De-risking before retirement

OldScientist

https://forums.moneysavingexpert.com/discussion/6655535/de-risking-before-retirement

To bridge the gap some alternatives are:

1. Index linked gilt ladder: according to https://lategenxer.streamlit.app/Gilt_Ladder the current payout rate on a 6 year index linked gilt ladder delayed for 2 years is 16.9%. In other words, your £150k will provide an inflation protected income of about £25k per year, but there will be nothing left at the end of the period.
2. Cash (MMF or easy access): Historically, in the worst case a 100% cash 'pot' would have provided an inflation protected payout rate of about 11% over 6 years (e.g., see https://www.2020financial.co.uk/pension-drawdown-calculator/ ). In other words, an inflation protected income of about £16.5k per year, but the amount left over depended on real cash returns over the 6 year period. Adding equities didn't make a lot of difference to the worst outcome (i.e., the payout rate was still about 11%), but it did increase the amount left after 6 years in the better historical retirements. I note that this calculator doesn't include the 18 months of potential growth, so the actual payout rate would probably have been slightly higher than 11%.

Of course, the different approaches could be combined.

LateStarter

https://forums.moneysavingexpert.com/discussion/comment/81888065#Comment_81888065

Love the gilt ladder link, thank you. I'm considering cash/gilts for essential spend, and keeping some of the SIPP in funds. If the funds grow, I sell them, if they don't I use the cash reserve until the funds recover.

LateStarter

And after the drops this week, I understand why you should de-risk when the world is stable.

Albermarle

https://forums.moneysavingexpert.com/discussion/comment/81908725#Comment_81908725

Although so far the drops are rather minor.

LateStarter

https://forums.moneysavingexpert.com/discussion/comment/81908858#Comment_81908858

Agreed; but it takes away the worry of further falls. And peace of mind is priceless.

NormalNorman

De-risking… don't forget the expensive death bit. Simplify, joint names, wills, POAs, give with warm hands, spend it vs hoarding, don't die with debt etc… Might save more money than say a fund choice.