Anyone in high equity allocation whilst retired?

MetaPhysical

^^^?
Wondered if anyone who is retired maybe had a large equity allocation - 80% plus in a global tracker- whilst protected by a cash buffer MM fund in the event of a crash?  I am retiring next March at 58 and would describe myself as moderately adventurous sort of person without being reckless and I am aware of risks.

Half of my pension income would need to be fuelled by this with the other half from some DB pensions that I also have and I am becoming increasingly attracted to this idea of a large equity allocation the more reading I do.  Doesn't seem that bonds these days offer quite the diversification they once did.

If I held two - three years of cash withdrawals in a MM fund inside the pension wrapper that should hopefully be enough for crash and recoveries.  If the equities boomed I could always move some more into cash as I got older.

Appreciate the collective thoughts please.

El_Torro

I think what you say makes sense. Having 80% or more equities and no cash buffer seems wreckless to me. However a decent cash buffer allows you to take more risk on your investments. 

I won't be retiring for quite a few years but I'm thinking of something like this:

3-5 years in cash
Years 6-10 in 60% equities
The rest in 80-100% equities

There are variations on the theme of course. You seem to be thinking along the right lines though.

MetaPhysical

The cash buffer seems a more sensible option in my eyes to cover any downturns.  Whilst it's true that this 3-4 years of cash (£100k in my case) isn't exposed to equity growth I will have six times that (600k) in global equities so that is more than enough to grow (hopefully!).  Yes it could be a lumpy ride with that much in equities but the cash buffer can smooth out any downs.  A faint heart never won a fair lady.  I don't intend to be rich but just comfortable and want to take 25-30k a year from this

Rather than the full 600k in global equities, I may put 10% of that in UK 1-5 year gilts, 5% in US short duration bonds and 5% in global corporate bonds to diversify a little bit.  I need to study some more.

EDIT.  And this somewhat resembles Warren Buffet's famous 2013 letter to shareholders portfolio - 90% equities and 10% short duration bonds.

Triumph13

We are in a very similar position.  Retired at 52 in 2018, using cash to bridge DBs and SP income until they kick in, but that gives us enough of a guaranteed 'floor' that we are happy being >90% global equities in the drawdown funds.

We are possibly using our cash buffer a bit differently than you though.  Our drawdown approach is a 3.5% fixed percentage of portfolio value and the cash buffer is just to smooth that income a bit.

This approach is possible because we have enough slack in our budget, and desirable because no SORR and best odds of leaving a good inheritance.

kempiejon

I've been 90% equities most of my investing career, I have increased my allocation to cash/bonds/fixed interest recently and have got up to 15%. I am expecting it to creep up a bit as I accumulate cash from dividends, there's a few larger than average finacial outflow predicted for the next couple of years.
I postulate that a crash could halve my capital and income flow and that such a crash might take several years to recover. Hold 3 years in cash and when such, or similar, a crash does happen, if it begins to recover after a couple of years I could ride out a downturn of at least 6 years using cash to top up income.
Never really bothered much with bonds or fixed interest before, I have a bit now and use gilts to return known amounts at known dates for the next couple of years. The idea of a rolling gilt ladder dropping half my expected annual income each year for 5 or 6 years is a way to deploy 3 years of cash. If times are good any money from maturing gilts can be invested into equities, used to buy another gilt for 5 or 6 years out or spent on indulgences or philanthropy.

Albermarle

It can also depend on other factors.
Such as if you already have ( or will have ) as much money as you may ever need, and are likely to pay significant amounts of IHT, why take the risk of going all in on equities.

kempiejon

When half your income is coming from DB pensions and there's a chance of state provision to come soon then you're not taking anything like the risk of someone retiring early and investing for all their retirement income. They might be more cautious without a DB security income. Those with not quite enough money might need to sweat their investments a bit harder or as Albermarle said if they've enough money one doesn't need to take a 100% equity risk.

Triumph13

Albermarle said:

It can also depend on other factors.
Such as if you already have ( or will have ) as much money as you may ever need, and are likely to pay significant amounts of IHT, why take the risk of going all in on equities.

That depends what timescale you are working on.  Over long enough periods, the inflation risk makes cash and bonds very unattractive, and lessens the issue with the volatility of equities.  I want to pass my portfolio on, so I'm investing with an eye to the next six or seven decades.  If I didn't have kids though, I'd be buying an annuity

Bostonerimus1

I have a 80% plus equity allocation in retirement. I get my income from a mix of DB pension, rent and eventually state pension so I can accept the risk of a high equity allocation and still sleep at night. 

Skylla2010

Money marker funds as a buffer will probably be the way forward if indeed the max contribution to cash ISAs will be sharply reduced as expected.

Skylla2010

*market

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