Stick or twist with contributions?

4500_Donavan

I have posted similar thoughts and questions before but am now getting more clarity of thought. So, apologies in advance to those who search old posts to find and call out repeat posters.

I'm 54 and a bit. I have 2 retirement options in mind. Scenario 1, ideally retire at 60. Scenario 2 is to retire at 62 when mortgage is paid off. SIPP and SP will be only retirement income. 

I have accumulated 67% of the capital required to retire at 60 and 75% to retire at 62.

I need the existing pot to grow annually by an average of 6% to retire at 60 and 3.3% to retire at 62.

I am invested as follows:

10% BlackRock World Technology

12% Fidelity Global Technology

25% Fidelity Index World

27% Legal & General Global Technology Index Trust

26% Legal & General Global 100 Index

I am very, very Tech and US heavy but I believe any crash will be short lived and the Al bubble will evolve into amazing industrial and consumer automation.

I work in IT for a manufacturing organisation and see the Al tools embedded by our software suppliers and the additional value they provide. I'm a believer!

I am employed and still contributing monthly to my SIPP.

In scenario 1, I am 5.5 years away from retirement. In scenario 2, 1 am 7.5 years from retirement.

Are my contributions now better served to building up my 4 year cash buffer?

I'd probably put the monthly contributions into Royal London Short Term Money Market.

If I continue contributing at current rate, I will have accumulated around half my of required 4 year cash buffer at retirement.

I recognise from my fund mix that I have a high risk appetite to chase the growth but I am wondering if now is the time to start building the cash buffer to reduce SORR. I am conflicted at the thought of missing out on growth of future contributions.

If my Dad was still around, I'd discuss it with him and we would work out a strategy together that I would feel confident in!

Marcon

It's a long post and I'm still none the wiser as to your priorities - and I suspect you may not be either! Until you work out what those are, you'll go round in circles. Only you know your attitude to risk - and how much FOMO might impact on your choices.

Albermarle

 am very, very Tech and US heavy but I believe any crash will be short lived

I think you need a Plan B in case you are wrong !

4500_Donavan

Albermarle said:

 am very, very Tech and US heavy but I believe any crash will be short lived

I think you need a Plan B in case you are wrong !

Thanks. Plan B would be the cash buffer. 

4500_Donavan

Marcon said:

It's a long post and I'm still none the wiser as to your priorities - and I suspect you may not be either! Until you work out what those are, you'll go round in circles. Only you know your attitude to risk - and how much FOMO might impact on your choices.

I think my priority has to be the cash buffer. Only needing annual growth of 3.3% to retire at 62. I think just writing it all down has helped me come to that conclusion. 

Marcon

4500_Donavan said:

Marcon said:

It's a long post and I'm still none the wiser as to your priorities - and I suspect you may not be either! Until you work out what those are, you'll go round in circles. Only you know your attitude to risk - and how much FOMO might impact on your choices.

I think my priority has to be the cash buffer. Only needing annual growth of 3.3% to retire at 62. I think just writing it all down has helped me come to that conclusion. 

I was sorely tempted to say something I've said on more than one occasion: read your own post. So often people have answered their own question, often unconsciously doing so in the process of formulating and writing down their thoughts. Such posts are rarely neutral, and listening to yourself is often a pretty good idea!

ali_bear

It depends on what you intend to do on retirement. If the majority of your fund is going to stay invested then a short term downturn at that time doesn't hurt you much. Alternatively if you were going to convert, say, half of your DC fund into an annuity it would. 

4500_Donavan

ali_bear said:

It depends on what you intend to do on retirement. If the majority of your fund is going to stay invested then a short term downturn at that time doesn't hurt you much. Alternatively if you were going to convert, say, half of your DC fund into an annuity it would. 

Thanks. My plan is monthly drawdown by selling fund units and using cash buffer outside of guardrails.

GenX0212

Is it 6% / 3.3% or 6% / 3.3% plus inflation that you need?

ColdIron

4500_Donavan said:

Albermarle said:

 am very, very Tech and US heavy but I believe any crash will be short lived

I think you need a Plan B in case you are wrong !

Thanks. Plan B would be the cash buffer. 

Your plan B needs to be an integral part of plan A

You need robustness and flexibility to provide a reliable income for the rest of your life in lieu of an earned income. Are you boxing yourself into a single course of action?

What is your actual plan B (let's call it plan C)?

4500_Donavan said:

ali_bear said:

It depends on what you intend to do on retirement. If the majority of your fund is going to stay invested then a short term downturn at that time doesn't hurt you much. Alternatively if you were going to convert, say, half of your DC fund into an annuity it would. 

Thanks. My plan is monthly drawdown by selling fund units and using cash buffer outside of guardrails.

Selling funds every month (if that is the plan) will get old very quickly

4500_Donavan

GenX0212 said:

Is it 6% / 3.3% or 6% / 3.3% plus inflation that you need?

Hi. Income requirements have inflation built in for amount required at 60/62 (6%/3.3%).