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AI pension advice
Comments
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It's not extremely unlikely, that's the whole point. Dunstonh has pointed out 3 such periods in the last 60 years, one of which was for 20 years, the others for 10 years which gives a very significant chance of it happening over the next 50 years.
Remember the saying: if it looks too good to be true it almost certainly is.1 -
And what did professionals do with the portfolios during this time?
Leave them alone and let them rot for 20 years?
Didn't the savvy ones make a killing in t his period?
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"Professionals" and sensible amateurs develop plans that can easily survive the historical extremes of the markets. That might include things like annuities to produce a guaranteed income floor. I started planning for retirement when at my first job and that long time horizon is now working out for me. During the 2007 crash I decided that I didn't want to rely directly on stock market returns for my retirement income and so took a job with a DB pension option. My reasoning was that I didn't want to worry about the ups and downs of markets when I should be retired and relaxing. I still have DC investments, but my day to day income comes from rent, DB pension and annuities with SP still to come. I would recommend that you ask AI about including an annuity in your plan.
And so we beat on, boats against the current, borne back ceaselessly into the past.1 -
During the 2007/8 crash and its aftermath I just kept rebalancing my index funds. This meant selling some bonds to buy equity funds. I look back now after 20 years and things have grow nicely rather than rotting. Doing nothing would have also worked. Doing nothing often works becuase it stops you from doing something actively stupid.
And so we beat on, boats against the current, borne back ceaselessly into the past.2 -
I have looked at a ten year one, I looked at a grand a month nett, and I forget how much h but at first it seemed reasonable, however it's a big difference with yearly rises.
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An annuity will remove risk from your plan and in the end retirement income planning usually comes down to balancing risk and return in a far more consequential way than other financial circumstances.
And so we beat on, boats against the current, borne back ceaselessly into the past.0 -
It was in fact more than a decade in some areas. The Nasdaq peaked in March 2000, and it only returned to that level in 2015. The S&P 500 was a bit quicker to recover, it only took 13 years.
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I'm not a person who always thinks the worse, ie the poster basing his calculations of a decade of -1.8, when in reality it's extremely unlikely.
No, I'm not basing my calculations on a -1.8% pa real return - I was replying to your question:
how badly would the market have to perform for a pot to lose that much by SP?
I'm basing my guess on the fact that I have no idea what the future will be so I've got my AI to model lots of different futures.
A 10% chance of running out of money by age 100 for me means that I will have to rely on the state pension at sometime - meaning that avocado on toast might go out the window (if I could afford a home with a window and ate avocado on toast). But that same guesses say I have a 25% chance of having £7m (in today's money) at age 100 and a 5% chance of more than £25m.
I'm the kind of person who turns up at the airport a good while before the gate closes. So I focus more on the ruin scenario than the being able-to-afford-a-long-weekend-at-centerparcs scenario. Also, my AI tells me I only have a 3% chance of being alive at age 100 so as you say "it's extremely unlikely" - but not impossible.
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I big dip is relatively easy to deal with while you're investing, assuming you're clear headed. How would you have dealt with that period if you were living off your investments at that time?
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2007/08 convinced me to arrange things so that I don't have to live off my investments. If I was still fully invested in the markets and there was a crash I'd reduce my spending, that's always been in my plan, and then spend interest, dividends and cash and maybe part of my bond allocation. But IMO, if you can, it's nice to avoid having to make such choices.
And so we beat on, boats against the current, borne back ceaselessly into the past.0
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