Ramin your timing is impeccable. I’ve watched videos from you about building bond ladders and how to invest cash, just as I sold a rental property. Now I’m 2-4 years away from retiring and here we are with this video. Thank you so much for all your videos. I can’t begin to tell you how much you have helped me, and I’m sure there’s plenty others out there who have benefited from your words as well 👍
I like the simple approach of buckets rather than complicated scenarios, or lifestyle investments. I will be putting 3 years living expenses into cash or safe bonds, 3 years before retirement and keeping the rest in global ETFs in equities. my plan is then to keep topping up the 3 year cash fund as long as equities are performing well. If theyre not, I will wait for the recovery & then top up. If that means years 2 & 3 I need to reduce my withdrawal rate or take a part time job, then Im happy to do that as I plan on retiring early anyway. Once the first 9 years of retirement are up, I qualify for state pension, which will help me with derisking even further, so I may not need to keep as much in cash fund from that point. Really good video & great explanation.
@@fredatlas4396 3 years of cash will be enough to cover 95% of stock market crashes. You can always look at the nucular scenario but there aren’t any good strategy’s to cover a ten year dip
@fredatlas4396 absolutely. Ive looked at the data very closely. Romin has also done a video recently with Making Money Clips entitled Why the 60/40 Rule is DEAD. Definitely worth a watch as an introduction to start to think differently
Read about 3 bucket strategy. 1st Bucket is cash in bank, 2nd bucket is bonds, 3rd bucket is stocks. 20% (or should be able to support 2 years or 3) of your funds should be in 1 and 2 bucket. 3rd bucket should be high risk ETFs. Don't invest in individual stocks after you retire. Thanks
As a recent retiree, this is very relevant to me. I feel pretty confident my SIPP is “de-risked”, with ~25% allocated to MMF, short term gilts, cash and bonds, enough to last me about 8 years, with ~5% gold and remaining 70% equities. The equities are further diversified between different regions, income and growth and different industries. It’s not exactly simple but everything is there for a reason. Over the last year it has grown in value by about 15%. Not too bad I think. Let’s see how robust it is over a longer time period!
Really good love your way of discribing this I started mine late last year watched the current flying market but still happy that my bonds are steady and still picking up on my reaming smaller pot in stock market feel confident to retire not a constant worry🙂
Hi @simonunion4657 it makes sense to dial down risk to a level you're comfortable with _before_ there's a selloff as you have. Well done! Thanks, Ramin
About six months ago pre-55, I restructured my SIPP portfolio to a focus on income (80%) and growth (20%) with about 16 investments. As of a couples a go, I started taking an income, however I only take out what the portfolio generates and do not touch the base capital amount. The biggest issue this year is the new government and what changes in the next Budget if they chose to introduce further private tax pensions.
Don't forget that gold is a big plus in a retirement portfolio. It's not about volatility of individual assets, it's about holding more un-correleated assets. We can boost the portfolio spend rate dramatically with international stocks, REITs, Gold, Long Term Treasuries and Defensive Stocks in the mix. Add in more inflation protection as well with oil and gas stocks. Defensive equities are consumer staples, utilities and healthcare. This has been studied.
I’m approaching retirement and thinking of having a low risk MyMap multi asset Fund for the lower volatility side, with a global equity. In a 50:50 weighting. The MyMap is. bit more diversified than single bond fund.
So the top comment is why switch out of ETFs ? Rich people borrow against assets to stay in the market during 'hard times' to get the most out of the recovery and avoid paying CGT. Why not suggest this as a method?
I am inadvertently following the 3 bucket approach and have recently retired in late 50s. GIA holds a couple of wealth preservation funds and a global tracker (+ 3 years in cash savings), ISA is 70% equities, SIPP 80% equities.
I retired at age 53 and am now in my early 60s. Many people resisted me because they couldn't understand the idea of not working if you don't have to. I considered my life to be in phases. I worked very hard to achieve what I have now, but in my last years, I owe it to myself to "stop and smell the roses." After I retired, I left the nation and now reside in Latin America. I was able to enjoy my new surroundings and escape from all the bad things that were going on in America. I haven't yet encountered anyone who laments their retirement.
Where do you live in Latin America and what are the tax implications of residing there? I am asking you because I would like to retire in argentina as I am native from there but the rules there are not favourable
There’s so many scenarios you can do. I like having a couple of years cash on standby as an emergency fund and to be all in with global equities. Unless you’re a millionaire you have to take on risk and need your money to work for you to create the return growth you need, especially if retiring early. Later on maybe sell some stocks and buy some global government bonds for some downside risk when you’ve accumulated a bigger pot. Then just use the 4% rule and sleep easy.
Interesting... I am about 3 years from retirement. Because of this, I am beginning to build up by Cash and CD position to allow me to live about 3-4 years without having to dip into my higher risk investments. An important point to think about is the absolute amount (3-4 years of estimated $ needed to support you) vs the % of your asset because someone with $1M will have to have a much higher % of their asset in cash/CD than someone with $10M. I plan to keep my risky investment relatively similar as I am today to allow it to go up and down according to my risk appetite. As mentioned in the video, the ups and downs of the stock market tend to be shorter (2-4 years) than other risky assets. Just my 2 cents.
