You've won the game so why keep playing?

[Bouncey]

At the age of 70, I'm in the privileged position of having sufficient assets to fund a long and sufficiently prosperous retirement.

So why continue with any equity investment, given the roller coaster ride that can ensue?

Having finally learnt about bonds, might it be sensible at my age to set up a rolling bond ladder (10, 15 years +) for 100% of my investments?

I'm guessing the risk of increased future inflation might be a worry, would a 50% portfolio in equities mitigate that risk?

Are there any other sensible ways to "stop playing the game"?

[GoSeigen]

To me these look like very sensible musings. If you have "won" and have enough for your retirement then, indeed why risk it all?

I'd just say though, that going 100% into one asset class is not minimising your risk, no matter what the asset happens to be.

My father very luckily sold his London studio flat for some £250k practically at the peak of the market in 2007. However he threw away the benefit of that by keeping practically all his money in cash for the next fifteen years. It turned out that the interest rate on cash collapsed and he earned practically nothing, while inflation, though low, slowly eroded the value of his savings. If he'd invested that cash the same way my mother did then at the end of those fifteen years it would have been worth £1m or more (or he could have spent a lot more than he did).

You risk a similar outcome by putting everything in gilts. So I while agree de-risking is a good idea I'd do that by either 1. a sound but conservative and low-maintenance active strategy if you are good at that or 2. an fairly even mix of a few asset classes, maybe 20% cash, 40% shares, 40% gilt ladder, all to be left alone for the duration with optional rebalancing. The gilt ladder is there for protection of capital and cash flows; the cash for liquidity and capital protection, the shares for gearing to inflation or economic growth. Vary the mix to match your needs and judgement about risk and markets.


GS

[Bouncey]

Thank you for suggestion no 2. Maintaining a 40 - 50% holding in equities would make perfect sense.

I wouldn't know how to follow suggestion No 1

I forgot to mention FOMO if exiting equities completely.

[mc2fool]

At the age of 70, I'm in the privileged position of having sufficient assets to fund a long and sufficiently prosperous retirement.

So why continue with any equity investment, given the roller coaster ride that can ensue?

Having finally learnt about bonds, might it be sensible at my age to set up a rolling bond ladder (10, 15 years +) for 100% of my investments?

I'm guessing the risk of increased future inflation might be a worry, would a 50% portfolio in equities mitigate that risk?

Are there any other sensible ways to "stop playing the game"?

Well you could mitigate the inflation risk by going for index linked gilts. The risk then becomes that your personal rate of inflation -- the inflation in the cost of things that you spend and will spend your money on -- will be more than the RPI inflation that index linked gilts are tied to. (CPI after 2030).

[SalvorHardin]

I can think of several reasons to not put everything into fixed interest. Mostly it is because the environment for investment may change in the next few years and real assets offer diversification and some additional protection.

1) Inflation. Remembering the 1970s? Several years of 20%+ inflation will play havoc with a fixed interest portfolio. Shares (also property and other real assets such as antiques) give you a fighting chance.

2) Protection against future governments increasing tax rates. In the 1970s we had 98% top rate of tax (83% + 15% unearned income surcharge). Equities offer growth opportunities that bonds don't (in a very high tax environment inflation is likely to be higher than today).

3) Might need to emigrate due to hostility from a future government. If I had to emigrate I'd be much happier to have a globally diversified equity portfolio and some portable assets than to have everything in the bonds of the country from which I was fleeing (exit taxes could be a big risk).

4) Some of us like the challenge posed by the stockmarket. I've beaten the S&P500 by a considerable amount since I retired in 2003 and am reasonably confident that I will continue to do so over the longer term.

[kempiejon]

As we age the rates for annuities become more attractive.
I have lots of equities but I still need my money to grow and have a while longer to spend it. My older brother has thought about cashing in part of his pension pot for the certainty of income and removal of uncertainty.
When you have enough money you should be extracting pleasure from it, you could consider spending more, if not on yourself perhaps others by gifting or philanthropy.

[Gerry557]

What you have been doing has been working so why change.

There might be merit in having more cash available base on your outgoings. Probable easily done collecting some dividends rather than reinvesting. Some more bonds also might be worthwhile you could consider an increase in the percentage. What is that currently?

Have you considered IHT? I might be considering giving some away. You could ask family to keep it invested for you in case of emergency.

Not sure Id get rid of all the equities though.

[dealtn]

At the age of 70, I'm in the privileged position of having sufficient assets to fund a long and sufficiently prosperous retirement.

