Colm Fagan
Registered User
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It's a straightforward compound interest calculation: 3.26^(1/13.5)=1.09148. (I've to disable the portrait orientation lock on my iPhone to get the power calculation, but you can also do it quickly on a spreadsheet.)Is it not 11.33%? I agree that one would expect 326% to translate into a higher number.
The money for my ARF didn't appear out of thin air on 31 December 2010. It came from a self-administered pension plan, which I started in 1996 and was also invested (almost) entirely in equities - and went through the floor in the GFC, but also experienced the subsequent recovery. I do agree that QE has done wonders for equity returns since then, but I would have happily settled for 3% a year less on average over the period since 2010. That would still have left me with an average return of over 8% a year. BTW, I did experience the "sequence of return" risk: the fund had a negative return in the first year (2011). So what? Of course, it would have been lovely to have kept some of my money in cash at the start of 2011 and then invested it in equities at the end of the year, but I would most likely have kept it in cash (or bonds) for the entire period and would therefore have experienced a lower return overall.Whilst I agree that people with other assets should think of their overall asset profile and consider having an all-equity ARF, you’ve been exceptionally lucky that your investment period started after the Global Financial Crisis. If you’d retired right before the dot.com bubble burst of the GFC kicked in, the picture would be different because of sequence of returns risk etc.
I agree that someone with limited other reserves (or unencumbered equity in their home) would not be well advised to do as I did. One of the main aims of my AE proposal was to give that freedom to pensioners of more modest means. Unfortunately, Minister Humphreys scuppered that ambition.
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