How much cash is too much?

rothers

Circs are that I have an index linked pension after tax of around £42k, my wife retires next month and she will have an index linked pension of around £5k. Our total income is around £3,900 per month after tax. We currently allow ourselves £5k per month to pay for all bills (mortgage is paid off), spending money, holidays and everything else.

Between us we have around £225k in stocks and shares SIPPs and ISAs and around £540k in cash.

I am aware that we hold far too much cash but how much do you think we should actually hold bearing in mind that I am 53 (retired) and my wife will be 55 next month when she retires?

I am comfortable with fairly high risk investment due to the relatively low extra amount I need each month to cover our spends. I only invest in low cost multi asset funds due to a lack on knowledge on the subject.

Any advice?

Cheers

vacheron

General consensus in retirement is between 1-3 years of outgoings as cash so that you can ride out any short term dips in the markets without being forced to sell depressed investments (aka sequencing risk). 

vacheron

rothers said:

.... I only invest in low cost multi asset funds due to a lack on knowledge on the subject.

Any advice?

Cheers

Many (myself included) may argue that this shows that you do have knowledge on the subject! 

rothers

vacheron said:

rothers said:

.... I only invest in low cost multi asset funds due to a lack on knowledge on the subject.

Any advice?

Cheers

Many (myself included) may argue that this shows that you do have knowledge on the subject! 

  Thanks 

rothers

vacheron said:

General consensus in retirement is between 1-3 years of outgoings as cash so that you can ride out any short term dips in the markets without being forced to sell depressed investments (aka sequencing risk). 

Our ISAs are maxed out so we can't put anymore in those until April, we could put the small amount allowed each year into our sipps but the rest would have to go into a general share dealing account. Given it's quite a large sum to be invested I'd probably be tempted to drip feed it in rather than putting it all in at once, who long do you think I should drip feed it in for? 12 month, 24, longer?

2010

£50k each in premium bonds for a start.

poseidon1

Low risk tax free gains on direct investment into low coupon UK government gilts.

rothers

poseidon1 said:

Low risk tax free gains on direct investment into low coupon UK government gilts.

I have no idea what you've just said there 

vacheron

rothers said:

vacheron said:

General consensus in retirement is between 1-3 years of outgoings as cash so that you can ride out any short term dips in the markets without being forced to sell depressed investments (aka sequencing risk). 

Our ISAs are maxed out so we can't put anymore in those until April, we could put the small amount allowed each year into our sipps but the rest would have to go into a general share dealing account. Given it's quite a large sum to be invested I'd probably be tempted to drip feed it in rather than putting it all in at once, who long do you think I should drip feed it in for? 12 month, 24, longer?

I do like to drip feed, but when I have asked a similar question on here previously, the consensus has been to put it all in immediately, I still drip fed it in anyway as it gave me some inner peace, but with the weapon of hindsight of the steadily rising markets over the last 4-5 years, dumping it all in at once would have been the better option.

Some (possibly including myself) might also note that markets are at record highs at the moment, but they could have also said the same in most of the last 10 years!

Also, long term, would you want to leave an inheritance, or would you prefer security? if you have no anticipated life limiting health issues, an alternative to "risking" your cash could be to use some of it to purchase an annuity to supplemement your protected pensions with an additional guaranteed income for the rest of your life.

rothers

vacheron said:

I like to drip feed, but when I have asked a similar question on here previously, the consensus has been to put it all in immediately, I still drip fed it in anyway as it gave me some inner peace, but with the weapon of hindsight of the steadily rising markets over the last 4-5 years, dumping it all in at once would have been the better option.

Some will also say that markets are high at the moment, but they could have also said the same in most of the last 10 years. 

Also, long term, would you want to leave an inheritance, or would you prefer security? if you have no anticipated life limiting health issues, an alternative to "risking" your cash could be to use some of it to purchase an annuity to suplmement your protected pensions with an additional guaranteed income for the rest of your life.

I'd like to leave an inheritance and don't really have any interest in an annuity, given the level of income that we have we are extremely unlikely to run out of money and still have the state pension to come when we hit 67.

Whilst I am fit and healthy now, I have had cancer twice in my lifetime, in both cases I wasn't expected to make it through.

Albermarle

 but the rest would have to go into a general share dealing account. 

I do not want to put you off, but these accounts take some effort to administer. You have to note all sales and purchases for CGT purposes and dividend income, so you can inform HMRC of the details and pay the correct tax.
None of this is necessary for money in a SIPP or S&S ISA.

You are relatively young in retirement, so health issues allowing, there is a good chance that one of you will still be around in 40 years time, so there is no rush, especially as current savings interest rates are keeping up with inflation.

Personally I would think about putting £20K each per tax year in a S&S ISA for the next 5 to 10 years, depending on what you were comfortable with. If you did £20K in April and £20K in say October it would be a form of drip feeding.
Of course it is just an idea to think about, not financial advice.