I've got fixed rate bonds equal to 1/4 (£160k) of my investments staggered over 5 years . The rest of my investments are split evenly between global funds, and in a Vanguard retirement 2025 fund. I have a DB pension paying out £7.5k p.a starting next year so if the stock market crashes I won't need to cash any stock for at least 3 years but despite this I'm considering whether to 100% de-risk as I don't need to take chances anymore. I don't like annuities either.
In the USA "Deferred Annuities" seem to be popular yet don't even seem to be here. "A deferred annuity is a contract with an insurance company that promises to pay the owner a regular income, or a lump sum, at some future date", I would guess that a deferred Annuity that only paid out when you are, say 80 would be very cheap but would reduce the chances of running out of money iif you live beyond that.
Never really thought about de risking post retirement but this gives me something to think about… I was moving a little into ST Bonds for the current cash like returns, maybe a little bit more needed now 👍
Love your show Ramin. 63 and retired. I am at about 58% stocks with 42 % in bonds and short term treasuries. Plan to stay there until social security starts at 67. Then will go to 75 stocks 25 bonds. If we have a major correction I will make that move earlier. Yeah market timing but has worked well for me for 40 years. Everything is a guess in the end.
Nice way to retire. For me, I believe retirees who struggle to meet their basic needs are the ones who could not accumulate enough money during their active years to meet their needs. Retirement choices determine a lot of things. My wife and I both spent same number of years in the civil service, she invested through a wealth manager and myself through the 401k. We both still earning after our retirement fund has grown way more than it would have with just the 401(k). Haha
Why put your retirement fund into the distribution version of said global tracker? If there is a crash you just buy the distribution version and you will track the same recovery path, but have Dividends for your income. Also you could keep a money market pot on the side for top ups?
I retire in 6 months time and have already moved 4 years expenses to a money market funds.. also that's when state pension kicks in.. But all my other funds is in a global ETF. I'm never sure what goes in bucket 2, which is why I don't have one..
Very useful thanks, have gone fully to cash until I decide what to do next I worry there could be a sizeable splat in the American market at some stage in 2025.
Thanks. Your video is very informative. My strategy during retirement will be to tilt more towards dividend paying stocks. During the financial crisis S&P 500 dropped more than 50% but dividends only dropped about 20%, and dividends recovered much more quickly than the index. Furthermore, if you are collecting dividends you won't have to sell as many shares to fund your living costs which is precisely what you don't want to be doing at very depressed prices. I will also be allocating some funds to 10-year Gov bonds since they tend to be inversely correlated with market crashes (perhaps due to flight to safety or market expectation of rate cuts to save the economy from sinking into a recession).
I like very much the idea of having dividend funds in my portfolio so that I get income without selling funds during crash periods. If I can ask, how do you think about taxes in this context? How do you minimise taxes? Do you have this in ISA or SIPPs? Thanks
Dividends offer no added protection from sequence risk. A share sale and a dividend are the same, mathematically. Then share sales move on to be superior in every way, due to control over risk level, spend rate, taxes and we can now work within a financial plan. As was proven decades ago, dividends are there (but irrelevant). :)
Exactly, as long as you have built up that amount of cash (which is obviously a form of derisking anyway)l can’t see any point in not staying fully invested in the years before and after retirement
Yes, I do this. I use T212 cash for an emergency fund. Short term gilts with enough value to see me through a 2 year equity dip and the rest in World Equity Index funds. I'm thinking of increasing that to three years of funds with the gilt ETFs. I keep the gilts topped up buying ore when their price dips, or the equities are buoyant. So far it has worked quite nicely and my funds grow faster than my withdrawals.
@@Pensioncraft yes perhaps I phrased it badly as I spent a few years building up to 3 years so that I didn’t have to think about derisking before and after retirement
The un correlated investments (giving optionality) is something I’ve done and am happy with as it appears to have worked over the last 3.5 years. However I feel it goes against the big managed fund invested in everything (Lifestrategy) which everyone seems to support. And if it’s impossible to actively buy well how is it possible to actively sell well? Genuine question!! 👍 great content and so good you covered this
It's precisely to limit sequence of returns risk when in early retirement. Going 100% stocks has a greater risk of failure than say a 75% stock, 25% bond portfolio historically, due to the risk of a large equity crash in the earlier years, then impacting you future pot size, due to drawdowns also being made at the same time. I would recommend the Early Retirement Now blog, as he has done a 60+ part series on the safe withdrawal rate and sequence of returns risk.
Could you please make a video on drawing down choices comparing selling shares and receiving dividends. I feel receiving dividends must be better due to not selling principle, but with everything being equal they appear to have the same outcome. For example 100k pot, 50% crash £50k pot, either sell 10k worth of shares leaving £40k pot, or receive £10k dividends again leaving £40k pot. I hear time again that not selling the principle means never running out of money, but these two scenarios are the same outcome?
Has there ever been a 20% crash (one that doesn't bounce back) of major stock markets? A crash at age 68 shouldn't be too catastrophic if you stay in the market and only withdraw what (minimum) you needed, shouldn't it??
@@Oggy1086how do I get to know Mr. Blobby? I'd really like to learn how he makes millions; it worked for Noel Edmunds. Is there a conference I can pay to attend, or an online course I can subscribe to?
