Your browser isn't supported
It looks like you're using an old web browser. To get the most out of the site and to ensure guides display correctly, we suggest upgrading your browser now. Download the latest:

Welcome to the MSE Forums

We're home to a fantastic community of MoneySavers but anyone can post. Please exercise caution & report spam, illegal, offensive or libellous posts/messages: click "report" or email forumteam@.

Search
  • FIRST POST
    • Theta101
    • By Theta101 8th Mar 18, 2:48 AM
    • 140Posts
    • 28Thanks
    Theta101
    Worst Case Scenario
    • #1
    • 8th Mar 18, 2:48 AM
    Worst Case Scenario 8th Mar 18 at 2:48 AM
    My retirement spreadsheet looks good for the most part but there are scenarios where my total outgoing exceeds my income.

    If we have a long period of negative returns say -15% per year for 10 years then my pension pots dry up. So I'd be left with 2x state pension.
    If I also lost my wife I'd be left with just the state pension.

    So for me there's the possibility of having to survive on around 10K per year from age 72 onwards.

    I know very little about social benefits.

    Could I expect some social benefits if I ended up in this situation?
    What happens to retired people today who have only the state pension to live on?
Page 1
    • Alexland
    • By Alexland 8th Mar 18, 7:10 AM
    • 2,389 Posts
    • 1,791 Thanks
    Alexland
    • #2
    • 8th Mar 18, 7:10 AM
    • #2
    • 8th Mar 18, 7:10 AM
    If we have a long period of negative returns say -15% per year for 10 years then my pension pots dry up.
    Originally posted by Theta101
    15% loss on your diversified pool of assets compounding each year for 10 years would be a terrible scenario that would wipe most people out. Even without withdrawals that would destroy circa 80% of your wealth. In that situation many of us would become experts in social benefits.
    Last edited by Alexland; 08-03-2018 at 7:14 AM.
    • AnotherJoe
    • By AnotherJoe 8th Mar 18, 7:35 AM
    • 9,436 Posts
    • 10,442 Thanks
    AnotherJoe
    • #3
    • 8th Mar 18, 7:35 AM
    • #3
    • 8th Mar 18, 7:35 AM
    You could (should) extend the period before investments ran out by cutting expenditure and thus withdrawal well before the ten years of negative returns. After 2 or 3 years.

    You also have to balance the odds of coping with such a scenario with the far more likely position that you will work (say) an extra five years to accumulate enough wealth that such an unlikely scenario can be coped with, and that it doesn't occur and that you worked those five years for nothing.

    Not to mention, if you think that way, whats so special about 15%. What if it was 25% for say only 3 years but the immediate years after you retired (after those extra 5 years even), and so on.

    Better to pick a figure, say 90%, or 95% or even 100% by which all previous scenarios of stock market decline can be coped with and go at that point and leave the rest to chance. Otherwise, working until you drop, or until you have enough cash to outlast the oldest age anyone lived to is your only option.
    • GDB2222
    • By GDB2222 8th Mar 18, 8:07 AM
    • 14,382 Posts
    • 77,698 Thanks
    GDB2222
    • #4
    • 8th Mar 18, 8:07 AM
    • #4
    • 8th Mar 18, 8:07 AM
    It is a perfectly reasonable question, but there may be a better board to ask it on. Or do your own research. Here is a Linky to get you started.

    https://www.turn2us.org.uk/Your-Situation/An-older-person

    Bear in mind that, when setting the state pension at current levels, the government said the idea was to take people off benefits. Also, in the sort of domesday scenario you described, benefits might be cut.
    No reliance should be placed on the above! Absolutely none, do you hear?
    • Mnd
    • By Mnd 8th Mar 18, 9:46 AM
    • 505 Posts
    • 607 Thanks
    Mnd
    • #5
    • 8th Mar 18, 9:46 AM
    • #5
    • 8th Mar 18, 9:46 AM
    In the situation you describe I think there would be a lot of destitute people
    • Triumph13
    • By Triumph13 8th Mar 18, 10:41 AM
    • 1,180 Posts
    • 1,463 Thanks
    Triumph13
    • #6
    • 8th Mar 18, 10:41 AM
    • #6
    • 8th Mar 18, 10:41 AM
    In any scenario where 80% of the world's capital gets wiped out you are going to have a lot more to worry about than coping on a pension. That's global pandemic, nuclear war or zombie apocalypse territory!
    • Theta101
    • By Theta101 8th Mar 18, 11:41 AM
    • 140 Posts
    • 28 Thanks
    Theta101
    • #7
    • 8th Mar 18, 11:41 AM
    • #7
    • 8th Mar 18, 11:41 AM
    It is a perfectly reasonable question, but there may be a better board to ask it on. Or do your own research. Here is a Linky to get you started.

