so reading between the lines then, and looking to retire in 2 years time (maybe even 1 with a good wind), that suggests a recommendation for putting my next few years shortfall into a low risk STMMF NOW then rather than drip feeding yes? ive understood you correctly there?

Maybe, depends what your current asset allocation looks like, tolerance of risk, experience of stock market drops, plus expenses and income flow lnumbers.

I do not use STMMF but if it's a cash like product why not. Cash and gilts have a very knowable cash flow and future value.

For me, if I was 100% equity and only 2 years away from the end of a regular income I would want a cash buffer to cover some years of base line expenses and then some less risky/volatile than equity investments.

sadexpunk

Maybe, depends what your current asset allocation looks like, tolerance of risk, experience of stock market drops, plus expenses and income flow lnumbers.

£200,000 SIPP invested in HSBC FTSE All-World Index Acc.

£15,000 p/a firefighters pension i can take any time i like now as ive just turned 62 and this is the forecast at 60.

£8000 p/a old engineering DB pension starts paying at 65.

SP at 67.

thats it. and id like to keep my current income which is £3200 per month in my hand.

AI numbers are a shortfall of £65,000 if i go at 64, £92,000 if i go next september at 63. apparently thats accounting for tax too.

so ive been doing all the AI stuff which recommends slowly building up a STMMF to prevent being affected if market drops just before i retire. and im thinking 'what if it drops next week??' so get that 65 or 92k shortfall in there NOW then im pretty much guaranteed the income all the way up to 67 when the remainder of the invested SIPP will just take a small hit each month/year. AI suggests that with interest, itll be indefinite once the SP kicks in.

I do not use STMMF but if it's a cash like product why not. Cash and gilts have a very knowable cash flow and future value.

just out of interest, what do you use instead of a STMMF for your 'safe' income?

thank you

Linton

https://forums.moneysavingexpert.com/discussion/comment/82168358#Comment_82168358

Yes, once you know your next few years are safe the short term variations in the stock markets and the doom predictions become much less of a concern. This reduces the temptation to derisk the bulk of your portfolio which would sacrifice long term gains.

sadexpunk

yep. obviously ill be sacrificing a (potentially) higher growth rate on a fair old whack of my SIPP, but i want the security of knowing i can retire more than the chance of higher growth.

its easy to get those greedy high-risk eyes on and think growth growth growth, but, it can just as easily go the other way :-)

kempiejon

@sadexpunk Well, with those defined benefit pensions a majority equity SIPP/ISA would be fine with me. Add to that a couple of years of spending or more, on a sliding scale as per ones own risk tolerances for a stock market drop.

just out of interest, what do you use instead of a STMMF for your 'safe' income

So I looked up Vanguards STMMF, its price appears to fluctate but I expect that is a result of distribution. Fees 0.12%, yield is ~4% and it holds debt, bonds gilts and so on. I'm unsure if this is being used as a store of capital, like cash or to generate an income. For income there are >4% options.

For my non-equity, safe, well low volatility choices I use mostly cash and conventional gilts. As said I hold around 5 years of expenses in safer products with predictable cash flows. I'm happy with my plan, aiming for more than I need with a riskier portfolio seeking income and growth and hold the option for belt tightening.

It becomes specific and personal but one sensible view is once you have enough stop playing the game, risk off, annuitize, build a long term gilt ladder and so on. If £65/92k in a STMMF suits you and buys peace of mind brilliant. I'd do my own numbers and first thought is a gilt ladder might be suitable, as I said using a STMMF is not a method I've not experienced.