Hi @malcolmsmith2083 you should take a look at my video "Dodging Dividend Disaster" ruclips.net/video/PHdScxyuPEE/видео.htmlsi=-wc1bdVLtcpB1wdO where I talk about the problems of living off natural yield which is that your capital gain may lag inflation in which case you end up with an income that gradually shrinks in real terms as you pass through your retirement years. Thanks, Ramin
There are two fundamental assumptions you and other pension advisors make which are not necessarily true. One is that you base your figures on the assumption that the pension bot will be spent in the country it resides. A lot of retirees such as myself live outside the UK. I live in Thailand as a UK citizen who is for tax purposes a UK resident however the cost of living here is between a fourth and a fifth of the same in the UK. Secondly no mention is ever made of the fact that even in drawdown you can continue to make contributions to your pension. You are restricted at the moment to £10,000 per year which may seem very little if you live in the UK. However, for me living in Thailand it helps enormously. As a UK tax resident, you only need to contribute £7,500, tax relief will make up the other £2,500.
Hi, I have LS60 in my pension. is it worth switching that to its constituate parts for the flexibility suggested by Ramin. 40% global government bond, 30% global ex uk, 25% US 5% Uk
Hi Romin. I tour draw down anslysis what are your assumptions before and after the drawdown. I believe you should sssume a higher return after a drawn. E.g. if vind drawdwon their yields would be higher as long as they are not too many defaults there returns will be higher
I feel privileged that I was affected by the worst stock market crash in history (Japan), as well as the worst bond crash in history. Although, in theory, a market crash makes little difference to your pension if it happens in your 20's or 30's, it can make a difference in your attitude to investment, making you perhaps less likely to trust the markets. Don't ask me how I know.
Hi @MattMcQueen1 I'm sorry you were hit by both crises. I've seen research that shows the same thing i.e. if you live through crises early in life it makes you more cautious throughout your life. That could lead to underperformance because you then take too little risk. Thanks, Ramin
@@MattMcQueen1 in a very crazy oversimplistic way if you are below 40 you want the market to go down and if you’re above 40 you want the market to go up. Don’t tell me I bet you’re unlucky at cards as well.😁
@@Pensioncraft Thanks, Ramin. I think I'm living proof of that. It was also very different back then, of course. Switching funds often meant filling in a form and posting it off - much easier now that you can go online and switch (although that also has it dangers; the ease of switching probably also leads to underperformance). I still say that putting people by default into lifestyle funds, and the fact that the vast majority of people don't switch from the default fund, has caused a lot of underperformance likely for the majority of people. Anyway, I've ranted enough for one day. This was another great video.
@@hachimaru295 But lucky in love LOL. I am well above 40 - I hit state retirement in less than 6 years. I took a substancial hit in my pension just a few years ago, when bonds collapsed. One of the perils of being in the default lifestyle fund. Unfortunately, if you lose half your pension fund in your early years (admittedly, a small amount of cash in reality), that can have a psychological affect. Back then, it did feel like gambling. I'm not sure that the current AI bubble is much different from the bubble in Japan.
@@Pensioncraft How about a house that is worth less than you paid for it nine years earlier ? That had more impact on my attitude than any stock market crash.
Does this apply to anyone who will live off dividend income? My pension will come from 2 Defined Benefit schemes, so I don't need to cash in my investments. My only thoughts now are to switch out of low-yield investments, such as S&P500 ETFs, and put them into higher-yield stocks. Does that make sense?
up to u if you want to take the higer risk the s&p etf is one of the best for getting a decent return anything higher means considerable risk with possibly illiquid funds and we all know what happends then aka neil woodward
Enjoy your videos but I don't remember you ever mentioning defensive investment trusts such as Capital gearing trust ,Personal assets trust, Ruffer investment trust or even a defensive hedge fund such as Man GLG Alpha Select Alternative? I'm 64 and retired and have around 75% of my ISA in these type of investments with the remainder in growth type equities. At least I should get decent growth in the short term with lowish volatility.
Ramin did a video on defensive investing about a year ago, where he mentioned these trusts. He also interviewed the 2 managers from Ruffer, but that was a members only video.
PAT and Ruffer performance has been dreadful in recent years, so can they really be described as "defensive" ? Personally I prefer 70% diversified equity funds and 30% cash and no bonds with that cash amount able to provide 5yrs worth of expenditure requirements.
Just a thought (as I suppose all comments are), if you are invested in a LifeStrategy fund and either equities or bonds fall, the fund will rebalance, buying more of the asset class that has just fallen, thereby giving a higher expected return. How does that compare to a non-rebalancing approach? Or, if equities crash, would you spend from bonds *and* buy equities?
im not convinced the lifestyle funds will work - if you need to sell shares to fund your retirement in a lifestyle fund when the price has reduced, you're having to sell funds across bonds & equities - you dont get to choose whether you sell just the bonds which are more likely to have kept their price. This is why i will effectively provide my own "lifestyling" fund, by transferring 3 years worth of expenses to cash or bonds & the rest into global ETF. That way, I can simply draw on the cash, or sell the bonds, instead of touching equities which are more likely to be the part of the lifestyle fund that has reduced in value and wait for the inevitable price recovery that weve seen from the stock markets time and time again
@@Mallarkey That was exceptional, bonds had been in a 30 year or more bull market because of lowering interest rates for yrs. Bonds look a lot cheaper now so in theory they should provide good protection if equities tank
Did he really say reach 96.😂😂😂😂Men die at 80 or below. And those last year's are full of illness. Get out asap and spend for a twenty year period in retirement. Otherwise your end of life care bills will take everything you have saved for later.