    https://www.turn2us.org.uk/Your-Situation/An-older-person

    Bear in mind that, when setting the state pension at current levels, the government said the idea was to take people off benefits. Also, in the sort of domesday scenario you described, benefits might be cut.
    Thanks for the link.
    So currently I could receive some state aid if I had no income.
    It's reassuring in a way.

    I'm close to retirement, within 4 years I think, I don't expect to run out of money but who knows?
    • GDB2222
    • By GDB2222 8th Mar 18, 12:16 PM
    • 14,382 Posts
    • 77,698 Thanks
    GDB2222
    • #8
    • 8th Mar 18, 12:16 PM
    • #8
    • 8th Mar 18, 12:16 PM
    Thanks for the link.
    So currently I could receive some state aid if I had no income.
    It's reassuring in a way.

    I'm close to retirement, within 4 years I think, I don't expect to run out of money but who knows?
    Originally posted by Theta101
    I just ran the benefits calculator on the basis that my spouse and I each have the basic state pension only and no savings. The only benefits we would get is some help with council tax. So, I'm not that reassured.
    No reliance should be placed on the above! Absolutely none, do you hear?
    • AlanP
    • By AlanP 8th Mar 18, 12:42 PM
    • 1,182 Posts
    • 851 Thanks
    AlanP
    • #9
    • 8th Mar 18, 12:42 PM
    • #9
    • 8th Mar 18, 12:42 PM
    You could defer 1 or both of the SPs for a period and build a higher inflation linked "floor income" just in case.

    Or lower the risk by looking into annuities and/or life insurance?

    Each has a cost associated with it but all risk mitigation has a cost of some kind.
    • Keep pedalling
    • By Keep pedalling 8th Mar 18, 12:48 PM
    • 4,996 Posts
    • 5,559 Thanks
    Keep pedalling
    I just ran the benefits calculator on the basis that my spouse and I each have the basic state pension only and no savings. The only benefits we would get is some help with council tax. So, I'm not that reassured.
    Originally posted by GDB2222
    Assuming you own your home you could always fall back on downsizing or equity release, providing the housing market has gone into major meltdown as well.
    • Malthusian
    • By Malthusian 8th Mar 18, 6:38 PM
    • 4,113 Posts
    • 6,451 Thanks
    Malthusian
    You could defer 1 or both of the SPs for a period and build a higher inflation linked "floor income" just in case.

    Or lower the risk by looking into annuities and/or life insurance?
    Originally posted by AlanP
    In the doomsday scenario the OP is describing - assuming he has a properly diversified portfolio and -80% over ten years reflects the global economy, and isn't due to duff investments - insurers would default on annuities and the FSCS would collapse. The government might print money to allow the FSCS to technically meet its obligations but then the value of the compensation would be near worthless due to inflation, so it makes little difference.

    There is little point worrying about the doomsday scenario, not so much because it is unlikely, but because there is no useful action that can be taken. Other than staying fit and healthy and learning skills that would allow you to defend yourself and be socially valuable if the apocalypse came.

    The answer to the OP's question is yes, some kind of relief will be available. This has nothing to do with the present benefit system, which will be destroyed in the event of a long-term 80% crash in global asset values. It is simply because most people are generally decent and some sort of support always exists for those in need, whether from the government, friends, charities, churches, etc etc.
    • sleepymans
    • By sleepymans 8th Mar 18, 6:41 PM
    • 718 Posts
    • 1,095 Thanks
    sleepymans
    Lets face it......the next decade or two will see S.P. becoming valueless.....
    Goddess
    • Keep pedalling
    • By Keep pedalling 8th Mar 18, 7:31 PM
    • 4,996 Posts
    • 5,559 Thanks
    Keep pedalling
    Lets face it......the next decade or two will see S.P. becoming valueless.....
    Originally posted by sleepymans
    And you base that on what exactly?
    • Alexland
    • By Alexland 8th Mar 18, 7:38 PM
    • 2,389 Posts
    • 1,791 Thanks
    Alexland
    Lets face it......the next decade or two will see S.P. becoming valueless.....
    Originally posted by sleepymans
    Hope not that's a core part of most people's retirement plans!

