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Thanks @Tracey, yes, enjoying it so far and a few part time ideas developing 🤞👍
Thanks @iainc and @andy4d I’ve yet to check out the Shack planners which look helpful but the guide.co.uk offered a quick and easy initial plan to play with Its process is kind of neat and its options for ‘there’s a shortfall’ includes a 25% pot annuity. ‘Pay more in’ isn’t really a thing as I’d like to stop work next year and already make the most of tax efficient contributions. Seems the combination of ‘take less’ and ‘turn some money into a fixed income’ is what I need to consider.
Now, just need to avoid losing pot value in the next few months.
^^ my recent experience is that the pension industry wants us to overthink and delay.
I reckon that with a bit of good research and proper planning it should be quite possible to retire at 60 with a reasonable, say 400 -500k, pot and live a comfortable life and pay very little tax until state pension age, at which stage less drawdown is required.
Obviously dependant on situation of partner where applicable, kids, mortgage etc. Here wife is still working part time, no mortgage, and the kids, whilst adults and still at home, are working and not costing us too much..
Some part time, say a day a week, interesting, challenging and well rewarded work will possibly feature next year onwards too🤞
Think I should start another thread, "late retirement how much resentment?"
I reckon that with a bit of good research and proper planning it should be quite possible to retire at 60 with a reasonable, say 400 -500k,
wow......wish someone had told me that 5 years ago. with a pot of no more than 100k
@lessmoneymoretime
retire at 60 with a reasonable, say 400 -500k, pot
Only triple the average for the 55-65 age group then. That's a very STW definition of 'reasonable'!
retire at 60 with a reasonable, say 400 -500k, pot
Only triple the average for the 55-65 age group then. That's a very STW definition of 'reasonable'!
I wonder how the average is calculated... I guess there are a lot of people with zero or tiny pots aside from state pension which brings the average down?
wonder how the average is calculated... I guess there are a lot of people with zero or tiny pots aside from state pension which brings the average down?
Figure 1 shows how wealth is shared between individuals when split into 10 equally sized groups (deciles), sorted by private pension wealth or total net wealth. Between April 2018 and March 2020, the top decile held 64% of all private pension wealth while the bottom five deciles held less than 1%. Median private pension wealth in the top decile was £637,500 compared with £0 in the first three deciles, £1,200 in decile 4 and £7,800 in decile 5.
My post about the 400-500k pot was more about highlighting that a drawdown pension pot can be used in a tax efficient manner over a good few years, rather than to get into the pot size etc.
I fully appreciate than some in their late 50s/early 60s will have 1M plus pension pots and many more will have sub 200k pots. It’s not a competition, thankfully !
I fully appreciate than some in their late 50s/early 60s will have 1M plus pension pots and many more will have sub 200k pots. It’s not a competition, thankfully !
Agreed. Nicely said.
I am coming to terms with the reality that I am, and will be, financially OK but that I need to make adjustments for retirement. As expected I won’t have the same spending power if I stop working as I would if I continued. This is balanced by the fact that my SO does not have that constraint for many well-deserved reasons.
I’m taken back to my youth when I figured that an income of £14,000 in 1991 would be ideal for an enjoyable life. Even allowing for British inflation i could retire on a bit more than that today.
^^ and bear in mind you wouldn’t be paying tax on the majority of it, plus you’d also be able to draw down on your 25% of the overall pot, also without paying tax. It can add up to a comfortable monthly available amount
that ons data is the most depressing thing I’ve read all week. I always saved as much as possible and viewed it as money that didn’t exist since it was taken before tax. A median pot of zero. Zero?! I guess people do not understand tax relief nor compound interest.
Tax relief on the way in, compound interest growth and 25% tax free (for now) on the way out. For a higher rate tax payer that’s still 20% net tax saving as you may only pay 20% on withdrawals, with compounding as well.
Am now depressed. I’ve got my sons pension saving earlier than I was able to start. Time flies.
A median pot of zero. Zero?! I guess people do not understand tax relief nor compound interest.
I guess some people do not understand how tight the median family's budget is. And to most people living for the moment is more important than possibly having more money in retirement than they have right now (if they ever get to retirement).
