GeoffF100 wrote:tjh290633 wrote:GeoffF100 wrote:Nonetheless, there is small probability that he will live a lot longer. He cannot afford to take many risks. If there is a bear market, he has very little chance of sitting it out. Hence the heavy bond allocation.
Past experience has been that it is better to sit out bear markets. Usually the income flow is maintained while share prices do their own thing.
You obviously have your own agenda.
Our man is 90. His life expectancy is 5 years. His cost of staying alive is £10K p.a. There is no social security system. He has £100K. He can invest his money in an index linked bond ladder yielding 0% real (better times than now, but not historically good). Alternatively, he can buy equities. The rule says he should invest £80K in the bond ladder, and 20K in equities. That looks reasonable to me.
Our man ignores this advice and buys equities. A severe bear market strikes. His £100K pot is now worth 30K. "No problem," you say "sit it out." He runs out of money after 3 years and starves.
My agenda is common sense.
Your agenda is based purely on drawing down capital.
The 90 year old will have invested 25 or 30 years ago and will have been drawing some of the income, reinvesting the rest and keeping his capital intact. The income continues during the downturn. If he only needs £10k to live on, he must be a hermit.
It is probable that he will soon need to go into care and will have to be self funded. A decent care home costs £50-60k per year. He would not last much over a year in your model.