How should you change your pension investments as retirement approaches?

@greatinvestments

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The video provides practical, actionable advice on retirement planning using a clear three-bucket strategy, addressing a common concern for viewers. The use of a calculator and the offer of free tools create tangible value and encourage engagement.

Summary

The video explains a three-bucket strategy for retirement investing to mitigate sequence-of-returns risk. It advises holding 12-24 months of expenses in cash, 1-3 years in defensive reserves, and the remainder in growth assets for the long term. The creator also promotes free tools on campaignforamillion.com for users to test their retirement scenarios.

Structure

1Introduction to retirement investment changes
2Explanation of sequence-of-returns risk
3Presentation of the three-bucket strategy (Cash, Defensive Reserve, Long-Term Growth)
4Discussion on the risks of holding too much cash and the volatility of bonds
5Demonstration of a retirement planning calculator and its results
6

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Alpsesh B Patel OBE Financial Times Author www.alpeshpatel.com/links Great Investments Programme Safe Withdrawal Rate Calculator Plan your retirement with confidence. Calculate sustainable withdrawal rates based on your investment portfolio, risk tolerance, and retirement timeline using Monte Carlo simulation. Book a Free Educational Pension Review Safe Withdrawal Rate Calculator Calculate sustainable withdrawal rates for your retirement portfolio Starting Investment Amount ($) 500000 Expected Annual Growth Rate (%) 7 Volatility (Standard Deviation %) 15 Monthly Contributions ($) 2000 Years of Contributions 10 Withdrawal Start Age 65 Life Expectancy 90 Calculate Safe Withdrawal Rate Post-Retirement Annual Income Goal The portfolio seeks to achieve reasonable income levels in retirement. Years to Retirement 30 25 20 15 10 5 0 -5 -10 Equity Mid-to-Late Career In Retirement 70% Tactical Allocation Range Fixed Income Early-Career Goldman Sachs Asset Management CAMPAIGN FOR A MILLION 5 YEARS FROM RETIREMENT? USE 3 BUCKETS 1 CASH 12-24 months of required withdrawals 2 DEFENSIVE RESERVE 1-3 years in money market funds, managed gilts or short-duration bonds 3 LONG-TERM GROWTH Keep the remainder invested for the decades ahead Retirement is not the end of investing. campaignforamillion.com Education only. Not personal financial advice. TOO MUCH CASH IS ALSO A RISK INFLATION 30 YEARS LONGEVITY RISK Inflation + a retirement lasting 30 years THE 3-BUCKET RETIREMENT PLAN 1 CASH 2 DEFENCE 3 GROWTH Match each asset to when you need the money. Portfolio Projection Over Time Shown the expected portfolio value throughout your retirement based on Monte Carlo simulation. Age 56 Age 60 Age 62 Age 64 Age 66 Age 68 Age 70 Age 72 Age 74 Age 76 Age 78 Age 80 Age 82 Age 84 Age 86 90th Percentile 75th Percentile Median (50th) 25th Percentile 10th Percentile What This Means Safe Withdrawal Rate Based on Monte Carlo simulation with 1000 scenarios, withdrawing 4.86% annually gives you a 96.96% chance of not running out of money during retirement. Key Assumptions - Requires a normal distribution with specified volatility. - No changes in withdrawal strategy during retirement. - Returns are adjusted annually for inflation. Recommendations - Consider reducing withdrawal rate or increasing portfolios size for better security. - Consider consulting with a financial advisor for personalized advice. Want Professional Guidance? Get personalized advice on optimising your retirement strategy with a free educational consultation. Book Your Free Pension Review Retirement Planning Made Simple Don't worry if this seems complicated - we'll break it down into life stages and show you think of this as your crash course in retirement planning. What's Retirement Planning? Think of retirement planning like saving for the world's longest holiday - except it's permanent. You can still afford to save that will pay your bills when you stop working. I have enough money invested on that even without a salary, you can still afford rent, food, Netflix, and maybe even some fun. Why Start in Your 20s? Compound interest is magic! If you invest £100 today and it grows 7% per year, in 40 years it becomes £11,497. That's your money working harder than you. Someone who starts at 25 and invests £200/month until 65 will have more money than someone who starts at 23 and invests £400/month. Time beats money. What's "Sequence Risk"? Imagine two people with identical investments that average 7% returns over 30 years. One has a lucky sequence of returns, later, demise it gets the opposite. Plat hell. They end up with very different portfolios. The first person has £427,184 as much as the average. That's sequence risk. Great Investments Programme Know what you own. Know why you own it. Know when it needs attention. Alpsesh B Patel OBE Hedge Fund Manager, Barrister, Financial Times Author, ex Bloomberg TV Fmr Fellow in Business, Oxford University my links are in the bio go to www.alpeshpatel.com as well thank you BBC WORLD NEWS bbc.com/news INTERACTIVE how I invest my pension Alpsesh B Patel OBE www.alpeshpatel.com

Transcript

How should you change your pension investments as retirement approaches? The five years before and after retirement can be particularly important. A market fall is unpleasant while you are accumulating, but it can be far more damaging when you are simultaneously withdrawing money. This is known as sequence-of-returns risk. In this video, I explain a practical three-bucket retirement strategy: 1. Cash: approximately 12–24 months of the withdrawals you expect to need 2. Defensive reserve: 1-3 years in money market funds, managed gilts or short-duration bonds 3. Long-term growth: Keep the remainder invested for the decades ahead. Retirement is not the end of investing. Too much cash is also a risk. Inflation + a retirement lasting 30 years. Well, absolutely not. At 57, your pension might need for another 30 years. Put too much into cash and you exchange short-term volatility for long-term inflation and longevity risk. I prefer thinking in three buckets. Bucket no. 1. Cash. Hold perhaps 12 to 24 months of income you actually need from the pension, not your total spending, your required withdrawals after allowing for state pension or other income. Bucket 2. Your defensive reserve. Consider another one of withdrawals in money market funds or short-dated gilts or basically high quality bank savings accounts. Okay, notice I said short duration, long-dated government bonds can be surprisingly volatile. Government bond does not automatically mean cannot fall. I actually prefer a high interest bank invest in bonds and I've got a guaranteed return. Bucket 3. This is for long-term growth. The remainder can stay invested in growth assets because money you will not spend for 20 years should not be managed as if you need it next Thursday. The Goldman Sachs glide path chart illustrates the principle: gradually reduce equity exposure as retirement approaches, but do not eliminate growth. And do not suddenly overhaul the portfolio on your 57th birthday. Build the reserve, preferably after stronger market periods. I've created two free tools to help you test the numbers. You can go to www.campaignforamillion.com/tools to test what happens if the market falls immediately, inflation remains high, or retirement lasts longer than expected. Because retirement planning is not about predicting the future perfectly. It's about ensuring one bad year does not wreck the next 30. If you'd like us to explain all of this in simpler terms than uh uh than I've done here, then go to campaignforamillion.com. This is education, not personal financial advice. Not financial planning for that. You might want to get an accountant, a certified financial planner. This is to build up your education so you're forewarned and educated and informed before you speak to anybody. Thank you.