Hi @coolmonkey619 you have to find a level of risk you're (a) comfortable with and which (b) will be likely to achieve your financial goals. There is no right or wrong answer to that question. But if you're 100% in stocks then ensure that if there is a crash your pot won't suffer an irrecoverable loss where the withdrawal rate spirals upwards and depletes the pot before you die. That's why something like the 4% rule is a helpful rule of thumb in working out a sustainable rate of withdrawal. You can fairly easily make a spreadsheet to work out the effect of such a crash and how it would affect the lifetime of your money. Thanks, Ramin.
Holding something that is not equities, so that you can draw from it in crashes ? Interesting. I wonder though, what about the losses long term from holding the cash and it decaying further from inflation. Maybe a compromise is to hold inflation linked bonds (not a fund but actual bonds) rather than cash ( buy more if they mature and don't need them), so that at the very least the "non-equity" bucket holds its buying power when i need it ?
Hi @wingtsun1 for the five years either side of retirement the effects of inflation won't be too large usually. But if you think that might be a concern then having some inflation linked bonds might make sense. Just be careful that you understand breakevens if you are going down that route. I was quite disappointed with my linker purchase as I overestimated what inflation would be for the lifetime of the bond and my return would have been roughly the same with a normal (nominal) UK government bond. Thanks, Ramin.
Inflation is perhaps not an issue at the moment. Trading 212 cash is 5.1% well above inflation. My Ishares Core Gilts are running at 9.4% over this last year (inc. divs). Amundi UK Government Inflation-Linked Bonds are currently 10.04% over the last year. (inc divs). The problem with the Amundi bonds is that the fund is only £78 million.
I recently sold some of my long-term position and currently sitting on about 250k, do you think Nvidia is a good buy right now or I have I missed out on a crucial buy period, any good stock recommendation on great performing stocks or Crypto will be appreciated.
I am sorry Romin. I am a big fan but not sure about this advice. Adding complexity post retirement seems like a bad idea with onset of cognitive decline.
Buffet recommended 90p spy and 10p bonds and he also said do not time the market so maybe this kind of timing makes sense. What would be your approach?
@@mircea_h I use systematic trend following models on allocatesmartly. Of course this is market timing too but in a systematic way rather than pure judgement.
Retired 53 1mil 70% blue-chip isa 40k in dividends. 12k sipp drawdown No tax 30% technology etfs plus high growth nivida tesla, etc. Take risks. Retire early, simple 👍
Hi @paulsetter2989 that's precisely what the video's about i.e. how to reach that properly balanced weighted portfolio. The asset allocation that's best for accumulation may well be different to the one you have during retirement. Thanks, Ramin
@@Pensioncraft I think he is referring to a constant percentage of shares / bonds eg the 60/40 portfolio which gets rebalanced whatever the calamity faced. Hence is stocks crash, the bond portion buys cheap shares and hence rebalances to target weights
@@bornufree Yes I should have been clearer. What triggered me was putting gold in high risk. You should always have some gold for inflation and cash for bargains in a crash. The bulk being income from divs and bonds + pension with a bit left for some stock market fun.
best explanation of "de-risking" on RUclips and I am glad you mention "de-risking too much could also pose a risk"
Glad it was helpful! @patoises
Ramin your timing is impeccable.
I’ve watched videos from you about building bond ladders and how to invest cash, just as I sold a rental property.
Now I’m 2-4 years away from retiring and here we are with this video.
Thank you so much for all your videos. I can’t begin to tell you how much you have helped me, and I’m sure there’s plenty others out there who have benefited from your words as well 👍
Hi @Banthah I can't time markets but I'm glad I got this timing right for you! Thanks, Ramin.
I like the simple approach of buckets rather than complicated scenarios, or lifestyle investments. I will be putting 3 years living expenses into cash or safe bonds, 3 years before retirement and keeping the rest in global ETFs in equities. my plan is then to keep topping up the 3 year cash fund as long as equities are performing well. If theyre not, I will wait for the recovery & then top up. If that means years 2 & 3 I need to reduce my withdrawal rate or take a part time job, then Im happy to do that as I plan on retiring early anyway.
Once the first 9 years of retirement are up, I qualify for state pension, which will help me with derisking even further, so I may not need to keep as much in cash fund from that point.
Really good video & great explanation.
What happens if it takes 10 yrs or more for equities to recover. Have you looked at portfolio charts
@@fredatlas4396 yes ive done my research. happy with the approach im taking
@@fredatlas4396 3 years of cash will be enough to cover 95% of stock market crashes. You can always look at the nucular scenario but there aren’t any good strategy’s to cover a ten year dip
@fredatlas4396 absolutely. Ive looked at the data very closely. Romin has also done a video recently with Making Money Clips entitled Why the 60/40 Rule is DEAD. Definitely worth a watch as an introduction to start to think differently
@@fredatlas4396 Exactly ! Our strategy should be prepared for prolonged down periods. For some reason my reply got deleted. Trying again.
