At what age do you grab your life savings and head for cover?

agent69

I'm late 60's and took early retirement about 6 years ago. I currently have state and DB pensions that I could just about live off of if disaster struck. I also have savings split between SIPP (£260k), investment accounts (£170k) and 'cash' (£60k mostly premium bonds).

When I was working I didn't worry about stock market fluctuations, as I could just carry on working a bit longer. However, as I get older the thought of waiting 10 years for a market recovery after a crash becomes less appealing. Of the £430k invested in the markets I guess about 25% is in bonds and 75% in equities. I'm thinking it may be time to reduce my exposure to equities (which have done well over the last few years), but not certain where to put the money instead.

I saw a graph a while ago that indicated how you should reduce your exposure to equities over time, but cannot find it again. I have bonds via my Vanguard account but am mindful that they tankeded at the end of 2022, and are still lower than they were at the end of 2021.

So can anyone offer any advice to an increasingly risk averse investor who likes the returns from his current portfolio, but thinks he should be de-risking?

InvesterJones

https://www.youtube.com/watch?v=GADWzgcB08g

lisyloo

I'm a few years away from retirement and I de-risked part of my portfolio recently.
Not all of it because some of it will be invested long term, but enough to ride out a slump/war/pandemic and not have to touch the riskier investments.

I got an IFA to do mine after discussing my concerns. For me it's well worth the 0.5% charge but I know some people prefer to DIY which is all fine.

Bostonerimus1

Just before I retired I de-risked by using a small part of my DC pension pot to buy an annuity and I have left the rest aggressively invested in equity index funds.

Albermarle

However, as I get older the thought of waiting 10 years for a market recovery after a crash becomes less appealing.

AFAIK, most crashes recover within a couple of year. A 10 year one would be unusual but probably not unprecedented. Plus you still get paid dividends.

I saw a graph a while ago that indicated how you should reduce your exposure to equities over time

That would only have been the opinion of the person who published the graph. I think it is fair to say opinions vary.

Having said that probably the typical retiree will be 40 to 60% equities.

Keep_pedalling

We are in a similar position but a little older. Having DB pensions  is a nice safety net so most of our savings are still in equities. No bonds we ditched those for cash. Have enough cash to cover emergency spend plus a new EV planned for next year and 2 years spend in case of big market fall.

kempiejon

agent69 said:

When I was working I didn't worry about stock market fluctuations, as I could just carry on working a bit longer. .... the thought of waiting 10 years for a market recovery after a crash becomes less appealing..... 25% is in bonds and 75% in equities. I'm thinking it may be time to reduce my exposure to equities (which have done well over the last few years), but not certain where to put the money instead.

On those points, when you were working, on top of savings did you have cash fund for emergencies like redundancy, ill health or large planned expenditure?
Were you saving for holidays or a new kitchen? Without work and an income to top up perhaps increased the size of that pot.

A market recovery might be 10 years but I think that is unnecessarily pessimistic. I'm catastrophising based on a halving of income taking 3 years to recover fully.

25:75 isn't very caution, if that risk level doesn't suit you change it.

Where to put it? You've answered that already bonds.

Or other suggestions an annuity dollars, gold, coins, art, bitcoin.

Of course if equities continue to do well you'll miss out on those gains.

I do not think capital values are necessarily the best measure for those retired it is income and growth of income that will change your living standards.

El_Torro

Keep 5 years worth of spending in cash.
Keep years 6-10 in not too risky a fund. Say maybe 60% equities max.
Years 11 onwards can be invested in a global tracker, or something a bit less risky if you prefer.
Step 4: Profit.

The above won’t suit everyone, but it might be the sort of thing you’re after.

Hoenir

Have you considered annuitising part of your portfolio to boost the guaranteed income you'll receive. Markets have been relatively benign for a very long time. No certainty how long this will remain the case. 

Bobziz

The most recent 10 year recovery period for the FTSE World in purple. In red/brown....the now unfashionable CGT.

Linton

El_Torro said:

Keep 5 years worth of spending in cash.
Keep years 6-10 in not too risky a fund. Say maybe 60% equities max.
Years 11 onwards can be invested in a global tracker, or something a bit less risky if you prefer.
Step 4: Profit.

The above won’t suit everyone, but it might be the sort of thing you’re after.

I would advocate this as the best approach.  Rather than choosing arbitrary allocations which make you happy base them on a liability matching approach where your allocations directly follow from your objectives.  The higher risk investments should not worry you since you wont need to access them for 10+ years.  The money you need in the short term is safe in cash.