Protecting against inflation part 2

[Kantwebefriends]

Does anyone know whether it is possible to buy a TIPS in SIPPs offered on any of the popular platforms? In other words, whether it's possible to buy TIPS not within an ETF or fund, but as an actual bond itself?

[1nvest]

The 4% SWR guide, take 4% of the initial portfolio value as income at the start of the first year, and then uplift that £££ amount by inflation each year as the amount drawn in subsequent years, historically was safe, saw you through 30 years in the worst of cases, more often did considerably better. That includes historic periods of high/rising inflation, well into double digit levels (north of 20% at times). The worst of cases typically arose when there was a bad sequence of returns (SoR) risk in the earlier years. Someone might save up 25 times their yearly spending, hit their 'goal/figure' and retire, but if a bad year(s) occur in those earlier years that strains the portfolio, is more inclined to 'just about' achieve a 4% SWR.

Often goals are achieved after relatively fast/large up-runs, such that some retire at relative highs and are more exposed to bad-early-year-SOR risk. One way to reduce that risk is to, at the point of retiring, swap into a 67/33 global stock fund/gold. No rebalancing, just let that run ... except if the portfolio weightings adjust to 33/67 i.e. gold heavy. At which time sell the gold and transition to 100/0 stock/gold. In bad historic cases where that occurred you did OK/well. In good cases where stocks just rose and gold became increasingly more lightly weighted relative to the total portfolio the gold-drag effect was acceptable, good instead of great rewards where both were 'more than enough'. If after a number of years of stocks doing well there is a large dip after say 10 years more often that is just giving back some of other-peoples-money, largely irrelevant.

A steady/consistent inflation adjusted income, with earlier years SoR risk reduction/protection, better protection of ones own interest, but at the expense of more often leaving less for heirs than if you'd been 100% stock all-along. Broadly inflation is irrelevant, as your income/spending rises in alignment to that. But there is the risk factor that your personal rate of inflation may be significantly different/higher than that of the broader inflation rate figure. But even then, more often a higher than 4% SWR could (can) have been used such that even that risk is partially/fully diluted.

Supplementing that, owning rather than renting liability matches rent risk. A home value can also serve as late life care home fees cover, typically for the longer surviving partner (as the first often tends to be cared for by the other in their own home). The average I believe is for 4 years in a care home, so at around £80K/year costs, after pension payments that might be a £60K x 4 years = £240K cost (appropriate/reasonable home value). So any retirement downsizing might look to buy a home value of no less than that.

The 4% SWR is a guide rather than rule, in bad cases it could fall short of the 30 years measure that was made against. But even then the shortfall tends to still be towards the upper end, maybe just sustaining 25 years for instance. For a 65 year old, living to 90 is a achievement that many wont achieve or if they do they may be near/at the stage of entering care anyway which the £80K/year sale of home funding covers.

As ever there are exceptions, nothing is truly safe and for instance high younger years illness/care-costs could be devastating. Life. The only insurance/protection there is to have way-way more than enough.

I retired at 65 and am now 89. I have stayed 100% in equities apart from some cash savings. I have the State Pension, an occupational pension and an annuity. I am better off now than ever. Going partly into bonds in 1998 would have been a disaster. Earlier I had it in mind to do so, but it was pointless when it came to the crunch.

The elephant in the room is the cost of care, but it may never come to that. Spending capital, if it becomes necessary, deprives the Treasury of 40% that might otherwise be payable in IHT.

What it comes down to is that you need to have more than enough income for normal living expenses, and inflation plus growth will see you all right. People focus on capital, but they should focus on income.

TJH

Pre Gen-Z had better options for safe inflation pacing/beating income streams. Whilst public sector (MP's etc.) still have golden occupational pension options, for many the risk has been shifted from the collective over to the individual. Whilst the US, where individual responsibility/risk is common, provide options for such individuals - iBonds/generous death duties allowances etc. the UK instead is more inclined to raid/hit such pots and/or withdraw such options at the worst possible times (since 2009 for instance National Savings withdrew inflation bonds availability of new issues to new investors). The UK state pension is also one of the lowest of developed economies.

Stocks are not for a safe income stream, and historically have seen both capital values and dividends decline 80% type amounts.

Compounding the matter is that former collective health insurance is increasingly also being shifted over to individuals (whilst the cost of what collective insurance remains available has doubled, NI increased from 6% to 12% for instance).

The UK did have one of the best of both worlds, but that attracted migrants to levels where what one gen saved up for was spent upon those entering the UK to benefit from the pensions/health without having had their parents/self pay into that system.

The more recent pathway is towards less of what wealth might have been accumulated to be passed on from one gen to the next, being more inclined to be confiscated by the state for collective redistribution (but to insufficient levels/amounts to cover the rising demand).

Fundamentally a total mess, induced by very poor state governance (Parliament), excepting of course those that work for/in that Parliament.

