on verge of retiring - rebalancing portfolio in volatile times

starving_artist

Hoenir said:

starving_artist said:

QrizB said:

I'm not you and I don't know your risk tolerance, but if you're planning to remain invested for the next 30+ years id have thought that 24% equity was too low?

Of course if you're planning to spend £250k of your DC pension imminently on a £10k pa RPI linked annuity, I could understand having that sum in short-dated gilts, bonds or STMM funds.

My risk tolerance has been quite high and I have been happy to sit out previous dips .

Many people don't know what their own risk tolerance is until they face the reality of a full blown bear market. Nor the value of diversified portfolio's. Which help negate the worst of the storm. 

Being on the brink of retirement has changed my risk tolerance at least in the short term.

SouthCoastBoy

starving_artist said:

El_Torro said:

I agree with QrizB in saying that 24% is too low, unless you plan to buy an annuity. If you're planning to draw down rather than go the annuity route I would have at least 40% in equities. Some people would go a lot higher. 

I personally think you don't need more than 5 years worth of cash (£100k in your situation) in cash and money markets. Once you start taking your state pension I guess that will relieve the pressure on your investments since you won't be drawing down as much.

That's really what I was asking - what the typical level of equity exposure in a DC retirement portfolio is.  I take your point about the cash.

I'm 60, and plan to retire some time soon, not sure when though, and with the latest market volatility I may wait a little longer. My split is 60% equities, 40% cash, no bonds for me. 

MeteredOut

SouthCoastBoy said:

starving_artist said:

El_Torro said:

I agree with QrizB in saying that 24% is too low, unless you plan to buy an annuity. If you're planning to draw down rather than go the annuity route I would have at least 40% in equities. Some people would go a lot higher. 

I personally think you don't need more than 5 years worth of cash (£100k in your situation) in cash and money markets. Once you start taking your state pension I guess that will relieve the pressure on your investments since you won't be drawing down as much.

That's really what I was asking - what the typical level of equity exposure in a DC retirement portfolio is.  I take your point about the cash.

I'm 60, and plan to retire some time soon, not sure when though, and with the latest market volatility I may wait a little longer. My split is 60% equities, 40% cash, no bonds for me. 

Really?

QrizB

starving_artist said:

That's really what I was asking - what the typical level of equity exposure in a DC retirement portfolio is.  I take your point about the cash.

We could hav a hundred-post thread debating this point and I doubt anyone would be any better informed by the end of it

Albermarle said:

starving_artist said:
That's really what I was asking - what the typical level of equity exposure in a DC retirement portfolio is.  I take your point about the cash.

For a drawdown that could last 30 years or more, the classic mix is around 50% equities +/- 10%.
The rest being mainly bonds , with some cash and maybe a sprinkle of gold.
However I have to say that opinions will vary.

Opinions do vary indeed.

60/40 or 80/20 also get bandied about, and then there are the nerves-of-steel crowd who claim that back-testing shows you're almost always better off with 100% equities provided you can just hang in there when they drop 50%.

I'm currently about 75/25 but recently the 75 is getting smaller.

MeteredOut said:

SouthCoastBoy said:

I'm 60, and plan to retire some time soon, not sure when though, and with the latest market volatility I may wait a little longer. My split is 60% equities, 40% cash, no bonds for me. 

Really?

I have more confidence that SCB will retire eventually than I have that <points at markets> *this* will all settle down before 2026.

SouthCoastBoy

MeteredOut said:

SouthCoastBoy said:

starving_artist said:

El_Torro said:

I agree with QrizB in saying that 24% is too low, unless you plan to buy an annuity. If you're planning to draw down rather than go the annuity route I would have at least 40% in equities. Some people would go a lot higher. 

I personally think you don't need more than 5 years worth of cash (£100k in your situation) in cash and money markets. Once you start taking your state pension I guess that will relieve the pressure on your investments since you won't be drawing down as much.

That's really what I was asking - what the typical level of equity exposure in a DC retirement portfolio is.  I take your point about the cash.

I'm 60, and plan to retire some time soon, not sure when though, and with the latest market volatility I may wait a little longer. My split is 60% equities, 40% cash, no bonds for me. 

Really?

I'm defining soon as next 2 to 3 years  😀

Bostonerimus1

Recent events just underline the need for planning and stress testing your plan. Anyone with a DC pension must think what they would do if there was a 10%, 20% or even 50% decline in equities and interest rates are at 10% or 0%. Maybe you want to have annuities and a good cash buffer in place for bad times and also a plan to reduce your spending. If you have a DB plan maybe you are ok with a high equity percentage because you can afford to loose a good portion of your DC pot. Think about the worst of times as well as the best of times.

Cobbler_tone

Nice little warning from L&G on the landing page. When it says “change” why not tell it as it is! Although my cash portfolio is going up so I guess they have to cover all bases.

Linton

starving_artist said:

So I posted on this board a little over a year ago about the affordability of retiring with the savings and pensions I had.  Someone gently suggested that although perhaps doable at the bottom floor of my desired income range I might be better waiting a couple more years.  My situation now is: 

Just over 6 years to SRA (I qualify for the full SP).  No debt, no partner/dependents. Own my property which I think of as my care home fee backstop.

Desired net annual income £20,000 although could manage on as little as £13,000.  I plan to use a mixture of tax free lump sums, draw down, ISA withdrawals in combination with a small annuity.

My investments have done really well in the last year but of course around half of my gains have been wiped out now due to reasons we all know.  I totally get the cyclical nature of these things but given that I am in the dreaded situation of being on the verge of retirement at an adverse time in the market I have significantly derisked and now have:

£135,000 in stocks and shares ISAs (of which £86,000 in SMM).

£225,000 in various DC pensions (of which £36,000 in SMM). 

Overall equity exposure is now around 24%. 

I am likely (if possible) to pull the trigger at any point in the next year or so during which I expect there will be continuing volatility in the stock market.  My question is:  Is this a sensible level of equity exposure?

IMHO the allocations to asset classes should be what they need to be to implement your retirement strategy and circumstances. For example you could decide that your next 5 years of income should be in cash or near to cash. The 5 years beyond that could be held in low risk investments, and the rest in 100% equity.

This seems a better approach than allocating arbitrary %s. It has the advantage that you can ignore equity crashes happy in the knowledge that you can maintain your income for at least the next 10 years. It also ensures that in the long term your assets are very likely to match inflation.