Tax relief isn't of interest when you earn so little you pay naff all.
Compound interest hasn't even kept up with inflation for most of my life time, and if you consider real inflation rather than what the government would have us believe even most of the funds that have been vaunted on this thread are only keeping up once fees are taken into account. On another thread someone has been losing money in funds which isn't unusual, it's just unusual for someone to admit it.
My own pension planning (or lack of) has included cashing in pensions when I've left jobs and taking a sabatical at 42 then never working again. However the cashed in pension gave me enough to start a business and despite the absence of planning I'll muddle through. Which is what most of the population does, muddle through.
Observing my parents and their contemporaries tells me that for the working class the best they can hope for is financial independance while they are physically and mentally independant. Once that independance has gone the costs go beyond even what the most prudent are saving. So my conclusion is only plan for as long as you'll be in control.
As for the pensioners I observe who are flying to sit in Costa Brava hotels or sit in a camper van between the main road and railway in some aire - stuff that. I'll walk and ride a bike till I can't and there's a bus stop around the corner.
So live for the moment, save if you're lucky enough to save without even feeling the lack of cash (which I suspect is your case given what you've said about what you do for which company) but have a little think about how much you understand about the financial situation of most of the population.
Carpe Diem.
compound interest growth
I see this and yet pension savings that are invested do not necessarily work like compound interest. At any point in the future a sudden change can shrink the pot value and eliminate not only previous gains but also underlying capital. Then, given time, there can be a slow return to the previous value and eventual resolution. It is worth reflecting that inflation compounds as well.
Over 30+ years most of the growth in my pots has been due to the contributions. What you’d expect really but some way from ‘a powerful natural force’ in compounding. Despite a reasonable ‘growth’ bias in investments the investment returns over that period are modest in comparison. Thank goodness for tax efficiency and fair employer contributions.
I was surprised by the ONS data too. Not just that nearly all the pension wealth is held by the top income decile but also that the top decile had a median pension pot value that was some way from the ‘magic’ £1,000,000 that turns up as a goal every now and again. Perhaps another illustration that the future always seems far away until you are living it, that income growth in the UK is weak, and very high income folks aren’t that common. https://www.ons.gov.uk/peoplepopulationandcommunity/personalandhouseholdfinances/incomeandwealth/bulletins/householddisposableincomeandinequality/financialyearending2023
the ‘magic’ £1,000,000 that turns up as a goal every now and again.
Indeed this seems a thing pushed hard by the industry that makes money from us saving more, compounded by people who really really save hard for a future.
Meanwhile, back in the real world....
Interesting chatting with an older relative yesterday. He was made redundant at 55, took his retirement early with heavy penalties. Has had a secure and comfortable 20+ years after downsizing, just doing occasional part time work when he fancied it.
Over 30+ years most of the growth in my pots has been due to the contributions
Mine has grown by considerably more, but only once I took it away from the company that was charging fees that almost wiped out the growth. It's really worth looking to see how much of the return is eaten up by fees - there is a huge variance among providers and the worst are very bad indeed.
When my wife left work in 1994 to look after our children, she was advised to transfer her company pension to a private pension. The pot was worth about £25k then, and over the 30 years since then the company managed to turn that into £33k. If it hadn't been a section 19 buyout with a Guaranteed Minimum Pension, things would have been worse, but in the end the company (a household name) had to find over £40k of their own money to add to the pot to meet their legal obligations. Which was nice.
Over 30+ years most of the growth in my pots has been due to the contributions
Mine has grown by considerably more, but only once I took it away from the company that was charging fees that almost wiped out the growth. It's really worth looking to see how much of the return is eaten up by fees - there is a huge variance among providers and the worst are very bad indeed.
Mine has gone up £15k in the past month, since we had a big defecit about 8-12 months ago due to Trump, mine went down by £50k but has now gone past that by £40k more...
I guess people do not understand tax relief nor compound interest.
This is a rather dismissive (and even self-congratulatory) take, if you don't mind me saying.