    My worst fear is that it becomes means tested.
    • westv
    • By westv 8th Mar 18, 8:38 PM
    • 4,525 Posts
    • 2,122 Thanks
    westv
    Perhaps if we all lived to 200 they might start means testing the SP but I very much doubt they would otherwise.
    • kidmugsy
    • By kidmugsy 8th Mar 18, 9:51 PM
    • 10,574 Posts
    • 7,234 Thanks
    kidmugsy
    Don't worry. The rise of antibiotic-resistant bacteria will reduce the likelihood of surviving into a poverty-stricken old age. It's an ill wind ...
    Free the dunston one next time too.
    • Theta101
    • By Theta101 8th Mar 18, 11:19 PM
    • 140 Posts
    • 28 Thanks
    Theta101
    The question, which has been answered by GDB2222, was not really about global stock market crashes but more about me learning about available current social benefits just incase MY POT was unexpectedly decimated.

    But we have already had a crash of more than 80% in the last 100 years. It didn't involve pandemics or zombies, as far as I know!

    The Dow Jones Industrial Average lost 89% of its value before finally bottoming out in July 1932.
    https://en.wikipedia.org/wiki/Stock_market_crash

    Of course that could never happen again in my life time!
    • badmemory
    • By badmemory 9th Mar 18, 12:43 AM
    • 1,624 Posts
    • 2,158 Thanks
    badmemory
    Question 1 - how many people receive or are within 10 years of receiving state pension?

    Question 2 - what proportion of the electorate that vote are over 50?

    Question 3 - if you are over 50 will you vote for party A or party B if party A has decided to stop paying the state pension?

    Question 4 - what party wants to ensure they won't get elected for some years?

    Question 5 - when will we ever get a political party that actually wants us ALL to thrive?
    • Alexland
    • By Alexland 9th Mar 18, 7:02 AM
    • 2,389 Posts
    • 1,791 Thanks
    Alexland
    The question, which has been answered by GDB2222, was not really about global stock market crashes but more about me learning about available current social benefits just incase MY POT was unexpectedly decimated.

    But we have already had a crash of more than 80% in the last 100 years. It didn't involve pandemics or zombies, as far as I know!

    The Dow Jones Industrial Average lost 89% of its value before finally bottoming out in July 1932.


    https://en.wikipedia.org/wiki/Stock_market_crash

    Of course that could never happen again in my life time!
    Originally posted by Theta101
    So are you planning to be 100% invested in a small selection of US companies during your retirement? Not interested in reducing risk by diversifying into the broader market, different geographies and other assets types?

    Stock market investing is supposed to be a long term investment (to allow time for crashes to recover) so it is prudent to have a plan for your short to medium term income requirements to avoid selling low.

    Alex.
    Last edited by Alexland; 09-03-2018 at 7:13 AM.
    • Sea Shell
    • By Sea Shell 9th Mar 18, 7:19 AM
    • 730 Posts
    • 1,016 Thanks
    Sea Shell
    We worry about the "what-ifs" too, but we know that we are in a much stronger position than a lot of people.

    My view is that, if we end up in trouble, with current funds behind us, then we'll have more to worry about than just our depleted investments...as the country will have probably gone down the toilet, taking everyone with it.

    But I'd rather be worrying about the money I do have, rather than worrying about money I don't have.

    What of those with debt, no savings, no personal pensions, renting...with no guarantee that benefits will continue, and if they do, what sort of life is that as you get older.
    " That pound I saved yesterday, is a pound I don't have to earn tomorrow "
Welcome to our new Forum!

Our aim is to save you money quickly and easily. We hope you like it!

Forum Team Contact us

Live Stats

54Posts Today

3,126Users online

Martin's Twitter
  • It's the start of mini MSE's half term. In order to be the best daddy possible, Im stopping work and going off line? https://t.co/kwjvtd75YU

  • RT @shellsince1982: @MartinSLewis thanx to your email I have just saved myself £222 by taking a SIM only deal for £7.50 a month and keeping?

  • Today's Friday twitter poll: An important question, building on yesterday's important discussions: Which is the best bit of the pizza...

  • Follow Martin