You are a very wise, knowledgable man Ramin, thanks
Read about 3 bucket strategy. 1st Bucket is cash in bank, 2nd bucket is bonds, 3rd bucket is stocks. 20% (or should be able to support 2 years or 3) of your funds should be in 1 and 2 bucket. 3rd bucket should be high risk ETFs. Don't invest in individual stocks after you retire. Thanks
As a recent retiree, this is very relevant to me.
I feel pretty confident my SIPP is “de-risked”, with ~25% allocated to MMF, short term gilts, cash and bonds, enough to last me about 8 years, with ~5% gold and remaining 70% equities. The equities are further diversified between different regions, income and growth and different industries. It’s not exactly simple but everything is there for a reason. Over the last year it has grown in value by about 15%. Not too bad I think. Let’s see how robust it is over a longer time period!
I have a DB Uni Pension with SAUL so I am staying 100% shares in my SIPP and S&S Isa forever.
For people without DB pensions a similar approach would be take out an annuity just big enough to pay the bills and keep the rest invested.
Yet another excellent video thanks. Was just thinking about this issue today!
Really good love your way of discribing this I started mine late last year watched the current flying market but still happy that my bonds are steady and still picking up on my reaming smaller pot in stock market feel confident to retire not a constant worry🙂
Hi @simonunion4657 it makes sense to dial down risk to a level you're comfortable with _before_ there's a selloff as you have. Well done! Thanks, Ramin
About six months ago pre-55, I restructured my SIPP portfolio to a focus on income (80%) and growth (20%) with about 16 investments. As of a couples a go, I started taking an income, however I only take out what the portfolio generates and do not touch the base capital amount. The biggest issue this year is the new government and what changes in the next Budget if they chose to introduce further private tax pensions.
Don't forget that gold is a big plus in a retirement portfolio. It's not about volatility of individual assets, it's about holding more un-correleated assets. We can boost the portfolio spend rate dramatically with international stocks, REITs, Gold, Long Term Treasuries and Defensive Stocks in the mix. Add in more inflation protection as well with oil and gas stocks. Defensive equities are consumer staples, utilities and healthcare. This has been studied.
I’m approaching retirement and thinking of having a low risk MyMap multi asset Fund for the lower volatility side, with a global equity. In a 50:50 weighting.
The MyMap is. bit more diversified than single bond fund.
So the top comment is why switch out of ETFs ? Rich people borrow against assets to stay in the market during 'hard times' to get the most out of the recovery and avoid paying CGT. Why not suggest this as a method?
I am inadvertently following the 3 bucket approach and have recently retired in late 50s. GIA holds a couple of wealth preservation funds and a global tracker (+ 3 years in cash savings), ISA is 70% equities, SIPP 80% equities.
Very useful, thanks for sharing your thoughts and experience aloud!
I retired at age 53 and am now in my early 60s. Many people resisted me because they couldn't understand the idea of not working if you don't have to. I considered my life to be in phases. I worked very hard to achieve what I have now, but in my last years, I owe it to myself to "stop and smell the roses." After I retired, I left the nation and now reside in Latin America. I was able to enjoy my new surroundings and escape from all the bad things that were going on in America. I haven't yet encountered anyone who laments their retirement.
Where do you live in Latin America and what are the tax implications of residing there? I am asking you because I would like to retire in argentina as I am native from there but the rules there are not favourable
There’s so many scenarios you can do.
I like having a couple of years cash on standby as an emergency fund and to be all in with global equities.
Unless you’re a millionaire you have to take on risk and need your money to work for you to create the return growth you need, especially if retiring early.
Later on maybe sell some stocks and buy some global government bonds for some downside risk when you’ve accumulated a bigger pot.
Then just use the 4% rule and sleep easy.
Interesting... I am about 3 years from retirement. Because of this, I am beginning to build up by Cash and CD position to allow me to live about 3-4 years without having to dip into my higher risk investments. An important point to think about is the absolute amount (3-4 years of estimated $ needed to support you) vs the % of your asset because someone with $1M will have to have a much higher % of their asset in cash/CD than someone with $10M. I plan to keep my risky investment relatively similar as I am today to allow it to go up and down according to my risk appetite. As mentioned in the video, the ups and downs of the stock market tend to be shorter (2-4 years) than other risky assets. Just my 2 cents.
I've got fixed rate bonds equal to 1/4 (£160k) of my investments staggered over 5 years . The rest of my investments are split evenly between
global funds, and in a Vanguard retirement 2025 fund. I have a DB pension paying out £7.5k p.a starting next year so if the stock market crashes I won't need to
cash any stock for at least 3 years but despite this I'm considering whether to 100% de-risk as I don't need to take chances anymore. I don't like annuities either.
Great video. I'd not thought about when may be a good time to start de-risking but 5 years feels like a good minimum.
In the USA "Deferred Annuities" seem to be popular yet don't even seem to be here.
"A deferred annuity is a contract with an insurance company that promises to pay the owner a regular income, or a lump sum, at some future date", I would guess that a deferred Annuity that only paid out when you are, say 80 would be very cheap but would reduce the chances of running out of money iif you live beyond that.
Never really thought about de risking post retirement but this gives me something to think about… I was moving a little into ST Bonds for the current cash like returns, maybe a little bit more needed now 👍
very good point made in this on post-retirement optionality, thanks!
