Db transfer to Dc

Harry81 wrote: »

From the last 3 years of my pot growth and what I've been reading up on. From what ive read 4-5% cautious 6-7% balanced 8-9% adventurous. Over 20 - 30 years i guess it is more of a gamble than a guaranteed 2.5% but surely worth the risk.:beer: or not :eek:

With a DB pension (or annuity) you are paying for guaranteed lifetime income. With drawdown from a DC pension there is no guarantee. If the statistics of future stock and bond markets are similar to those of the past then a 60/40 equity to bond allocation should give you a 95% chance of being able to draw an inflation indexed 3.5% for 30 years without running out of money. Notice all qualifications and used of the conditional tense in the last sentence.

LHW99 wrote: »

But it may also drop by up to 50% in a year if things go really pear-shaped. Could you cope with seeing that, or would you sell out in a panic? What would happen if that really bad year was the one just after you retired?

50% stock market losses are very rare, but they have happened. If a withdrawal is set at 3.5% then a couple of really bad years at the beginning would probably push you into the 5% failure rate for a sensible 60/40 portfolio. So in bad years you should reduce your withdrawals, get a part time job or spend from the cash you set aside for just such a bad sequence of returns. Of course if you don't have a portfolio that is diverse and has broad stock market statistics then your chances of failure will go up. if you put everything into an alternative energy mini-bond or a single small cap stock the risk of failure will increase.