Irish Life Pension & Lifestyling

Sarenco said:
I’m not making any assumptions.
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Apologies for the terminology. I mean:

What equity index are you referring to?
Does the example hold for dollars or euros?
Does the example refer to Irish, euro are, or US inflation?

I’m sincerely trying to replicate this as it’s an important example.
 
Fortune said:
Which index did you use?
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MSCI World (EUR), net returns, with assumed ARF total expenses of 0.5%.

But it doesn’t really matter what global index you use - small caps/EM stocks didn’t help over this period.
 
SquirrelChaser said:
So the reason they exhausted their fund is not because of sequence of returns, but because they took their fund value at face value and spent accordingly while wilfully ignoring the world changing around them.
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If you want to plan for retirement based on imaginary figures, that’s up to you.

I’ll stick with real world numbers.
 
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That's taking a constant €40,000pa (not inflation increasing) from the MSCI ACWI with zero charges, starting at the end of 2000
 
And this is on a forward looking basis with an inflation increasing income of 40,000pa from 1M starting value (ignore the currency)

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Colm Fagan said:
Markets went mad in the few years up to 2000, so anyone who started drawdown on 1 January 2000 would have realised that the amount emerging was far more than they were expecting only a short time previously, and they would probably have taken a cautious approach.
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You do remember what all those cautious Irish folks did in the subsequent years, right???

You and @SquirrelChaser are sophisticated investors compared to Joe Bloggs in Ireland, I think you're both significantly over-estimating how many folks even track their pension growth, never mind understand when equities are expensive versus inexpensive.

Furthermore, you're both also comfortably positioned wealth-wise - the vast majority of folks are not, so they don't have the capacity to halve their annual incomes for some indeterminate period of time.
 
Colm Fagan said:
Lots to reply to!
First of all, @Sarenco and @conor_mc have said that if @SquirrelChaser and I are so confident about knowing when markets are about to tank, then why not go into cash, etc.?
Of course, no-one knows in what direction the market is going to move at any time. We're always worried that it might fall, but sometimes we're more worried than at other times. It doesn't mean you exit the market. You're just that bit more cautious.
As to the comment about Irish investors' lack of caution in relation to property investment, so why should we expect anything better for shares, I suppose that's where the adviser adds value, by reminding retail investors that markets can fall, and may fall precipitously. At times, the risk is higher, at times it's lower.
There's been lots of talk about 60:40 and 80:20 portfolios. I have never seen a good explanation for why either is reasonable.
@Marc says that a 100% equity portfolio is as mad as a 100% cash portfolio. As everyone know, my portfolio has been 100% equities practically from when I started saving for my own retirement in 1996 (with a few small exceptions years ago). I don't think I'm mad. Yes, I suffered badly in 2007/08 but I also experienced the recovery. I also suffered in early 2020 with the Covid scare but I came through it. I hope the long-term results (which I know should include the period pre-2010 but I don't have them to hand) support this belief. @Marc says it's all luck. How long would the experience have to be to convince him that it's not luck?
I repeat my conviction that a 100% growth ("equity") strategy is best for a committed long-term investor, who'll be investing for a long number of years and drawing down for a long number of years. No-one has shown why I'm wrong.
I'm afraid that @Marc's graphs leave me cold. I think part of the reason is that I don't have a clue of the underlying assumptions. For example, is there an assumption of an ERP? If so, how much? Does he allow for auto-correlation? Auto-correlation is insignificant at short durations but it's very important at long durations. Pension investing is about as long as it gets so some autocorrelation should be assumed, even implicitly, especially when modelling the more extreme possibilities, which is where he focuses a lot of his attention. What expenses are assumed in his various graphs (i.e., the expenses the retail investor will have to bear, not just investment management fees)? My regular analyses of my portfolio allow for all expenses. GIGO - garbage in, garbage out.
Finally, I think there's a slight misunderstanding between @Sarenco and @SquirrelChaser in relation to the word "drawdown". They are using two very different meanings for the word.
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Just so everyone is on the same page of the teach yourself investing manual.

When you are saving for retirement sequence of returns are irrelevant. Having an equity bias is fine when you are adding to a portfolio.

It hits when a) you are taking withdrawals AND b) your initial returns are negative like the examples provided of the 1930s 1970s and early naughties

In terms of time horizon I need around 60 years of data simply to generate a meaningful t-stat to demonstrate that I expect stocks to beat t-bills. So I really do need more than your investing lifetime to draw any meaningful statistical conclusions.

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For global equities I am using the historic characteristics of the MSCI ACWI since inception which was 1990 to that's a pretty decent proxy for "equities" for the purposes of this debate.
 
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I cant add anymore to this debate. There are none so deaf as will not hear.


Maybe we’ll meet on Christmas Day for a game of football.

Less than 30% nearing retirement have used an adviser, according to new research from behavioural finance experts, Oxford Risk - https://lnkd.in/eQV9bwnX

Marc Westlake CFP, TEP, APFS, QFA, EFP
Chartered, Certified and European Financial Planner
Registered Trust & Estate Practitioner
Everlake
 
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For global equities I am using the historic characteristics of the MSCI ACWI since inception.
 
Hi @Dr Strangelove
I'll quote again what I said earlier
Colm Fagan said:
Of course, no-one knows in what direction the market is going to move at any time. We're always worried that it might fall, but sometimes we're more worried than at other times. It doesn't mean you exit the market. You're just that bit more cautious.
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If I were heavily into AI type stocks, I would now be more worried than usual. As readers of my investment updates know, though, I'm not into them (and have stopped trying to short them after my disastrous experience with Tesla) and I'm not an adviser so I haven't kept up to speed on them, so I'm probably not the best person to ask.
Interesting, by the way, that I just now googled the NASDSAQ return for 2023 and it said it was the best year since 1999, the year we've just been talking about!
 
I'm with @Louisval. I'm in the front row watching Pele,Maradona,Best, Cruyff, Puskas, Messi and Ronaldo playing 3-and-in. I've no idea who'll win but it's engrossing. I have some skin in that type of game but as Malcom Tucker says I'm like Stephen Hawking at the match....very close to the action but unlikely to score a goal.
 
NotMyRealName said:
I'm with @Louisval. I'm in the front row watching Pele,Maradona,Best, Cruyff, Puskas, Messi and Ronaldo playing 3-and-in. I've no idea who'll win but it's engrossing. I have some skin in that type of game but as Malcom Tucker says I'm like Stephen Hawking at the match....very close to the action but unlikely to score a goal.
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Engrossed here too. Significant ARF investment decision coming for my wife next year so this is fascinating ….although I can’t shake the feeling that I’ll be more confused and indecisive than I was at the start!
 
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I have moved the general discussion to this thread

Should retirees be 100% invested in equities?

I have a pension with Irish Life and am 7 years to retirement. I noted today that I am now in 2 funds Empower Growth Fund (Risk Rating 4) Empower Stability Fund ( Risk Rating 2) I am being "sheperded" into low risk funds the closer I get to retirement. I will take an ARF self administered...
www.askaboutmoney.com
 
Thanks all, given I have 7/8 years to retirement I've elected to switch out of lifestyling and put the funds into Indexed World Equity Fund (Risk Rating 6).

Have read and listened to enough opinions (independent of this thread) to be reasonably confident in this approach.

I've never been a gambler and this seems ( for me) the correct path.

Time will tell.

When retired I expect ill put proceeds into a self administered world Equity type fund balanced with bonds.

Thanks for all contributions , on both threads, may not have understood the technicality of it but got a flavour.
 
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