Adventurous approach to retirement planning

RogerPensionGuy

MeteredOut said:

Pat38493 said:

If I had my time over again and I was more than 20 years from retirement, I would have my money in 100% equities.  I would only start to change that about 5 years out from stopping work.

Since I am stopping work soon (October this year), I have structured things differently now.  Roughly speaking I have
- 2-3 years of spend in cash or cash type assets like short term money market funds 
- around 3 years in a lower risk like maybe 60:40 equities/bonds.
- Another 5 years in a higher risk mix 80/20
- Anything not to be spent for 10+ years is 100% equities.

Unfortunately I only figured this out about 2-3 years from retirement - if I had figured this out about 10 or 20 years ago I would for sure have already finished work a year or two back.

Whilst I broadly agree, you have to realise this hindsight might only be the case because markets have performed so well over the past 10-20 years. And whilst history tells us that is likely to be the case going forward too, was it a 10-20 year period when markets had not performed so well, you may well have been thankful for the approach you took.

Just my view on what market history shows us historically, the last 10 or 20 years has been generally looking back at the overall market. 

However some markets have increased way more than other parts of the markets. 

The last 20 years has also shown us a nice few dips, 2008, 2020 & 2022 come to mind and very nice if people piled in on them dips or any other dips that occurred. 

My main point is history shows us history, I tend to look back at long history like 100 years and that certainly shows a bumpy ride overall, but draw a straight line and it looks super great, however that bumpy journey proved nice for some and very bad for others. 

My view is at say 55 or 60 years old we generally can not really expect or plan for a nice smooth 5, 6 or 7% rising market over even 20 years. 

History shows us history and the future will be different, but indeed it may well show us similar patterns we observed from history. 

I tend to plan for the worst and put maybe a 20% topping on that and just hope my glass half empty views don't materialise for me, but if indeed they do, I will of planned and just accept it.

It is all summed up in basic sequences risk that can be nice or not nice.

So I'm certainty not making my plans on just the last 20 years, I really feel certain segments of societies, governments and businesses may have too much debt and markets may have a few stumbling events the next few decades and beyond. 

I'll try to post an excellent YouTube on this post about the stockmarket in the late 1920s, it looked a bit slow to start, but glad I watched it fully, I have watched it a few times by now.

Talk about sequence risk, it's a sobering watch. 

***

https://youtu.be/qlSxPouPCIM?si=pluNI6mhUyTMvsIL

Hoenir

Pat38493 said:

Over 20 years though I'd be very surprised if you could have historically got a better outcome.

QE era surprised everyone. Still huge amounts of liquidity about chasing returns. QT amounts to "cold turkey".  Probability of another period of unusual financial history being written remains high. 

Bostonerimus1

As long as you can secure reliable retirement income sources other then drawdown then I think it's a good idea to stay aggressively invested in retirement. People who plan to use their pension pot for drawdown income will also probably need to have a growth component in their portfolio to keep up with inflation. De-risking into gilts and/or annuities won't provide most people with sufficient income...of course that depends on the size of their pension pot relative to their retirement income needs.

It's good that you are thinking as long term planing will help you succeed and another vital component is thrift. So here's what I did in your situation:

Make a budget and look to save money, but avoid being a Scrooge.
Buy the second hand Toyota over the new BMW.
Take note of the observation of Mr. Micawber: "Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds nought and six, result misery."
Avoid all high interest debt like credit cards and car loans. If you have any such debt pay it off asap.
Put 6 months to a years spending in an easily accessible emergency fund in your bank.
Put as much as you can into your workplace pension, invest in low cost index tracker funds.
Put as much as you can into your ISA, invest in low cost index tracker funds.
Put as much as you can into a general investment account, invest in low cost index tracker funds.
If you want to buy a house don't over extend your finances and don't be in a hurry to buy. Save for a good deposit.