Sequence of returns risk in retirement

[BramStokey]

Would love to hear from people managing their own pension/investments in retirement (or the run up to retirement) or who follow what their advisor is doing closely.

I'm a few years off retirement and gradually moving from 100% equities to additional cash and gilts- planning on roughly 2 years' expenditure in cash and maybe a four year cycling gilt ladder (possibly index linked), with the rest remaining in equities.

I'd be interested in how other people are approaching this- are you thinking in terms of ladders/buckets or just hoping that a less volatile portfolio will mean you're never down by much?

I know a few data needs who've done extensive scenario modelling on this. They've found sequence of returns risk is usually only a significant worry at the start of retirement, and there's very little benefit in keeping a permanent cash ladder. So they're all starting with 3-5 years in cash/low risk, spending that first, and keeping the rest of the pot in equities permanently.

I think it may depend on pot size, though. They all have room to flex their spending in lean years. If you're starting at 'just enough', then it may be worth doing more successive derisking.

Watching with interest as about to crystallise DH sipp.

Thank you @ProfessorBinturong . I think it's slightly complicated by the fact we are retiring early (early-mid 50s) so possibly with a long retirement to fund, dv. I will have a DB pension from 67 so that takes some of the risk out.

I'm in a similar position, and have gone earlier- and therefore with less spending flexibility - than my speeadsheet friends.

I started with a 5-year cash/bond ladder. Running it down to 3 years and then plan to hold at 2-3 years cash equivalent until minimum pension access age. At that point I'll probably run down again to approx 12-18 months buffer knowing that I can draw pension early if necessary.

I'm in my early 50s. Probably retiring between 55 & 60.

My portfolio is transitioning to:

• 60% global equity. Long term growth. 10+ years.
• 20% global bonds. For when a recession hits.
• 20% short duration (up to 5/7 years) inflation linked gilts. Some inflation protection. Monevator has some good articles about inflation protection. Need to hold the gilts to maturity.

I'm not using buckets. I'm intending to keep my portfolio balanced.
I may buy an annuity with part of my portfolio and drawdown for the rest.

I'm aiming for a more conservative withdrawal rate of around 2.5%. Vanguard has an article about dynamic spending.

Comfort wise I'll probably keep a year in cash + emergency fund.

Probably wise to transition to a portfolio similar to above 10 to 15 years before retirement. The dotcom and GFC took a long time for equity to fully recover.

Bogleheads - Investing from the UK

Assuming you're looking at something like a 30-year retirement, why not keep it all in a 100% equities fund? IIRC, the longest downturn in a market was only a few years so you could start building that into an ISA which you could draw from instead of your pension if there is a downturn, thus eliminating sequence of returns risk.