The Retirement Investing LIE!

[@deputydd4364]

So I’m doing 3 pots of retirement funds to last a 30 year retirement. So I know for age 60-70 I can burn through pot 1 and leave pots 2 and 3 in higher risk investments. That just helps my simple head for planning! My biggest fear is getting to 85+ and wishing I’d spent more aged 62. I know mathematically it doesn’t matter but it helps my planning head.

[@johnmasterman]

That’s not a bad idea

[@bonditltd5346]

Bonds I have are less than 2%, but the rest - global index funds, rental incomes, 2 final salary schemes, back up in ISAs and Premium bonds. Should be covered

[@soulsynthesiscreations]

Such a well explained piece, earned a sub

[@HourGlassFigureCD]

I think the issue here is not bonds but bond funds. Buying individual gifts is a fantastic way to diversify risk. But bond funds do not perform the same function as you never really know what you are getting. They just buy another bond / girl when the latest one matured, and so follow equities down if they are dropping.

[@PrinciplesPersonalFinance]

Yes, that's an important nuance. Good point!

[@johndoh539]

I like Nick Murrays suggestion. Keep 5 years worth of cash or cash like products needed in retirement (less state pension or other pensions) Have the rest in equities, where you can draw 3 to 4 % every year. In a down period, dip into your cash reserves to stop you selling when shares are down. When shares recover, top up the cash pot. Rinse and repeat . The 5 years worth of cash reserves is the length of recovery time of a severe bear market.. What do you think !

[@DeeCee-nb6ev]

Average UK income is £42,000 = £210,000 five years - 20% tax = £168,000 not including state or other pensions in cash / cash products?

[@johndoh539]

@@DeeCee-nb6ev perhaps I wasnt clear. 2 times state pension plus small private pension gives say £30k per annum. If I require 40k per annum then I only need another 50k for 5 years..(in premium bonds for a bit of fun and easy accessibility.

[@DeeCee-nb6ev]

@@johndoh539 thanks for that. Wasn’t sure if you were including pensions or not. £50k in cash / Physical savings between two is achievable. Spreading the £50k between (for example) cash in bank, premium bonds, gold, etc is a good strategy. Lots of actual cash in the bank while nice to have is not a good idea with the government / HMRC being able to know you have it.

[@allthegearuk]

​@@DeeCee-nb6evthat sounds right. As you near retirement you should funnel some money from your pension into cash or cash like assets. If you have enough cash for retirement you should have your money anyway. 5 years of guide, each to their own but it should be enough for shares to recover.

[@liverpool3469]

I am from Canada and that is exactly my plan: 5 years in cash and everything else in 100% stocks

[@audience2]

I select the long term 5 years+ best performing fund in my employer pension. This is a broad index based fund with companies like apple, nvdia, etc. I avoid lower risk, lower performing funds and avoid ESG.

[@RandomJane104]

At 51 I'm at 80/20. By 60 (when I hope to at least drop to part-time work), I plan to be 70/30. I will probably stick with that.

[@bsmith5404]

Interesting and timely views, thanks. My overriding thought now though … what’s with the stoop and walking stick icon for a 65 year old? 😆

[@PrinciplesPersonalFinance]

🤣🤣 I could blame my editor for that, but more accurately I'm projecting and it's me at 65. These knees aren't lasting 30 years!

[@CarolinePicking]

I'm right at the start of retirement. I'm 90% invested in stocks (global, passive). I have my next 3-5yrs in (slightly) lower risk fund, next 2yrs in cash and around a 3yr emergency cash (ISA) fund. But there are 2 big factors: my basic living needs (no luxuries) are met with state pension + an annuity (increasing with rpi) and I have potentially up to 5yrs in cash if needed to top that up. So overall it feels fairly low risk. I also have a track record of coping & not panicking when the market goes to shit. I stop looking and hunker down & wait. So everything in my SIPP and most of my s&s ISA can run free and take the risks.

