Bear Market/Crashes: how do Retirees Deal with it?
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Thrugelmir wrote: »I know a few people that have taken their NHS pension at 55 only to regret it a few years later. As their compatriots continue to grow their benefits to an even higher level.
Yup, keeping DB running if you can is no brainer. Zero DB for me as technology industry so none of this legacy.
My sharp mind wants to work on more challenging things than work has thrown up for the last two years.55 is a young age to retire. Worked with many people over the years that kept their hand in. Well into the 70' and 80's. Sharp minds never deaden.
I can retire and take 4% from pots pre state pension (and less post) with *zero* drop in "take home pay". Why keep on working? I can't put any more into UK pensions, tax is now at silly levels, stress and conference calls until 8/9/10pm were harming my health, so sod it all TBH.I am not a financial adviser and neither do I play one on television. I might occasionally give bad advice but at least it's free.
Like all religions, the Faith of the Invisible Pink Unicorns is based upon both logic and faith. We have faith that they are pink; we logically know that they are invisible because we can't see them.0 -
DairyQueen wrote: »Good topic for discussion OP. No offence to the zillionaire and comfortably-DB'd contributors but this post seems aimed at others - i.e, those that that can't rely on those kinds of financial cushions but whose essential retirement income is entirely exposed to the vagaries of cash returns and the markets.
There's been a lot of research into retirement income withdrawal rates from various stock and bond portfolios, but that doesn't give you the whole picture on how you might want to organize your money for retirement income. The UK was until recently heavily biased towards annuities and it has now flipped to DC drawdown and with interest rates so low annuities are seldom even considered and CETV are very tempting. Drawdown can seem very attractive with some reasonable assumptions, but you should always be conservative when planning retirement income and even if the 4% rules says you are very likely to be ok you should consider some income diversity. I expect at least partial annuitization to come back in favour as interest rates climb back up and stock markets start acting a bit more sensibly and revert back to less than double digit annual gains.“So we beat on, boats against the current, borne back ceaselessly into the past.”0 -
Thrugelmir wrote: »Annuities come in various guises. They should not be disregarded out of hand. As provide a guaranteed income stream. That combined with the state pension at least provides a solid base level.
Foolish to leave ones entire pension invested at the whim of the markets. No amount of hindsight can predict the future. More so given the past decade. Where the aim of the Central Banks is actually to maintain financial stability. Not provide investors with a bumper return. That in fact has come about as there is no where else to invest/save money with any hope of a positive return. When there's only one game in town. Can only end one way.
I am nowhere in your league of knowledge but I don't think I made any reference to disregarding annuities.... just not now. As far as I am aware there are only three sources of guaranteed, index-linked retirement income at the moment: SP, DB and annuities (the latter being particularly poor value right now). I'm open to learning if I've missed something in that list.
Assuming that SP is not enough, and DB is absent, and annuities are very poor value what do we have left? As far as I know we have cash and the markets. As you say, that's the only game in town.
It will cost a sum more than the average person has available to fund a 'base level' annuity at the moment. I'm sure that you know the size of the average retirement fund.
I (and I'm sure others) know the risks involved. We may be newbies but that's the first lesson we learn. We have a choice: buy a (poor value?) annuity, invest in cash (at returns below inflation) or take a risk. With millions of others I have chosen to take a (I hope) calculated risk. If the markets go against me then I plan to draw on my cash reserve and top-it up when markets are better.
I am not seeking a 'bumper return'. If annuities represented anything like a decent return - ditto cash - then I wouldn't feel the need to expose so much of my retirement fund to the markets. As things stand I feel that I have no choice.
I also believe that when interest rates rise a large number of retirees will move funds from the market. In the interim 'one's entire pension is (not) invested at the whim of the markets' but definitely more of it is invested this way than would be so if there were any guaranteed/inflation-linked alternatives that made financial sense.
I think it's likely that many retirees/, and hose close to, will move funds into safer investments if economic conditions return to historic norms.0 -
Thrugelmir wrote: »
55 is a young age to retire. Worked with many people over the years that kept their hand in. Well into the 70' and 80's. Sharp minds never deaden.
You can keep your hand in and your mind sharp without all the hassles, politics and the life shortening stress of work. I've recently completed an OU BA in Maths. Working on the MSc now.0 -
You can keep your hand in and your mind sharp without all the hassles, politics and the life shortening stress of work. I've recently completed an OU BA in Maths. Working on the MSc now.
Totally agree. Even though i am working now (im 34) i plan to go part time soonish and on my "off" days i plan to continue to learn to code.0 -
DairyQueen, you seem to be well organised with a good strategy, but I'm interested in your comment above. When you say unlikely to invest the cash until the markets settle, do you mean wait to hopefully settle at a much lower level than at present? I am not yet fully invested and am also happy to bide my time in the current circumstances, but if they continued to fall to say 20% I'd be tempted to invest more at that time even although they may well still be volatile and could fall further.DairyQueen wrote: »I am currently holding 4% of my SIPP portfolio in cash but am unlikely to invest that until the markets settle. I would prefer to miss any opportunistic gains( losses?) than try and guess the markets.0 -
bostonerimus wrote: »My accounts will be $100ks less than they were a couple of weeks ago. But you can only spend cash so until you sell it isn't real. Keeping these losses "theoretical" is why a retiree should have a cash buffer and get some income from things like dividends, spare time job, rent, annuities or a define benefit pension.
managing to stay calm in the face of £50k or so of paper (online?) loses this month...not interested in knowing the exact amount.
My asset allocation has helped to moderate losses a little and gains over the last 18 months since I stopped working/retired reassure. Quietly pleased with myself that I have handled this first, albeit small, test satisfactorily. Even my wife was surprised by my response...fearing a less tranquil reaction to plunging markets.
Now mentally telling myself that if it were £300k :eek: instead that would be ok because I have cash and bonds to tap into before I go near forced equity selling. No doubt that would/will be a lot more painful but the principle is the same as the last week of loses just supersized.
The likes of Jim Rogers saying the next bear market will be the worst in our lifetimes (and he's in his 70s) is sobering....and you have to hope this is not a 1966 scenario in the making.
But as they say, nobody knows nothing.0 -
You can keep your hand in and your mind sharp without all the hassles, politics and the life shortening stress of work. I've recently completed an OU BA in Maths. Working on the MSc now.
Not suggesting that one works in a normal everyday full time position. With years of experience in a particular field one knows when one is right. Being politely blunt is an effective tool for dismissing those that expel hot air.0 -
When I retire I hopefully 5 years time I will have to psychologically get my head around actually withdrawing money. I!!!8217;ve never spent any investments and will take some getting used to.0
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