The mean household disposable income (per the ONS) for a working household with children is around £34k, so the median is presumably south of that. If you're trying to support kids on a care worker's wage you're not going to have much left over for pensions.
My own pension pot was zero until 34 - not because I was too thick to understand interest, but because I was broke (I made the financially disastrous choice to "follow my dreams" and "do what I love"). And if you don't earn over 12k, tax relief is an irrelevance! That said, the concept of deferred tax IMO is quite a nuanced thing for many people to get their head around, although it might not seem like it to a community of cycling poindexters whose idea of fun involves working out gear ratios, head angles and watts/kg figures.
Another anecdata point - possibly less relevant now but my mum's pension pot, as a dinner lady in the 80s and 90s, was probably zero for a long time - but she's a boomer and my dad had a DB pension that was enough to support two people. So some of the older generation might also be skewing the medians.
Reminds me, checked on a couple of my pensions, and they've more than recovered from Trump's shenanigans at the start of the year. About 5% growth from 'before' the Trump hit. It was very depressing watching the figures in March/April.
And if you don't earn over 12k, tax relief is an irrelevance!
There is a quirk here. I've just been through this in detail for my 24/25 tax return as I've been making some pretty desperate pension contributions to make up for being asleep at the wheel into my fifties.
If your contributions get relief at source, 20% is claimed for you by the pension provider. As a Scottish taxpayer, I was interested in what happened for the 21% intermediate band and the 19% starter band. It turns out that you get back the 1% for anything intermediate, just like you get back extra for higher rate. So far, so simple. But... for the 19% they just don't bother. You paid 19% tax on that starter band of income but you will quite happily benefit from a 20% tax relief.
I believe this carries on all the way down into your personal allowance. The maximum you can contribute is 100% of your relevant earnings (up to the £60k limit) and you'll get 20% relief all the way down, which sounds like a handout.
Another data point is for non-earners. You can contribute £2880 into relief at source and that will get topped up to £3600. You didn't pay any tax, but you get tax relief.
This appears to be a rare instance of HMRC having a generous spirit. That's my understanding but happy to be corrected.
I think the non-earner tax contribution is there to help stay at home mums and similar groups of others of an employment age but not actually earning a wage accumulate some pension savings.
Reminds me, checked on a couple of my pensions, and they've more than recovered from Trump's shenanigans at the start of the year. About 5% growth from 'before' the Trump hit. It was very depressing watching the figures in March/April.
I've been feeding my stocks and shares isa from my cash isa since April as cash isa interest rates are falling.
I'm up about 6.75% in 6 months... I'm pretty pleased with that.
"nother data point is for non-earners. You can contribute £2880 into relief at source and that will get topped up to £3600. You didn't pay any tax, but you get tax relief."
Indeed, free money. Mrs IRC has no income so for the last 3 years we have done this. She will cash out before she gets her OAP so no tax comes off as the total, less the 25% tax free, will be under her personal allowance.
Reminds me, checked on a couple of my pensions, and they've more than recovered from Trump's shenanigans at the start of the year. About 5% growth from 'before' the Trump hit. It was very depressing watching the figures in March/April.
I've been feeding my stocks and shares isa from my cash isa since April as cash isa interest rates are falling.
I'm up about 6.75% in 6 months... I'm pretty pleased with that.
thought I would check mine. Taking out what I have paid in so far this year then I am sitting barely up 1%, primarily due to the usd going from 0.94 to 0.85 vs the euro.
I've been feeding my stocks and shares isa from my cash isa since April as cash isa interest rates are falling.
I'm up about 6.75% in 6 months... I'm pretty pleased with that.
This might not be the thread for this question, but...
Anyone have any feelings that the US economy, that I'm sure we're all quite exposed to, is a lot weaker and more vulnerable under Trumps meddling than the strength of the stock market would suggest? I'm wondering if it's time to move my S&S ISA into the low risk fund for a while.
Anyone have any feelings that the US economy, that I'm sure we're all quite exposed to, is a lot weaker and more vulnerable under Trumps meddling than the strength of the stock market would suggest? I'm wondering if it's time to move my S&S ISA into the low risk fund for a while.