[@richardlincoln886]

09:11 - Re the biggest drops, Is there any information on how long each too to bounce back to the same level?

[@stephen2203]

I am nearly 70. I run my own ISA and SIPP because I looked at the insurance products (annuities) and was reminded of Giraffes. I am 100% stocks, no funds and no ETFs. I owned a bond once when it was marked down by 45% against its principal, and sold it when the price came back to within 90% of principal. In 2020 when the market collapsed ... none of my holdings collapsed. I scratched my head, then two weeks later my holdings also collapsed along with their dividends, so I reduced my withdrawal rate but didn't sell anything. It all came back eventually. At the moment I am making 12% and reinvesting the excess. It helps having two other income streams otherwise I would have been in a dark place in 2020/21. I have just started buying Gold in an ETC, only a tiny amount so far and it is an experiment.

[@nickgreen8268]

A PM ETC and ETF decay in value over time when compared to the underlying metal due to overheads, exacerbated by the fact that they don't deliver income. Also there is counter party risk and the biggest advantage of PMs is there inclination to offset stock market falls, however mostly they are kept as insurance against total collapse but only the physical metals can impart this advantage as the ETC contracts would likely default under such conditions.

[@stephen2203]

@@nickgreen8268 Well that was interesting. I just looked at the "spot gold" price since 2010 and compared that to the Xetra Physical Gold ETC over the same period. For the last ten years (Jan'14 to Jan'24) the gain on a one-time buy in Xetra was 108%, the gain for the spot price was 68%. 🤔

[@andrewn7340]

If the 50% drawdown can last 6 years, and you retire with a 30x annual expenses investment portfolio (a more conservative version of the 4% rule) then it stands to reason a 20% cash or short duration bond allocation you can draw down on in a disasterous situation would see you through. Personally i think markets these days are more volatile and more liquid than ever and see faster falls and faster recoveries.

[@johnforrest4373]

A market down turn is quite often a buying opportunity. DC pensions are for me a minor component. Avoided lifestyle funds, went by pre 2008 performance data from a major fund manager. 8.3%pa target 4.7% real yeild 3.6% inflation. Multi sector&multi country int. If one sector up 16.6% and the other down 8.3%. 8.3% switch from the up to the down. Perhaps reversed a few year later. Figure sometimes affected also by currency movement. Had a good run on index linked bonds for a good while 😊 Bought a wee bit today MYI 255 the other day, bought in at 240 today 3%added to invested component, in drawdown portfolio from cash. Maybe BoE should have done 0.5%, feeling this mornings atmosphere 😂

[@PrinciplesPersonalFinance]

Thanks for watching. Yes, it's been an interesting trading day today for sure!

[@mauroaurelio6534]

Hello George, thanks for your video. I always learn something from your vidoes. One question that really irks me is when to "measure" is enough to retire...for example 1 month i thought I had reached my "goal"...now 1 month later the pension fund is down by 8% and looks like we could be in for a long decline...so what must i do???? Delay my "plan" ...I was thinking of part time work but now i think maybe I have to continue full time...

[@matthjas67]

When viewing the downturns and a return to where you recover your losses. Is it losses plus inflation? If not, those downturns would actually be longer if you build in inflation?

[@davehorton7712]

I am 68 and still have the same 70% stocks and 30% bonds strategy I have had for many years, 20% returns in 2024 so far, after all fees.

[@christopherjhall]

I’m 51 and 100% in equities

[@richardc861]

Do you do individual stock picking or just an etf tracker for example?

[@ReggiePerrrin]

It’s good to see the sensible youtubers are out in force. Is the shift to bonds as you get older also due to annuities, i.e. it was traditional to go for one of these at retirement, where now drawdown and UFPLS are more popular (what genius came up with “UFPLS” as a name?). I’m 85% equities, i like the income from bonds to pay platform fees and give me some cash to buy more equities when the market dips… today is a good day for that

[@PrinciplesPersonalFinance]

Thanks for watching. Yes, you're right certainly a large amount of this was due to annuities. Interesting day in the market today as you mention!

