Retirement Planning

20122013

The 'Savings & investments' board have suggested to post here and have edited this post.

I am nervous about investing but need to get on with it.

I have 12 years till SP age, an old work pension worth about £100,000 and a separate pot of savings to last till 12/2030 with no debt.

My current spend all in is about £30,000 pa (net) due to my needs will increase to £32000 pa (net) from 1/2031.

I have 10 years (minimum) to invest all my savings and I would like to know how to ensure my portfolio is diverse and include some guarantee income as I may need a large lump sum (for emergencies).

I will need £32,000 net per year return/ income from 1/2031 and I was planning to invest in bonds after I have got my SP but if I need a guarantee income from 1/2031 I should start getting bond or something else other than equities?

50% of my total investment will be S&S ISA. I have one investment which is an all world index fund. Due to Magnificent 7 / US tech stocks, I will be selling half and reinvest it.

Split:

25% HSBC FTSE All World Index C Acc | all world index fund (high risk noted) only current investment

40% MSCI World Defensive Sectors Index | Defensive stock index tracker, need an alternative which is available on ii (not sure about ETFs)

25% Multi asset fund or mixed equities/bonds portfolio Vanguard life strategy

10% thinking of my options, a Global Fund with limited exposure to the "Magnificent 7" US tech stocks : Vanguard Global Equity

I would like to know What size 'pension' pot do I need, and in what investments, to deliver an income of Y (factoring in inflation and tax)?
and What lump sum do I need, and in what investments, to deliver an income of Y (factoring in inflation and tax)?

Vitor

You are trying to plan a whole retirement income strategy, including bridging to State Pension age, managing tax, keeping emergency access to capital, and deciding whether any of the income needs to be guaranteed. That is exactly the sort of situation where a good independent financial adviser is worth paying for. A forum can give general ideas, but it cannot tell you what is suitable for your circumstances

Marcon

I have 12 years till SP age, an old work pension worth about £100,000 and a separate pot of savings to last till 12/2030 with no debt.

My current spend all in is about £30,000 pa (net) due to my needs will increase to £32000 pa (net) from 1/2031.

I have 10 years (minimum) to invest all my savings and I would like to know how to ensure my portfolio is diverse and include some guarantee income as I may need a large lump sum (for emergencies).

I will need £32,000 net per year return/ income from 1/2031 and I was planning to invest in bonds after I have got my SP but if I need a guarantee income from 1/2031 I should start getting bond or something else other than equities?

You don't say how much is in the separate pot of savings or why that only has to last until 2030 - from the way you've phrased the comment, it sounds as if the savings pot will run out at that point?

I see from one of your other threads that 'had' used an IFA for a long time, so I wonder what's changed to make you decide you want to go the DIY route when you describe yourself as 'nervous about investing'? You've also mentioned in a post last month that you 'hope to get back into paid employment' which suggests you might not be in employment at present? If you need a net return of £32K from 2031, you'll either need to be earning a very substantial salary, or have a very large pot of capital tucked away somewhere to invest - and have pretty strong nerves to the the sort of risks you'll need to take to achieve that outcome, certainly from 2031 until your state pension kicks in about 6 years later. Without knowing which of those applies (if either), it's difficult to make any helpful comments.

Linton

https://forums.moneysavingexpert.com/discussion/6659809/retirement-planning

Some initial thoughts to give you an idea of a sensible approach and some of the issues involved…..

Firstly assume current prices. You are wanting a net income of £32K. That means a gross income of say £36K. For the first 10 years it will all be covered from savings/investments but in 10 years time your annual withdrawal will drop to about £24K with the remainder covered by State Pension.

So the lump sum required is £125,000+inflation for the 10 years before SP and, assuming 3% of initial sum withdrawal the rest could be covered by £24K/3% = £800K. The 3% may look low but your drawdown would need to increase in £ terms because of inflation. So a first pass total estimate would be £925K if you were starting now.

But the 3% assumes you are invested 60% equity 40% bonds for the rest of your life. The equity is essential because it will broadly increase at least by inflation. Your suggestion that you will only be using bonds could be very dangerous, the worst possible financial outcome being that you live longer than your money.

The usual recommendation here for people who are very risk averse is to buy an annuity where the income, possibly increasing with inflation, is guaranteed until you die.

Given your lack of experience with investing and the amounts of money involved I would agree with @Vitor that you could look at paying for advice from an IFA who would consider your circumstances and needs, make recommendations, and if necessary set up investments and/or buy an annuity for you.

Vitor

For £32,000 you'd need about £800k for cautious drawdown, about £450k-ish for a level annuity at around age 65, and quite a bit less if State Pension is making up part of the £32,000

20122013

I have started a 5 year cash ladder which will lasts till 1/2031 and it will be replenished from my investment. if that does not work out then I will sell some investment regardless of how the market is doing but all being well, it should work out.

My previous message may not have been clear, I would prefer to invest 100% in equities. As I need guarantee income, I may have to hold some bonds along 70% - 80% equities? I will have a look at annuity.

Marcon

Do you have £800K to invest?

ali_bear

You don't mention if you are still working?

Marcon

https://forums.moneysavingexpert.com/discussion/comment/81924462#Comment_81924462

There's an awful lot of OP hasn't mentioned - especially the amount they have available to invest.

OP, if you have significant savings held outside a pension scheme, have you considered using some of those savings to buy a purchased life annuity? That would give you a guaranteed income, and receives favourable tax treatment because part of each payment is treated as a return of capital.

20122013

I am not working at the moment due to personal reasons and looking for other source of income (take in a lodger)

I have thought about annuity, it is great to have some guarantee income, I would like to know how flexible will it be if I need more than the annuity? I have not looked into it fully. I also need to understand more about the options. Hence, my post.

ali_bear

Annuities are not flexible at all. They just pay out and may (or may not) increase over time according to whatever type was purchased.

You could think about having one that just covered your basic living costs, and using other sources to cover the more costly periods or events in life.