That's pretty much the reason I opened the thread linked above about punting on gold. The jury is still out on they one... The market didn't crash at all yet, but I agree it looks shady. If it does then I'll take my 10% out of gold and put that back in the newly slumped stock market ( assuming gold doesn't tank at the same time. But the money needs to go somewhere right... Can't all tank at the same time. Can it?)
I've been feeding my stocks and shares isa from my cash isa since April as cash isa interest rates are falling.
I'm up about 6.75% in 6 months... I'm pretty pleased with that.This might not be the thread for this question, but...
Anyone have any feelings that the US economy, that I'm sure we're all quite exposed to, is a lot weaker and more vulnerable under Trumps meddling than the strength of the stock market would suggest? I'm wondering if it's time to move my S&S ISA into the low risk fund for a while.
The us economy is in trouble... soya farmers in a really bad way as the chinese (thier largest customer IIRC) have stopped buying it due to tarrifs, and trumps left them high and dry begging for goverment handouts. even though they all love trump and hate 'socialism', but not when they want handouts, socialism for me, and not for thee, lol.
They gon learn the hard way!
So that's one thing in one industry... there's a lot more sectors affected, boycots by Canadians on goods and tourism etc... funny that threatening to annexe your neighbour would hsave consequenses, eh?
But if you look at the mag7... Nvidia, Alphabet et.al its the tech industry thats really driving US stocks... they are not going anywhere I dont think. In fact after the US government bought a load of intel the other week, (10% iirc) Nvidia have just bought $5bn of intel, too...
Will it pop? maybe, but that's why you don't go all in on s&p500, by all means buy, but hedge it a bit too...25% of my stock are top 500 european companies.
I'm not sure it's clicked with republican voters that trump is using his presidency purely for personal enrichment, I'm not sure they ever will.
Not sure if its already been mentioned but worth checking out Rebel Finance School on you tube. The couple who do it are mildly over enthusiastic ( annoying?) but if you can put up with that have some great content with lots of planning tools. Basically they are all about the power of compounding and passive investing across a wide portfolio with low fees. I've just parted with my FA having worked out that i was paying fees of circa 1.5% on my SIPP whereas there are people like Vanguard and Interactive Investor who are charging less than 0.2%- if you had 500k that equals £6.5k pa saving that can be invested. Warren Buffett is a massive advocate of passive investment as opposed to trying to guess the next big thing so that's good enough for me.
Yeah diverse passive investment is like investing on cheat mode.
Picking individual stocks.. 95% apparently lose and that's including professionals.
Plus keeping on top of multiple stocks, what to buy, what to hold, what to sell and when...
.. Well that quickly becomes a full time job in itself if you want to stand any chance of success.
can folks recommend any sites that might support some initial scenario testing with a bit more than either simple drawdown or somple annuity estimations? Wanting to look at the trade offs of pot growth/drawdown combined with different annuity values.
Here are some books with backing websites.
Abraham Okusanya's "Beyond the 4% Rule" already got a mention.
I would add these three books/sites to the list:
- A Richer Retirement: Supercharging the 4% Rule to Spend More and Enjoy More. by Bill Bengen, the guy who created the original 4% rule
- Planning for retirement: Your guide to financial freedom by Noel Watson of Pyrford Financial Planning - has more of a UK focus
- Living Off Your Money by Michael McClung. The bible, what happens when a data scientist looks at 100+ years of data from several global markets and figures out the best way to make your money last, including options for whether you want annuities, whether you want to leave a legacy, and whether you are flexible about how much you draw down each year.
The books above give some strategies for getting the 4% rule up into 5-6% territory, especially if you are flexible in how much you draw down (i.e. less in a bad year and more in a good year).
I would also mention again what I have said before in this thread: you're looking at a probability problem, which is "what is the probability I run out of money before I die?"
Part of this is "when will I die", and you can look that up. For the middle-aged men here there is probably a 50% chance you make it to 84, and a 10% chance you make it to 97. Women get an extra 2-3 years for the same chances.
