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I got an annual statement from my work pension yesterday and was shocked to find it has about twice as much money in as I thought it would, and I didn't check that long ago. I am now far more upbeat about the future as I might be able to retire just before I'm 60. Provided I can do something about the mortgage, of course.
If you are worried about stock volatility a good bond fund should be part of your mix:
which is why a lot of actuarial advice and ready made Lifestyle funds gradually increase the proportion of bonds in the portfolio as you approach retirement age, so as give a higher degree of certainty of avoiding the impact of a stock market crash just before needing retirement money. Not only that but bonds performed very well, perhaps “too” well up until 2021. There is a school of thought which thinks the models which allocate to bonds probably overdid it - after all, someone retiring in their early 60s might be needing funds for nearly 30 years and the real value from a bond portfolio is going to deteriorate significantly in that time.
If you are worried about stock volatility a good bond fund should be part of your mix:
Vanguard also do 'life strategy' funds which are equities and bonds combined, split 80/20, 40/60, 50/50 etc..depending on how much you want to de-risk from pure equities as you approach retirement
You say good but that chart ends in May 2019 and appears to have lost money since (about 30%)
Wheras the S&P500 has more than doubled in value.
A typical global fund has nearly doubled in that period.
None of this is advice on what to buy and where you are at in saving or retiring will have a bearing on what you actually do.
Chart is https://investor.vanguard.com/investment-products/etfs/profile/blv
None of this is advice on what to buy and where you are at in saving or retiring will have a bearing on what you actually do.
this is the key thing, there's no 'one size fits all'.
For example if your private /employer pension de-risks automatically as you approach retirement, but you have a big stocks ISA thats pure equities, you might just leave things as-is, or move it from s&p500 to a more 'safe' more diverse global index fund, or sell some to buy some bonds,etc, etc.
Buffett himself is a very successful long term stock picker, Joe Public isn’t and should stick to index tracking
Or buy Berkshire Hathaway B shares.
There is a school of thought which thinks the models which allocate to bonds probably overdid it - after all, someone retiring in their early 60s might be needing funds for nearly 30 years and the real value from a bond portfolio is going to deteriorate significantly in that time.
The answer to this is a "bond tent" as described by retirement researcher Michael Kitces. In general this states that you are mostly in equities until 5-10 years before retirement, when you gradually increase the amount of bonds. At retirement you then draw down mostly on bonds so that the proportion comes back down over the next 5-10 years. This stabilises your pension fund in the critical few years before and after retirement, while allowing it to grow more at other times.
Just checked my pension - seems to have recovered from Trump - up 17% year on year. Can't argue with that. Just in a normal global equity tracker (which I assume most people are/should be also in). In theory on for an aged 55 retirement (in 11 years time - gap to 57 covered by an isa) but am skeptical my pot won't get raided by the government before then. Assuming i'll start off at around 4% and then drop down to 1/2% by the time my wifes small pension kicks in and the state pensions appear (if they do!).
seems to have recovered from Trump - up 17% year on year. Can't argue with that
Nice, but the main thing I get from 17% is "optimism". Some of the recent stock gains have been extraordinary and leave companies with valuations that make me more than a little bit nervous. Last time I felt like this was April 2000 and I'm doing what I did then.
Buffett himself is a very successful long term stock picker, Joe Public isn’t and should stick to index tracking
Or buy Berkshire Hathaway B shares.
Nope, spread your bets.
I own some berkshire hathaway, but only as part of a global index fund.
It makes me wonder though, if retail investors just keep pumping into index funds, where does it end? what's the end game? It'll just become pure hype, after a while, and that's really dangerous?
Berkshire Hathaway arguably has the negative of the death of Buffett to overcome in the not too distant future. Sure, he is more on the periphery of the decision making these days but when he does pop off his well-earned saintly status will surely induce some selling.
The rise of index tracking many poses questions which remain unanswered. Index tracking enables Joe Public (and professionals) to avoid doing any worse than the relevant stock market average, even if they don’t do any better. That’s OK as long as share prices rise, which they have done. The only real trigger for selling will be if there is a widespread belief that equities are in for a prolonged spell in the doldrums, but even then there needs to be a credible case for an alternative home for the money. The most likely alternative, government bonds, is likely going to require a collapse in inflation and a fixing of government deficits to make them properly interesting again.
