Where to put €300k cash?

[Sarenco]

Do you mind me asking why 10 years? The longest bear market was about 3 years in length.

Well, the Dow did not return to its peak close in 1929 for 25 years.

And Japan's Nikkei stock index has still not returned to its peak close in 1989 - that's 33 years and counting.

But to answer your question - there is no particular magic about having 10 years of anticipated expenses in "safe" assets at retirement.

It just seems like a reasonable balance to me.

 

[Brendan Burgess]

And there is no point in saying 'inflation is 5% so you lost 5%' because you may not spend all your cash on things that make up the inflation basket

It's an average. And you may spend more or less.

The point is that you are pretty much guaranteed to lose money if you put it in cash.
You are fairly sure to beat inflation the longer you leave it in equities.

Of course, if you are buying a house in 6 months' time, you leave it in cash.

Brendan

 

[Roro999]

And there is no point in saying 'inflation is 5% so you lost 5%' because you may not spend all your cash on things that make up the inflation basket

Cash is real money at the end of the day

Is'nt this pertinent in the whole question of how inflation eats away. If one spends say 40k running a household this year and 5% inflation is average for next year then it affects your cash position in that it should cost 42k. But if one can make savings somewhere in that 42k expenditure say to tune of 2k, then no worse off for effect of inflation.

 

[Reick]

Correct.

Death is not treated as a disposal for CGT purposes.

Of course, if the beneficiaries exceed the CAT thresholds, they will pay CAT.

Brendan

"US estate tax can be relevant in any situation where a non-US person owns taxable US situs assets, directly or indirectly, through a structure considered to be US tax transparent." (https://www.ey.com/en_uk/ey-frank-hirth/how-to-navigate-us-estate-tax)

 

[galway_blow_in]

Ah Galway Blow in can second guess the market.

Brendan

Fixed income is viewed as a wise location to park money for those on the final stretch prior to retirement and with say five or ten year government bonds, you are near guaranteed to get back what you put in , hardly the same as sticking 300k in the S+P until 2028 so it’s not really “ guessing the market “

Unlike two years ago you have decent yields now too so it’s not a bad trade I would argue ?

 

[Brendan Burgess]

Fixed income is viewed as a wise location to park money for those on the final stretch prior to retirement

By you. By tradition. And probably by people forced to buy annuities.

But it would be a very foolish location for the majority of people who at 65 will have at least a 20 year horizon.

Brendan

 

[galway_blow_in]

By you. By tradition. And probably by people forced to buy annuities.

But it would be a very foolish location for the majority of people who at 65 will have at least a 20 year horizon.

Brendan

Who waits until eighty five to retire?

 

[Brendan Burgess]

No one waits until 85 to retire.

You seem to be stuck in the rut that retired people must be 100% in cash or bonds.

Retirement is irrelevant to your investment strategy unless you are forced to buy an annuity.

Brendan

 

[podgerodge]

My concern would be that, if something were to happen in my life that required access to funds, that I could be in the middle of an "equity downturn" and have to withdraw and suffer the loss. Sure, I'm being glass half empty (or more), but I would regret putting 300k into equities and, in 2027, find they were worth (temporarily or whatever) 180k, and i had no choice but to withdraw. In that case I would regret not losing some value to inflation on deposit.

Waits for attack!

 

[Brendan Burgess]

That is a valid concern.

1) The risk of needing to cash all your shares after a downturn
vs
2) the fairly sure gradual loss of your money due to inflation.


But let's put the 50% fall into perspective.

Usually such a fall happens after a prolonged period of increases.
And usually there is a quick recovery

So to lose out

1) The fall needs to happen soon after you invest
and
2) There is no short term recovery
and
3) You need all the money before the recovery

If you invest €100k today and it rises to €200k over 5 years and then falls 30%, you are still left with €140k.

I remember an elderly woman telling me she lost €1m on bank shares. I asked her when she had bought them. She thought it was the 1960s. She had had a stream of dividends for 50 years so she didn't lose that much.

Brendan

 

[Sarenco]

Retirement is irrelevant to your investment strategy unless you are forced to buy an annuity.

Well, that’s not really true.

First off, a 65-year old that plans to draw equal amounts from an ARF to meet living expenses over a 20-year period has an investment horizon of roughly 10 years - not 20 years.

Secondly, sequence-of-returns risk (i.e. the risk that an investor experiences negative portfolio returns very late in their working life or early in retirement) is very real. Early market declines can have a huge effect on how long a portfolio can sustain a retiree.

I agree that pretty much every (near) retiree should continue to have some exposure to equities but most folks should not have 100% of their portfolio in equities when coming up to retirement (unless they have no intention of spending down the portfolio and are only investing for their heirs).

 

[KOW]

Im 60 wife 62.
Keeping generous amount in cash accounts at best interest I can get. Attack retirement bucket list over next 8-10 yrs.
Remainder averaging into ETF over the next say 5yrs.
Hope the bodies hold out.

 

[Brendan Burgess]

Remainder averaging into ETF over the next say 5yrs.

Why averaging?
Why ETFs?

Averaging gives a false sense of comfort.
If you own shares when you die , the CGT disappears. If you own an ETF, you pay taxes.

Brendan

 

[KOW]

Averaging while every study has shown produces less returns I am just more comfortable this way. True about false comfort.
I have and will continue to buy the odd few shares but will run etfs alongside just to see how it goes in comparison.

 

[nest egg]

My concern would be that, if something were to happen in my life that required access to funds, that I could be in the middle of an "equity downturn" and have to withdraw and suffer the loss. Sure, I'm being glass half empty (or more), but I would regret putting 300k into equities and, in 2027, find they were worth (temporarily or whatever) 180k, and i had no choice but to withdraw. In that case I would regret not losing some value to inflation on deposit.

Waits for attack!

You could take a variation of Sarenco's approach & put a % of the funds in cash, leaving the rest to benefit from the better (on average) equity level returns, while having some cash if you need it.

The only thing which slightly grates is that I know the stock market is up far more than it is down, and therefore there's a greater likelihood I would gain from keeping everything in equities, than end up suffering a loss. Risk & reward.