The other part is "how long will my money last?". According to the original 4% rule (with further analysis), withdrawing an initial 4% from a 60:40 shares:bonds portfolio and increasing it by inflation each year means your money would last 30 years in 87% of cases, so a 13% chance of running out.
With the magic of probability maths, if you retire at age 67 then the chances of getting to age 97 AND running out of money with the 4% rule are: 10% x 13%, i.e. 0.10 x 0.13 = 0.013 or just 1.3%. For most people that's pretty safe, especially as you'd probably start cutting back anyway if it looks like you're on course to run out.
the chances of getting to age 97 AND running out of money with the 4% rule are: 10% x 13%, i.e. 0.10 x 0.13 = 0.013 or just 1.3%
At 97 there's about a 20-25% chance you'll have been living in care for 5 years and ran out of money a couple of years ago if you'd lived to the 4% rule.
that ons data is the most depressing thing I’ve read all week. I always saved as much as possible and viewed it as money that didn’t exist since it was taken before tax. A median pot of zero. Zero?! I guess people do not understand tax relief nor compound interest.
Tax relief on the way in, compound interest growth and 25% tax free (for now) on the way out. For a higher rate tax payer that’s still 20% net tax saving as you may only pay 20% on withdrawals, with compounding as well.
Am now depressed. I’ve got my sons pension saving earlier than I was able to start. Time flies.
Not by teachers...but financial experts.....this stuff should be 'taught'/talked about at school from an early age. The absolute basics of saving a few pennies week in week out linking in as kids get a little older with pensions/tax and all the other stuff. (It may well be taught in UK schools now? I've lived in France for the last 3 yrs)
Warren Buffett is a massive advocate of passive investment as opposed to trying to guess the next big thing so that's good enough for me.
That isn't a binary choice. Warren Buffett advocates passive investing for the average retail investor. His company doesn't practice it though. My understanding is that Berkshire Hathaway invest in companies with a long term view based on the sector and quality of the corporate governance. They are definitely not passive index trackers, but they aren't jumping on every bubble either.
I’ll check out those links @dhague while I’m OK with probabilities and risk my SO is risk averse. IRL I expect a mix of annuity and drawdown from a ‘balanced’ pot will be where I end up with some anticipation of further belt tightening in case of surprises.
the comments on income vs saving for pensions are accurate. Some folks I know had to opt-out of good DB schemes early on to afford to get by. A hard decision they knew wasn’t best but was necessary. They contributed as soon as they could. While I have no DB schemes I have had the good fortune/planning to be able to contribute at levels where my contributions were ‘matched’ to a fair, and almost generous, degree with some.
In relation to some of the investment risk/balance comments there was some commentary on the shift towards equity investment in the USA on Reuters Commentary | US savers go all in on 'cult of equity' - https://www.reuters.com/markets/funds/us-savers-go-all-cult-equity-2025-09-22/
and in news that will surprise few NVidia and OpenAI seem to be getting even closer
Nvidia to invest up to $100 billion in OpenAI, linking two artificial intelligence titans - https://www.reuters.com/business/nvidia-invest-100-billion-openai-2025-09-22/
I'm going to say it out loud and some may take exception. I'm envious of those that have retired early on 'lower' pensions and are now living the life. But I hope they have really worked it through and are managing carefully (or have bought annuities sensibly) because if you find you went too early there's not a lot of chance to pull it back....
I've watched my father do this. He took a nice early retirement payment, went through a tough time losing my mother, but frankly has since 55 spent his time on charitable and personal projects in the UK and India, and has barely earned anything after 60. He has slowly cut his cloth more and more, downsized house to release capital to live off. On one hand he's led a wonderful life, but on the other as he turns 84 he realised he has very few options as he starts a transition into a 'semi sheltered' place and thinks ahead to what his declining health will really mean. He's relatively well off monthly but that means nothing in the face of growing housing costs and potential personal care costs in the near future.
He's quite open about hoping his (dodgy) heart just crapping out one day allows him to dodge personal and nursing care issues...
As for the 'expect state to pick up care bills later on' / 'if I'm pissing a cheap bed or expensive one, who cares?'