One of the side effects of the increase in index tracking is that automatically more money goes to the companies which are already big and less money goes to smaller companies. Pre index tracking, professional active investors might keep this in check by taking profits on the biggest companies and investing elsewhere but index trackers have no interest in providing checks and balances, and the amount of money at the hands of those who are more active has been declining rapidly. So, the “efficiency’ of the stock market - having share prices properly reflecting the prospects of individual companies rather than the amount of money chasing them - has been declining and there is little sign of this changing. At the same time, valuation extremes have risen as money goes into big companies with outsized demand and not into smaller ignored companies. It’s also partly why UK shares are out of favour - when a single US company is bigger than the entire UK stock market, deciding to buy UK shares in a global context is, frankly, irrelevant. I have absolutely no idea how it ends, but funnily enough, I think it is less dangerous if the majority of money is accidentally betting on an average than if it was consciously betting on a single idea.
Index tracking enables Joe Public (and professionals) to avoid doing any worse than the relevant stock market average, even if they don’t do any better.
A true index tracker will always do a little worse than the index. There will be buying and selling fees and in general shares rise the instant they enter an index and fall the second they leave. The only way to avoid those issues is to anticipate which companies are likely to enter or get kicked out of an index.
Index tracking enables Joe Public (and professionals) to avoid doing any worse than the relevant stock market average, even if they don’t do any better.
A true index tracker will always do a little worse than the index. There will be buying and selling fees and in general shares rise the instant they enter an index and fall the second they leave. The only way to avoid those issues is to anticipate which companies are likely to enter or get kicked out of an index.
Which is a fools errand, as a retail investor.
Yes an index fund won't 'beat the market'... but it will match it pretty close, minus about 0.2% if you play your cards right with providers.
anticipate which companies are likely to enter or get kicked out of an index.
May as well buy individual stocks in that case, I wouldn't do it with my entire retirement fund - maybe set aside 5% or 10% of your total portfolio to gamble on individual companies as 'play money', but then you may as well go to Vegas and play roulette with it.
Correct Matty. And even if you tried making up for the rounding error shortfall of a tracker vs the index by dealing in individual stocks, as a retail punter you’d likely lose at least that 0.2% by being unable to deal at the price index trackers do.
I wasn't suggesting you or any other retail investor anticipate which companies will enter or leave and index, I was suggesting that's a strategy market tracker fund managers can use. There are usually some old tech dogs in an index that it's highly probable will fall out. Kodak's fall from the S&P was predictable and predicted for example. One of the factors in the rise in indexes is the turnaround in the stocks included in the index. If the Dow Jones was still based on the original 12 companies the index would be a fraction of what it is having constantly integrated new and growing companies whilst kicking out the dogs - quite apart from GE being the only one of the 12 that is still independant .
Well yeah that's the whole point of an index fund.. It doesn't really matter if some companies crash out or don't make the mark any more.
You're only really gambling on the companies within the index that do well, will outweigh the losses of those that don't.
That's where you make the money.
This has got very technical !
Having just retired, or hopefully semi so, I’m planning on drawing down from my pot around 3k a month, but on an as required basis, whilst maintaining 6 months or so worth in a 4% instant access account, to act as a bit of a buffer for any big market variables.
I’m hoping that will work. I am not planning to start drawing down for hopefully another 10 months or so, maybe longer if I get some part time work in place.
ianc. - presumably you’re aware of ufplus (* a sort of manual drawdown with 25% tax free) , ps I might have posted this before, so apologies if you know all about it.
^^ thanks, yes, that’s the plan.
I wasn't suggesting you or any other retail investor anticipate which companies will enter or leave and index, I was suggesting that's a strategy market tracker fund managers can use.
There's an ETF for that 😀 : Opinion: Low-cost index funds are best for investors, right? Not so fast. - Marke****ch
The "Research Affiliates Cap-Weighted Index, or RACWI" tries to account for stocks that leave the index and plummet (because index trackers sell them) and also those that enter the index and rise (because index trackers buy them).
“From July 1991 to the end of 2024, RACWI beat S&P 500 by 69 bps [basis points — i.e., 0.69 percentage points] per annum,” they said.
I suspect those forced to work until they drop to keep the mortgage paid
I guess this is as valid an aim as early retirement. Not for me though.
I suspect for most, clearing the mortgage is probably a prerequisite before retirement, whether aged 60 or 70.
For most I would think so yes. That's my point really, average mortgages have increased in value to high multiples is earnings. They've been kept affordable month on month by increases to term length. I haven't checked but iirc 30 and 35 year mortgages are now the norm, and 40 is not unusual. I fear that ignoring pensions is also a step many are taking to make ends meet month to month. If this is the case we will see increasing numbers working to SPA ish and beyond just to pay the mortgage off and have nothing but the house and a state pension at that point.