Glad it was helpful @patchydrizzle2858
Love your show Ramin. 63 and retired. I am at about 58% stocks with 42 % in bonds and short term treasuries. Plan to stay there until social security starts at 67. Then will go to 75 stocks 25 bonds. If we have a major correction I will make that move earlier. Yeah market timing but has worked well for me for 40 years. Everything is a guess in the end.
Nice way to retire. For me, I believe retirees who struggle to meet their basic needs are the ones who could not accumulate enough money during their active years to meet their needs. Retirement choices determine a lot of things. My wife and I both spent same number of years in the civil service, she invested through a wealth manager and myself through the 401k. We both still earning after our retirement fund has grown way more than it would have with just the 401(k). Haha
Glad to hear that you like the channel!
Why put your retirement fund into the distribution version of said global tracker? If there is a crash you just buy the distribution version and you will track the same recovery path, but have Dividends for your income. Also you could keep a money market pot on the side for top ups?
Excellent video..
Hi @rajTrondhjem10, thank you! Ramin
I retire in 6 months time and have already moved 4 years expenses to a money market funds.. also that's when state pension kicks in..
But all my other funds is in a global ETF.
I'm never sure what goes in bucket 2, which is why I don't have one..
Retirement isn’t an end g0al, but a journey best secured by careful and consistent investments.
Very useful thanks, have gone fully to cash until I decide what to do next I worry there could be a sizeable splat in the American market at some stage in 2025.
Glad it helped @davidgray3321
Thanks. Your video is very informative. My strategy during retirement will be to tilt more towards dividend paying stocks. During the financial crisis S&P 500 dropped more than 50% but dividends only dropped about 20%, and dividends recovered much more quickly than the index. Furthermore, if you are collecting dividends you won't have to sell as many shares to fund your living costs which is precisely what you don't want to be doing at very depressed prices. I will also be allocating some funds to 10-year Gov bonds since they tend to be inversely correlated with market crashes (perhaps due to flight to safety or market expectation of rate cuts to save the economy from sinking into a recession).
I like very much the idea of having dividend funds in my portfolio so that I get income without selling funds during crash periods. If I can ask, how do you think about taxes in this context? How do you minimise taxes? Do you have this in ISA or SIPPs? Thanks
Dividends offer no added protection from sequence risk. A share sale and a dividend are the same, mathematically. Then share sales move on to be superior in every way, due to control over risk level, spend rate, taxes and we can now work within a financial plan. As was proven decades ago, dividends are there (but irrelevant). :)
why derisk about 3yrs cash and stay fully invested for ever
You should actually watch the video !
Exactly, as long as you have built up that amount of cash (which is obviously a form of derisking anyway)l can’t see any point in not staying fully invested in the years before and after retirement
Hi @hachimaru295 it sounds like you've already de-risked sufficiently to ride out a lot of stock market crises. Thanks, Ramin.
Yes, I do this. I use T212 cash for an emergency fund. Short term gilts with enough value to see me through a 2 year equity dip and the rest in World Equity Index funds. I'm thinking of increasing that to three years of funds with the gilt ETFs. I keep the gilts topped up buying ore when their price dips, or the equities are buoyant. So far it has worked quite nicely and my funds grow faster than my withdrawals.
@@Pensioncraft yes perhaps I phrased it badly as I spent a few years building up to 3 years so that I didn’t have to think about derisking before and after retirement
The un correlated investments (giving optionality) is something I’ve done and am happy with as it appears to have worked over the last 3.5 years. However I feel it goes against the big managed fund invested in everything (Lifestrategy) which everyone seems to support. And if it’s impossible to actively buy well how is it possible to actively sell well? Genuine question!! 👍 great content and so good you covered this
I think de risking is a very old fashioned concept It’s fine when the only option was buying an annuity now with a drawdown option Why ?
It's precisely to limit sequence of returns risk when in early retirement. Going 100% stocks has a greater risk of failure than say a 75% stock, 25% bond portfolio historically, due to the risk of a large equity crash in the earlier years, then impacting you future pot size, due to drawdowns also being made at the same time. I would recommend the Early Retirement Now blog, as he has done a 60+ part series on the safe withdrawal rate and sequence of returns risk.
Could you please make a video on drawing down choices comparing selling shares and receiving dividends. I feel receiving dividends must be better due to not selling principle, but with everything being equal they appear to have the same outcome. For example 100k pot, 50% crash £50k pot, either sell 10k worth of shares leaving £40k pot, or receive £10k dividends again leaving £40k pot. I hear time again that not selling the principle means never running out of money, but these two scenarios are the same outcome?
Has there ever been a 20% crash (one that doesn't bounce back) of major stock markets? A crash at age 68 shouldn't be too catastrophic if you stay in the market and only withdraw what (minimum) you needed, shouldn't it??
How about Vanguard Total Global Bond Index Fund vs Vanguard Global Aggregate Bond ETF ? Also, Difference from Money Market Funds?
The sheer quantity of scam comments on this video is worrying
Hi @Stabbles I'm sorry, I've run the spam filter and done the usual whack-a-mole of deleting the spammers. Thanks, Ramin.
