De-Risk as approach retirement /and once retired

Mick70

Hi
wonder if could help with some opinions, do posters with DC pots (not final salary) tend to de-rsk their pensions as they approach retirement and/or once retired ?
My wife pension is about 75% in a 60:40 split and the remaining 25% is 80:20 split  (Bonds:equity).
We are hoping she can retire end March 2026 and will be 58 , is it a wise move to have all the funds moved into 60:40 portfolio so less exposed to risks of downturns , however still taking some risk 

also, on my own circumstances , mine is with royal london , one of their governed portfolios and is fairly high risk, I believe the portfolio is called "Enhanced" and the next one down regarding risk exposure is called "Growth"  and then "Moderate" , I am hoping to retire in just under 2 years time (hopefully) ,  again should i seek to de-risk slightly as I approach retirement 

Many thanks for opinions
Mick

El_Torro

I am not close to retirement myself but if you're not planning to buy an annuity I think it's important to allocate money depending on when you are going to access it. Money that is going to be accessed in 10 years or less should probably not be 100% equities. Say years 1 to 5 in cash and years 6 to 10 in a 60 / 40 multi asset fund. Different people will have different approaches of course. 

For money that will be accessed in 10 years or more I don't see a big problem with having this in 100% equities, or 80 / 20 if you wish. Just make sure to rebalance your pots as time goes by and when the market allows. 

PhoneBook

Relevant video here from PensionCraft    www.youtube.com/watch?v=74xWcwY8KMM

Mick70

thank you for help

Pat38493

Mick70 said:

Hi
wonder if could help with some opinions, do posters with DC pots (not final salary) tend to de-rsk their pensions as they approach retirement and/or once retired ?
My wife pension is about 75% in a 60:40 split and the remaining 25% is 80:20 split  (Bonds:equity).
We are hoping she can retire end March 2026 and will be 58 , is it a wise move to have all the funds moved into 60:40 portfolio so less exposed to risks of downturns , however still taking some risk 

also, on my own circumstances , mine is with royal london , one of their governed portfolios and is fairly high risk, I believe the portfolio is called "Enhanced" and the next one down regarding risk exposure is called "Growth"  and then "Moderate" , I am hoping to retire in just under 2 years time (hopefully) ,  again should i seek to de-risk slightly as I approach retirement 

Many thanks for opinions
Mick

I am using a cash flow ladder model to model my retirement, finishing work in October.  This splits the required spending into different phases.
- First 2-3 years cash (could be inside or outside pension wrapper)
- Next 3 years 70/30.
- Next 4-5 years 80/20
- Anything not needed for 10 years or more 100% equity.

These were just the numbers I chose - you could go with 60/40 and 70/30 or whatever according to your risk appetite.

In the end, once you calculate this all out in a spreadsheet, for me it results in an current overall allocation of 69/8/23 Equity/Bonds/Cash, so my equity is in the similar ballpark to your wife.  Cash is high as I have much bigger outgoings in the first few years than later in the plan.

Theoretically I would get the very similar end result if I just shove the whole lot into an 70/30 multi asset tracker fund but the psychological crutch of the cash buffer will hopefully help me sleep at night.

I also have some of my planned spending in the first 10 years classified as "not affecting lifestyle" - things like planned solar/battery install or kids LISA contributions - these can be deferred to later years if needed so I have those amounts still sitting in equities.

So yes I have effectively de-risked somewhat because I was on about 85% equities 15% bonds up until about a year ago.  However I expect the equity % to go back up over time unless I get a very poor sequence of returns.

Albermarle

OP
Apart from the good comments above, it is partly a matter of personal choice.
What I might do would not necessarily be the same as you would do, or what Joe Bloggs would do.

All you can really say is that the volatility of 100% equities in retirement would not suit the large majority.
On the other hand keeping it all in cash, or low equity % ( < 25%) is normally not recommended either.
So something inbetween , sorry not be more helpful !

leosayer

I de-risked before retirement by making all new contributions go to a short-term bond fund instead of a global equity index fund. My wife and I are now retired and we allocated 70/30 equity/bond however a lot of that bond allocation will be use in the next year to fund building work.

Up until then I was invested 100% equity however this is only part of my retirement income - I also have a deferred DB pension.

There are many considerations when deciding on the allocation suitable for you but ultimately it comes down to what helps you sleep at night and stops you from doing things against your own long term interest like panic selling in a market downturn.

Albermarle

leosayer said:

I de-risked before retirement by making all new contributions go to a short-term bond fund instead of a global equity index fund. My wife and I are now retired and we allocated 70/30 equity/bond however a lot of that bond allocation will be use in the next year to fund building work.

Up until then I was invested 100% equity however this is only part of my retirement income - I also have a deferred DB pension.

There are many considerations when deciding on the allocation suitable for you but ultimately it comes down to what helps you sleep at night and stops you from doing things against your own long term interest like panic selling in a market downturn.

I agree.
In fact if one has some DB pension and some cash reserves, then if your 60% equities portfolio gets hit with a 30% stock market crash, you overall are only down by maybe 10%, although as we saw recently inflation of 10%+ can hit everything.

Mick70

leosayer said:

I de-risked before retirement by making all new contributions go to a short-term bond fund instead of a global equity index fund. My wife and I are now retired and we allocated 70/30 equity/bond however a lot of that bond allocation will be use in the next year to fund building work.

Up until then I was invested 100% equity however this is only part of my retirement income - I also have a deferred DB pension.

There are many considerations when deciding on the allocation suitable for you but ultimately it comes down to what helps you sleep at night and stops you from doing things against your own long term interest like panic selling in a market downturn.

great username BTW

Bianchiintenso

I'm in 'semi' retirement,  I shifted slightly to more adventurous when I set up my own sip for retirement from 100% balanced to 75% balanced / 25% Adventurous,