Stress Testing your Retirement plan....have you??

vulcanrtb wrote: »

Anyone considering converting their pension pot to cash for a period of volatility? My neighbour converted his to cash (not drawing on it, just converted) just prior to the credit crunch. I don't know why he did it, but he did. Lucky man as it turned out!

No. And how "lucky" he was depends how quickly he reinvested it, because he could have missed out on big gains as the market recovered.

I hold plenty of cash so that I will not be affected by market downturns in the short term. I planned that before I retired.

However, my goal of matching or beating inflation isn't working well so far, as my SIPP today is exactly where it was (within a few hundred pounds) in August 2017. It's down around 3.5% since its peak this year. But I am invested for the long term so hopefully that's not a concern (get back to me in 5 years and we'll see).

vulcanrtb wrote: »

Anyone considering converting their pension pot to cash for a period of volatility? My neighbour converted his to cash (not drawing on it, just converted) just prior to the credit crunch. I don't know why he did it, but he did. Lucky man as it turned out!

Very lucky indeed. If he's telling the truth (which is a big if) he's in a <1% minority of investors. The proof of this can be obtained simply by looking at the stockmarket graph.

If he also put all his money back in the market in March 2009, and if he sells out again just prior to the next proper crash, tell him to stop messing about with his piddling pension pot and open a hedge fund.

If he still hadn't gone back into the market by 2013 then he lost money by dumping his pension into cash.

MK62 wrote: »

However, you never really know at the time if you've won the game, as you never know how much you really need in your pot today, as you don't know what will happen in the future (inflation running rampant, global trade war and recession, market crash....then again....years of below normal returns etc.....hopefully not, but possible).

All this is true, alas. I hope I'm not being heartless - I take no joy in his misfortune. But the poster did start off by saying that he had had enough at the start of the year, and mentioned a portfolio of ITs. Perhaps that was the point for the IT-lover to swap to Personal Assets Trust, Ruffer Investment Company, Capital Gearing Trust, and the like. Or to consider whether he could have imitated their portfolios without paying their fees. Oh well: next time, eh?

I'm not sure, he just told me in passing when he learned I was planning retirement that this is what happened to him. He also mentioned that his co-workers weren't so lucky and many of them had to stay in employment a year or two longer to recover enough to consider retiring.

Next time I see him I'll ask him what prompted him to convert to cash.

vulcanrtb wrote: »

I'm not sure, he just told me in passing when he learned I was planning retirement that this is what happened to him. He also mentioned that his co-workers weren't so lucky and many of them had to stay in employment a year or two longer to recover enough to consider retiring.

Next time I see him I'll ask him what prompted him to convert to cash.

I retired in 2014 with the Dow Jones around 16k and cashed in some of my pension pot to buy a guaranteed lifetime income. The Dow is now at 25k so if I'd waited I would have done better. But how could I know that? I did what was strategically sensible at the time....I took some of my pot and bought enough lifetime income to make my retirement secure and left the rest to compound in the market. A good strategic decision might not result in the greatest possible return, but that doesn't necessarily make it a bad decision. Simply "converting to cash" is not a plan....or if it is it is a foolish one for most people.....what did your friend do with the cash...set up a savings bond ladder, Invest in a BTL or keep it a current account while inflation eats away at it?