Not your fault Ramin...they need to do more to stop this
Although if you are still getting scammed by the 'I've been investing with Mr Blobby and earnt millions' then there is not much we can do
@@Oggy1086 Mr Blobby 😂
@@Oggy1086how do I get to know Mr. Blobby? I'd really like to learn how he makes millions; it worked for Noel Edmunds. Is there a conference I can pay to attend, or an online course I can subscribe to?
surprised no mention of living off natural yield of a basket of stocks/bonds
Hi @malcolmsmith2083 you should take a look at my video "Dodging Dividend Disaster" ruclips.net/video/PHdScxyuPEE/видео.htmlsi=-wc1bdVLtcpB1wdO where I talk about the problems of living off natural yield which is that your capital gain may lag inflation in which case you end up with an income that gradually shrinks in real terms as you pass through your retirement years. Thanks, Ramin
That one naturaly reduces your withdraw rate and would be less volatile
There are two fundamental assumptions you and other pension advisors make which are not necessarily true. One is that you base your figures on the assumption that the pension bot will be spent in the country it resides. A lot of retirees such as myself live outside the UK. I live in Thailand as a UK citizen who is for tax purposes a UK resident however the cost of living here is between a fourth and a fifth of the same in the UK.
Secondly no mention is ever made of the fact that even in drawdown you can continue to make contributions to your pension. You are restricted at the moment to £10,000 per year which may seem very little if you live in the UK. However, for me living in Thailand it helps enormously. As a UK tax resident, you only need to contribute £7,500, tax relief will make up the other £2,500.
Hi, I have LS60 in my pension. is it worth switching that to its constituate parts for the flexibility suggested by Ramin.
40% global government bond, 30% global ex uk, 25% US 5% Uk
All depends on health and what age you retire. Could be 55 or 75 years old.😮
Hi Romin. I tour draw down anslysis what are your assumptions before and after the drawdown. I believe you should sssume a higher return after a drawn. E.g. if vind drawdwon their yields would be higher as long as they are not too many defaults there returns will be higher
I feel privileged that I was affected by the worst stock market crash in history (Japan), as well as the worst bond crash in history. Although, in theory, a market crash makes little difference to your pension if it happens in your 20's or 30's, it can make a difference in your attitude to investment, making you perhaps less likely to trust the markets. Don't ask me how I know.
Hi @MattMcQueen1 I'm sorry you were hit by both crises. I've seen research that shows the same thing i.e. if you live through crises early in life it makes you more cautious throughout your life. That could lead to underperformance because you then take too little risk. Thanks, Ramin
@@MattMcQueen1 in a very crazy oversimplistic way if you are below 40 you want the market to go down and if you’re above 40 you want the market to go up. Don’t tell me I bet you’re unlucky at cards as well.😁
@@Pensioncraft Thanks, Ramin. I think I'm living proof of that. It was also very different back then, of course. Switching funds often meant filling in a form and posting it off - much easier now that you can go online and switch (although that also has it dangers; the ease of switching probably also leads to underperformance). I still say that putting people by default into lifestyle funds, and the fact that the vast majority of people don't switch from the default fund, has caused a lot of underperformance likely for the majority of people. Anyway, I've ranted enough for one day. This was another great video.
@@hachimaru295 But lucky in love LOL. I am well above 40 - I hit state retirement in less than 6 years. I took a substancial hit in my pension just a few years ago, when bonds collapsed. One of the perils of being in the default lifestyle fund. Unfortunately, if you lose half your pension fund in your early years (admittedly, a small amount of cash in reality), that can have a psychological affect. Back then, it did feel like gambling. I'm not sure that the current AI bubble is much different from the bubble in Japan.
@@Pensioncraft How about a house that is worth less than you paid for it nine years earlier ? That had more impact on my attitude than any stock market crash.
Does this apply to anyone who will live off dividend income? My pension will come from 2 Defined Benefit schemes, so I don't need to cash in my investments. My only thoughts now are to switch out of low-yield investments, such as S&P500 ETFs, and put them into higher-yield stocks.
Does that make sense?
up to u if you want to take the higer risk the s&p etf is one of the best for getting a decent return anything higher means considerable risk with possibly illiquid funds and we all know what happends then aka neil woodward
Enjoy your videos but I don't remember you ever mentioning defensive investment trusts such as Capital gearing trust ,Personal assets trust, Ruffer investment trust or even a defensive hedge fund such as Man GLG Alpha Select Alternative?
I'm 64 and retired and have around 75% of my ISA in these type of investments with the remainder in growth type equities.
At least I should get decent growth in the short term with lowish volatility.
Ramin did a video on defensive investing about a year ago, where he mentioned these trusts. He also interviewed the 2 managers from Ruffer, but that was a members only video.
I would say that those defensive funds would provide a valid alternative to the options mentioned in the current video?
PAT and Ruffer performance has been dreadful in recent years, so can they really be described as "defensive" ?
Personally I prefer 70% diversified equity funds and 30% cash and no bonds with that cash amount able to provide 5yrs worth of expenditure requirements.
Just a thought (as I suppose all comments are), if you are invested in a LifeStrategy fund and either equities or bonds fall, the fund will rebalance, buying more of the asset class that has just fallen, thereby giving a higher expected return. How does that compare to a non-rebalancing approach? Or, if equities crash, would you spend from bonds *and* buy equities?