Again, this is where my father planned a retirement around what he saw his grandparents and father did - had family care/host and affordable care before heart attacks (heart issues run in the family). He then assumed that we the kids would pay care for him. But that's impossible in our position to any meaningful extent. So he's now going to be reliant on the state.
At least next month he's in a place with easily accessible support, strong community, with personal care and nursing care on site through the charity which runs the place....but it's not the future he had planned even a decade ago.
I think my retirement may be similar, and maybe I will be the one hoping that heart attack will nail me at some point...
🙁
Robola is right correct - Buffett himself is a very successful long term stock picker, Joe Public isn’t and should stick to index tracking. Buffett’s style is find individual companies which can compound their profits year after year whereas index tracking reflects the fact that over history share prices in totality have tended to go up.
The cult of equity exists in the US because, quite frankly, it has tended to be the right thing to do - buying shares in some form or other and holding onto them has tended to produce outsized returns. The last time there was an extended period when this didn’t work was the 1970’s. Add in the fact that share ownership is so much more prevalent in the US compared to the UK means that a much higher proportion of the population have experienced it and can relate to it. In the UK, because direct share ownership is much more restricted, such feelings don’t exist. However, we have a cult of property ownership which plays a disproportionate part of our national financial psyche. I have long been amazed by those personal financial columns where the question “property or pension?’ is posed and the proportion plumping for the former is probably 90%+. I can’t blame them because in general people have made a lot of money through housing but because they live in their main asset rather than live off it we end up with a lot of policy distortions.
I understand the issues with pension pot. But something more important and you can have an affect over is your fitness and health.
All the money means nothing if you don’t have the fitness and good health to enjoy it. Get fit and stay fit. It will pay huge dividends in retirement.
^ From another poster on the old 2020 thread.
Obviously there was a lot going on that year,but it's interesting reading through some of it again .
I remember how that post rang true,as I started to plan my escape.
The cult of equity exists in the US because, quite frankly, it has tended to be the right thing to do - buying shares in some form or other and holding onto them has tended to produce outsized returns. The last time there was an extended period when this didn’t work was the 1970’s.
It's the holding onto them bit that is problematic if you are saving for retirement though.
There have been other notable periods since then that have not been great and in fairly recent memory, S+P 500 lost decade:
I only really got to a point where I could make decent contributions in my 40s. If there is a big market dip when you are <10-15 years away from needing the pot are you able to ride it out? Have people got the discipline to de-risk their own investments as they approach retirement?
Have people got the discipline to de-risk their own investments as they approach retirement?
It depends on your strategy.
Are you looking to cash-out once you retire which relies on the market being in a good position at that time?
Or do you just draw-down on that pot across your retirement?
Cashing out could be buying an annuity.
Starting the drawdown when the pot has lost a large chunk is going to drain it more quickly or reduce the amount you can draw down. Or, given this is an early retirement thread, delay your retirement.
Neither particularly desirable.
This isn't a particularly useful comment for planning purposes but more and more i suspect people are living for now with no saving towards retirement going on at all, and plenty of 'middle class' included in that.
When i look at the people having nice holidays, driving new cars, and moving house every few years they either earn, or generate a lot more than I thought, or the house is on a 35 or 40 year mortgage at an eye watering amount and there's nothing going to a pension.
Some may be 'saved' by inheritance but I fear more and more for people getting toward traditional retirement ages. I suspect those forced to work until they drop to keep the mortgage paid is going to increase significantly in the coming decade or 3.
Choices yes, but there's some economic drivers like the high house prices for example, and costs of child care.
So we've an aging population, and one that's not so rich... or at least it is cash poor and debt funded asset rich at best!
Picking individual stocks.. 95% apparently lose and that's including professionals.
Plus keeping on top of multiple stocks, what to buy, what to hold, what to sell and when...
.. Well that quickly becomes a full time job in itself if you want to stand any chance of success.
Whoah! I think you urgently need to clarify what you mean by " lose" or you will be unnecessarily scaring a lot of people.
I presume you mean " not making as much as you would by investing in passive funds"
A lot of people will take it as meaning " your total value will actually go down" - which is bollocks
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.