[@guyr7351]

Uncrystallised Fund Pension Lump Sum, trips of the tongue, not. Lifestyle investment can be a killer especially as many have no intention of buying an annuity.

[@stephen2203]

The shift to bonds as you age is to protect the FAs from being sued and to 'crystallise' more of the funds into cash or cash equivalents. This is the correct path for people with no understanding of risks and market turmoil. Others can make their own decisions. Treat it like a second career, it will take ten years to become proficient.

[@TheBillBomb]

Buy bonds when interest rates are high.

[@TheSilvercue]

Just don’t buy too many bonds, they are poor compared to stocks, full stop

[@johnristheanswer]

Where can I read up on the 95% figure mentioned in the thumbnail? Thanks

[@PrinciplesPersonalFinance]

Of course, there's an article in the description linked. Further details below: "96% of memberships in non-micro schemes are invested in the scheme’s default investment strategy (Table 2.13)" www.thepensionsregulator.gov.uk/en/document-library/research-and-analysis/dc-trust-scheme-return-data-2021-2022#aa8dfae0cb21491ea9720291b1c09177 It does assume the default strategy is lifestyled. Most tend to be... I'll level with you and say it's a KZbin hook, not something I would submit for peer review! 😉

[@johnristheanswer]

​@@PrinciplesPersonalFinance Thanks for that info. Great stuff.

[@gavjlewis]

I intend to stay 100% stocks into retirement. Yes there are some risks but I may also get ill or get hit by a bus. So its sensible to look at the risk vs reward. While there may be a massive market crash it's not highly likely. Is a crash of a third likely that lasts for around a year. Well yes. Can i weather it, or more importantly do i need to. If my pot is £1m and I take 4% then thats £3,333 a month. If the market drops a third and recovers in a year and I continue at the £3,333 rate rather than the new £2,222 then I will have depleated by pot by about £12.5k extra. Its not going to change my overall outlook. So if you dont plan on taking a lump sum then even a relatively big correction in the market shouldn't really disrupt your retirement. But i think this goes hand in hand with other things to lower the risk of needing to raid the pension pot at the weong time. So pay off your mortgage, get your electrical, heating, windows, roofing all done before you retire. Maybe get solar to lower tour monthly bills. So you are derisking here. Treat your pension as your salary replacement and not a savings account.

[@MattMcQueen1]

Of course, default pension funds are always "lifestyle" funds. A lot of money has been lost due to this.

[@dontuno]

I've never quite understood why one should de- risk when you could have 30 years in retirement or put another way a loss of 30 years worth of decent returns. Personally I am fortunate to have a significant cash buffer and the likes of a £40k fund(s) paper loss over the last 10 days or so is bearable and currently of no consequence. Importantly, I have no desire to crystallise my losses by selling funds now when my cash should in theory last another 7 to 8 years, which will (hopefully) be way more time than is needed for my funds to recover and then some. Maybe a different take on matters as the cash runs out and there is always "Plan B" in a worse case scenario i.e. equity release, but in practice I'm sure my funds will be worth much more then than they are now.

[@PrinciplesPersonalFinance]

I hear you, I always thought de-risking was a terrible strategy for those in drawdown. Thanks for watching. 👍

[@ciaranirvine]

I suspect the de-risking is simply outdated advice from the days (only a few decades ago) when people died a lot younger. If most people only had 5-10 years (at most!) of active retirement, you can't take too many risks. But nowadays most reasonably healthy people can expect 15-20 years active retirement and maybe another 10 years of twilight years after that, so loading up on annuities and bonds at the ripe young age of 60 makes no sense at all.

[@topboychris104]

Ok so there was 100x growth in stocks in about 90 years and 4x growth in the 34 or so years since.

[@neilcook1652]

Age 62 - 85/15

[@llamudos9809]

just track s&p 500 & world job done