So why continue with any equity investment, given the roller coaster ride that can ensue?

Having finally learnt about bonds, might it be sensible at my age to set up a rolling bond ladder (10, 15 years +) for 100% of my investments?

I'm guessing the risk of increased future inflation might be a worry, would a 50% portfolio in equities mitigate that risk?

Are there any other sensible ways to "stop playing the game"?

Well you could mitigate the inflation risk by going for index linked gilts. The risk then becomes that your personal rate of inflation -- the inflation in the cost of things that you spend and will spend your money on -- will be more than the RPI inflation that index linked gilts are tied to. (CPI after 2030).

Assuming you are happy with the real yield. Buying above par with a negative real yield - the scenario of much of this current century, wouldn't have protected you from inflation.

Mitigate is doing a lot of heavy lifting in that sentence.

[mc2fool]

Well you could mitigate the inflation risk by going for index linked gilts. The risk then becomes that your personal rate of inflation -- the inflation in the cost of things that you spend and will spend your money on -- will be more than the RPI inflation that index linked gilts are tied to. (CPI after 2030).

Assuming you are happy with the real yield. Buying above par with a negative real yield - the scenario of much of this current century, wouldn't have protected you from inflation.

Indeed, however right now most index linkers are going for below par, hence the suggestion. As for being happy with the real yield, well it's 0.25-1.3%pa over RPI (short-long) but the point was the real preservation of capital.

[dealtn]

Assuming you are happy with the real yield. Buying above par with a negative real yield - the scenario of much of this current century, wouldn't have protected you from inflation.

Indeed, however right now most index linkers are going for below par, hence the suggestion. As for being happy with the real yield, well it's 0.25-1.3%pa over RPI (short-long) but the point was the real preservation of capital.

Agreed, but many (most?) are unfamiliar with the asset class, and without that caveat - on a site that will maintain that post, and be searchable for the future - it is needed. the history of this site, and the Gilt board in particular, is littered with many similar sentiments since inception, which would have been costly to follow for the majority of this century.

[mc2fool]

Indeed, however right now most index linkers are going for below par, hence the suggestion. As for being happy with the real yield, well it's 0.25-1.3%pa over RPI (short-long) but the point was the real preservation of capital.

Agreed, but many (most?) are unfamiliar with the asset class, and without that caveat - on a site that will maintain that post, and be searchable for the future - it is needed. the history of this site, and the Gilt board in particular, is littered with many similar sentiments since inception, which would have been costly to follow for the majority of this century.

I think most readers would understand that suggestions as to what someone might do going forward would be with respects of the current situation in the market, and would ask questions if unfamiliar with the suggestions, and I would expect that anyone reading these posts in future would also understand that.

Without that you could say the same of any asset class or investment. I don't think it's expected that any and every post explicitly details every one mentioned or gives chapter and verse on their past; that'd get pretty long winded and tedious. If people are unfamiliar they can ask.

[DrFfybes]

Well you could mitigate the inflation risk by going for index linked gilts. The risk then becomes that your personal rate of inflation -- the inflation in the cost of things that you spend and will spend your money on.

This is the biggie. Have you budgeted for 5 years of care fees at £60k each at current prices, more if you need nursing care? For us it would be paid for by downsizing, but future expenditure is unknown.

I forgot to mention FOMO if exiting equities completely.

We are a bit younger, but I cashed in circa 10% of our equities in March, mainly to top up savings to pay for the building works whilst markets were at an all time high, since then VEVE has risen about another 12%. Yeah, I know, it's only 1% of our portfolio value I missed out on, but it still irks, probably more than if they'd dropped 10% and I hadn't cashed in.

You need to choose what works for you, what fits with your risk profile, your desire (or not) to be involved with your finances, and if you can set something up that will amply support you for the next 30 years that you are comfortable with and will give you peace of mind then go for it.

Paul

[Bouncey]

At the age of 70, I'm in the privileged position of having sufficient assets to fund a long and sufficiently prosperous retirement.

So why continue with any equity investment, given the roller coaster ride that can ensue?

Having finally learnt about bonds, might it be sensible at my age to set up a rolling bond ladder (10, 15 years +) for 100% of my investments?

I'm guessing the risk of increased future inflation might be a worry, would a 50% portfolio in equities mitigate that risk?

Are there any other sensible ways to "stop playing the game"?