Except it all goes wrong when stocks AND bonds collapse, as we experienced a few years ago.😢
im not convinced the lifestyle funds will work - if you need to sell shares to fund your retirement in a lifestyle fund when the price has reduced, you're having to sell funds across bonds & equities - you dont get to choose whether you sell just the bonds which are more likely to have kept their price.
This is why i will effectively provide my own "lifestyling" fund, by transferring 3 years worth of expenses to cash or bonds & the rest into global ETF. That way, I can simply draw on the cash, or sell the bonds, instead of touching equities which are more likely to be the part of the lifestyle fund that has reduced in value and wait for the inevitable price recovery that weve seen from the stock markets time and time again
@@Mallarkey 2-year cash buffer to the rescue!
@@Tbc810 I prefer 3 year but yes! 👍
@@Mallarkey That was exceptional, bonds had been in a 30 year or more bull market because of lowering interest rates for yrs. Bonds look a lot cheaper now so in theory they should provide good protection if equities tank
T212 is Bulgarian
Did he really say reach 96.😂😂😂😂Men die at 80 or below. And those last year's are full of illness. Get out asap and spend for a twenty year period in retirement. Otherwise your end of life care bills will take everything you have saved for later.
U don't derision just all out stocks and don't spend too much
When i hit 55 do i buy 100% bomd . So slowly adding only bond
Hi @coolmonkey619 you have to find a level of risk you're (a) comfortable with and which (b) will be likely to achieve your financial goals. There is no right or wrong answer to that question. But if you're 100% in stocks then ensure that if there is a crash your pot won't suffer an irrecoverable loss where the withdrawal rate spirals upwards and depletes the pot before you die. That's why something like the 4% rule is a helpful rule of thumb in working out a sustainable rate of withdrawal. You can fairly easily make a spreadsheet to work out the effect of such a crash and how it would affect the lifetime of your money. Thanks, Ramin.
Oh dear Bonds over last 5 years have done very badly
Why isnt anyone planning for a 50%+ crash and a very long recovery? Easily possible at the moment.
Holding something that is not equities, so that you can draw from it in crashes ? Interesting.
I wonder though, what about the losses long term from holding the cash and it decaying further from inflation.
Maybe a compromise is to hold inflation linked bonds (not a fund but actual bonds) rather than cash ( buy more if they mature and don't need them), so that at the very least the "non-equity" bucket holds its buying power when i need it ?
Hi @wingtsun1 for the five years either side of retirement the effects of inflation won't be too large usually. But if you think that might be a concern then having some inflation linked bonds might make sense. Just be careful that you understand breakevens if you are going down that route. I was quite disappointed with my linker purchase as I overestimated what inflation would be for the lifetime of the bond and my return would have been roughly the same with a normal (nominal) UK government bond. Thanks, Ramin.
Inflation is perhaps not an issue at the moment.
Trading 212 cash is 5.1% well above inflation. My Ishares Core Gilts are running at 9.4% over this last year (inc. divs).
Amundi UK Government Inflation-Linked Bonds are currently 10.04% over the last year. (inc divs). The problem with the Amundi bonds is that the fund is only £78 million.
I recently sold some of my long-term position and currently sitting on about 250k, do you think Nvidia is a good buy right now or I have I missed out on a crucial buy period, any good stock recommendation on great performing stocks or Crypto will be appreciated.
I am sorry Romin. I am a big fan but not sure about this advice. Adding complexity post retirement seems like a bad idea with onset of cognitive decline.
The action needs to be taken 5 years either side if onset if retirement.. Pay attention…
How to de risk a portfolio before retirement. BUY GOLD!!! Zero counterparty risk . Tier 1 asset.
Did you not see how long gold has been in drawdown?
Hello Teddy!
Why ?
Hi @lawrencehooper4341 Teddy says hi back. He's just sitting by me chilling out as we've been for a long walk. Thanks, Ramin
That's good to hear Ramin.
And thank you for all of the content that you put out. Much appreciated.
This is market timing in disguise
Buffet recommended 90p spy and 10p bonds and he also said do not time the market so maybe this kind of timing makes sense. What would be your approach?
@@mircea_h I use systematic trend following models on allocatesmartly. Of course this is market timing too but in a systematic way rather than pure judgement.
Retired 53
1mil
70% blue-chip isa 40k in dividends.
12k sipp drawdown
No tax
30% technology etfs plus high growth nivida tesla, etc.
Take risks. Retire early, simple 👍
Don't agree with this. By retirement have a properly balanced weighted portfolio. Zimples
Hi @paulsetter2989 that's precisely what the video's about i.e. how to reach that properly balanced weighted portfolio. The asset allocation that's best for accumulation may well be different to the one you have during retirement. Thanks, Ramin
@@Pensioncraft
I think he is referring to a constant percentage of shares / bonds eg the 60/40 portfolio which gets rebalanced whatever the calamity faced. Hence is stocks crash, the bond portion buys cheap shares and hence rebalances to target weights
@@bornufree Yes I should have been clearer. What triggered me was putting gold in high risk. You should always have some gold for inflation and cash for bargains in a crash. The bulk being income from divs and bonds + pension with a bit left for some stock market fun.
Are you not robbing your children if you de-risk.
???
@@tancreddehauteville764 there will on average be less in the pot when you die.