A chap I work with is retirement age, is drawing a pension, but is still working crazy hours and paying a mortgage. Certainly not short of a bob or two, but is still working to pay for a big house in a posh area. I am not working at 67 plus !
is drawing a pension, but is still working crazy hours and paying a mortgage. Certainly not short of a bob or two, but is still working to pay for a big house in a posh area.
one would imagine that he is paying a fortune in tax also in that situation, and also not able to benefit from any real tax efficiency with ongoing pension contributions.
Probably got 25% gain on the way in (for some at least) and its losing 40% on the way out!
Anyone invested in Vanguard Target Retirement funds? As I wind down for retirement, I'm looking to sell various individual stocks and invest in safer accumulation funds. I did quite well with actively managing stuff over the covid period, but now want to ask those gains and stress less about 'global political turbulence'.
Should I be looking elsewhere? As I type this, it sounds like a "Should I buy <this dull old gits car> or <this dull old fuddy duddy motor>". I'm asking anyway though.I'm aiming to use a reduced 4% type strategy to top up my teachers pension.
This appears to be a rare instance of HMRC having a generous spirit.
Or government trying to encourage us to be self sufficient when we're decrepit.
whilst maintaining 6 months or so worth in a 4% instant access account,
Chase will give 4.75% for the next 12 months (or 2.25% 'bonus' at least)
My mate is 60, has a million quid in a pension pot AND in a bloody savings account, has no mortgage, and doesn't want to retire. Isn't it a bit irresponsible blocking a decent job that some other younger person might need to gain their security?
Chase will give 4.75% for the next 12 months (or 2.25% 'bonus' at least)
thanks, happy with where it is at 4.13% with Investec.
Seeing as there are plenty of financial gurus on here. If i wanted to have £50k put somewhere for 6 months without needing access to it (My mortgage is on 1.8% and runs out in 6 months time). Where do i put it? Do i just put it in a saver account with my own bank or is there somewhere better.
Have you used this year’s ISA allowance, and do you have a wife/partner with ISA allowance? You could avoid tax on £40000 between you if you have both of your ISA allowances available (20k each). Then find the best rate available.
Nope we havent used this years allowance. So just put it in cash isa with highest rate we can find. Sounds simple.
Nope we havent used this years allowance. So just put it in cash isa with highest rate we can find. Sounds simple.
Yep... It's even more simple as the money saving expert website keeps a list of the best ISAs that's updated fairly frequently, so you just pick the one that suits you best from their list.
https://www.moneysavingexpert.com/savings/best-cash-isa/
I think you can put £50k into premium bonds too.
My mate is 60, has a million quid in a pension pot AND in a bloody savings account, has no mortgage, and doesn't want to retire. Isn't it a bit irresponsible blocking a decent job that some other younger person might need to gain their security?
Some people don't want to retire. As I think I have said earlier in this thread, my neighbour recently retired (I think it was last autumn) from the police in his early 50s, and got a gorgeous Porsche Carrera using 'a bit' of the lump sum he received. He's bored stupid already and has gone back to work (not in the police obviously).
The ‘would you retire at 60 if you won £1M’ thread certainly seems to suggest that would be enough for most folks/couples 😁
Just been catching up on the other thread, about the 1M win, so thought would bump this one.
My pension pot, having just retired at aged 59 and 3/4 is around half that, mortgage is fully paid off, adult kids at home still but working, no car finance, as both cars are less than 2 yrs old and fully paid off. Wife working 20 hrs a week and earns just enough to pay hardly any tax and no plans to retire soon as she is 5 yrs younger than me.
When doing the sums I think it’s all quite doable with a decent fairly comfortable lifestyle, so struggle to see how quite a few folk reckon a pot double that size would still be a bit lean..
just a heads up to all those worrying about need mega amounts to retire on.
just checked my own personal bank account. currently spending about £5 per week. on 98p coffees from Pret.
Well said @ton , the other thread is quite depressing with regard to what seems to be deemed a decent retirement income.
work stresses him out massively and he can't wait to retire, yet despite this and millions in the bank, he still won't call it quits!
How much is enough, just a little bit more
From the £1M win thread.^^
A reminder that we are all wired different ,but sometimes trying to plan or worry too much about the 'What ifs' ,can leave some folk trapped in limbo.