Well you could mitigate the inflation risk by going for index linked gilts. The risk then becomes that your personal rate of inflation -- the inflation in the cost of things that you spend and will spend your money on -- will be more than the RPI inflation that index linked gilts are tied to. (CPI after 2030).

I'm embarrassed to admit it took a long time to get my head around ordinary bonds - the index linked variety is next for my education list!

[Bouncey]

As we age the rates for annuities become more attractive.
I have lots of equities but I still need my money to grow and have a while longer to spend it. My older brother has thought about cashing in part of his pension pot for the certainty of income and removal of uncertainty.
When you have enough money you should be extracting pleasure from it, you could consider spending more, if not on yourself perhaps others by gifting or philanthropy.

I've already gifted lots, but have three properties I plan to gift outright to my children.

Annuities? No, I don't think so, my 10 year bond ladder provides a suitable income (for 10 years at least)

[mc2fool]

Well you could mitigate the inflation risk by going for index linked gilts. The risk then becomes that your personal rate of inflation -- the inflation in the cost of things that you spend and will spend your money on.

This is the biggie. Have you budgeted for 5 years of care fees at £60k each at current prices, more if you need nursing care? For us it would be paid for by downsizing, but future expenditure is unknown.

Yeah but that's true (and is "the biggie") no matter which way you go. Potentially could be even worse with equities if your 5 years starts soon after a severe crash and goes into a prolonged (longer than 5 years) down period.

[Bouncey]

What you have been doing has been working so why change.

There might be merit in having more cash available base on your outgoings. Probable easily done collecting some dividends rather than reinvesting. Some more bonds also might be worthwhile you could consider an increase in the percentage. What is that currently?

Have you considered IHT? I might be considering giving some away. You could ask family to keep it invested for you in case of emergency.

Not sure Id get rid of all the equities though.

Gilts are currently 7% of SIPP AND ISA portfolios.

IHT? I have earmarked my entire SIPP for my children's benefit.

[Bouncey]

Well you could mitigate the inflation risk by going for index linked gilts. The risk then becomes that your personal rate of inflation -- the inflation in the cost of things that you spend and will spend your money on.

This is the biggie. Have you budgeted for 5 years of care fees at £60k each at current prices, more if you need nursing care? For us it would be paid for by downsizing, but future expenditure is unknown.

I forgot to mention FOMO if exiting equities completely.

We are a bit younger, but I cashed in circa 10% of our equities in March, mainly to top up savings to pay for the building works whilst markets were at an all time high, since then VEVE has risen about another 12%. Yeah, I know, it's only 1% of our portfolio value I missed out on, but it still irks, probably more than if they'd dropped 10% and I hadn't cashed in.

You need to choose what works for you, what fits with your risk profile, your desire (or not) to be involved with your finances, and if you can set something up that will amply support you for the next 30 years that you are comfortable with and will give you peace of mind then go for it.

Paul

Similarly to you, downsizing or equity release to budget for care home fees.

[mc2fool]

Annuities? No, I don't think so, my 10 year bond ladder provides a suitable income (for 10 years at least)

Ah, now, is your ladder an "income" one or a "spending" one?

I.e. are you figuring on living off of just the income, and ending up at the end of the 10 years with the same £ amount as you started?

Or is your ladder a put-aside-to-future-spend one, where e.g., if you project you'll need, say, £nK in each of the next 10 years, you're going to invest £nK in each of a 1, 2, 3, 4, 5, 6, 7, 8, 9 & 10 year bond and when each one matures you'll just spend that £nK? (And any income along the way is just beer money...)

[Bouncey]

Annuities? No, I don't think so, my 10 year bond ladder provides a suitable income (for 10 years at least)

Ah, now, is your ladder an "income" one or a "spending" one?

I.e. are you figuring on living off of just the income, and ending up at the end of the 10 years with the same £ amount as you started?

Or is your ladder a put-aside-to-future-spend one, where e.g., if you project you'll need, say, £nK in each of the next 10 years, you're going to invest £nK in each of a 1, 2, 3, 4, 5, 6, 7, 8, 9 & 10 year bond and when each one matures you'll just spend that £nK? (And any income along the way is just beer money...)

Each year's redemption is to be fully spent. I additionally have £100k invested in ERNS (Ultra short bond fund) which needn't be touched for 10 years

[GoSeigen]

the history of this site, and the Gilt board in particular, is littered with many similar sentiments since inception, which would have been costly to follow for the majority of this century.

I don't understand this part of the post, could you illustrate it with an example or two?

GS
@extremely happy holder of gilts for much of this century (starting 2001)