There's a paradigm shift in the making. Thatcher's buy-your-own-home saw large scale expansion of Tory party support. Now buying your own home is no longer a asset for the next gen but rather is a pot for funding ones own retirement/care, with greater inclination/pressures to not bother and instead spend today rather than spending on paying off a house. Given recent Tory party suicide it wouldn't be unsurprising to see a large Lab majority government in #10 for 20+ years, with many hoping that given the failures by the Tories to better cover broader self-funding options that a return to better collective funding may return.

Like many, I voted for BJ at the last election, and likely would have voted for him again at the next GE. Also like many I'll be far more inclined to vote Lab at the next GE, as even though having modest/good wealth, as a relatively new retiree I see the direction in which we are being led and opine that a return to collective insurance as being the more preferable for the next generations. I used to see Lab as being financially irresponsible, but by contrast the Tories have demonstrated themselves to be far far more irresponsible. BJ for all of his relatively minor faults was achieving many good/great things, but the Tories have opted to pull that rug along with push away swathes of voters. I might have otherwise voted LD, however their extreme anti-democracy practices slammed that door shut for me.

Without US style iBond options and generous inheritance tax allowances (Americans can pass on over $10M tax free) a return to broader collective insurance is the better choice. The transition to that however has been and will continue to be very expensive for the present pre-retired gen. Forward time and stocks are much less inclined to be the magic bullet that they have been for those who have saved/retired over past recent decades (since 1980's). As-is the best for those in later life is to be passing on wealth during their remaining living years rather than leaving it as a intended pot following their demise. The UK is also not a good prospect for the younger/working gen, but then again few other places are either. Maybe the US???

[CliffEdge]

It's difficult isn't I? But when I see the desperation in eg PastCaring's posts it brings home to me the reality of global warming. Australia is the bellwether and is rapidly becoming uninhabitable and economically unworkable.

Our shift in prices, inflation, is a harbinger of effectively a permanent drop in living standards, put simply some things that were available to many people in this country will in future only be available to the genuinely wealthy. Of course brexit will make things far worse until it is fixed and is maddening because it was so stupid and unnecessary.

We are entering an inflexion point phase for civilisation and it's not going to be plain sailing.

For what it's worth, nothing, I am betting on the US as my wealth preserver.

[XFool]

It's difficult isn't I? But when I see the desperation in eg PastCaring's posts it brings home to me the reality of global warming.

I feel you may have to expand on that point just a little.

I confess it had never occurred to me that PastCaring's "desperation" (exasperation?) was driven by global warming. But what do I know?

[Steveam]

I doubt that I’ll do anything. I have very substantial “buffers” both of income and of cash or equivalents.

My total net worth (excluding my home) is down 6% from its peak on 17th January. I do, of course, realise that my numbers are in current value £.

Best wishes,

Steve

[anon155742]

Our shift in prices, inflation, is a harbinger of effectively a permanent drop in living standards, put simply some things that were available to many people in this country will in future only be available to the genuinely wealthy. Of course brexit will make things far worse until it is fixed and is maddening because it was so stupid and unnecessary.

We are entering an inflexion point phase for civilisation and it's not going to be plain sailing.

I agree with a slight change:

Our shift in prices, inflation, is a harbinger of effectively a permanent drop in living standards, put simply some things that were available to many people in this country will in future only be available to the genuinely wealthy. Of course decades of mass immigration will make things far worse until it is fixed and is maddening because it was so stupid and unnecessary.

We are entering an inflexion point phase for civilisation and it's not going to be plain sailing.

[dealtn]

Our shift in prices, inflation, is a harbinger of effectively a permanent drop in living standards, put simply some things that were available to many people in this country will in future only be available to the genuinely wealthy. Of course brexit will make things far worse until it is fixed and is maddening because it was so stupid and unnecessary.

We are entering an inflexion point phase for civilisation and it's not going to be plain sailing.

I agree with a slight change:

Our shift in prices, inflation, is a harbinger of effectively a permanent drop in living standards, put simply some things that were available to many people in this country will in future only be available to the genuinely wealthy. Of course decades of mass immigration will make things far worse until it is fixed and is maddening because it was so stupid and unnecessary.

We are entering an inflexion point phase for civilisation and it's not going to be plain sailing.

Can we stop this ridiculous racism please, particularly on a thread about investment.

Any net movement in people, of any description, be it up or down, has the potential to change wealth (per person - the usual measure) depending on the marginal value those people (again in or out) have on society.

If you want to make a legitimate economic argument, or one based around an investment strategy lets hear it. If what you are looking to add is different please take it elsewhere (and bear in mind the clear site rules which are easily found).

[anon155742]

Can we stop this ridiculous racism please, particularly on a thread about investment.

Any net movement in people, of any description, be it up or down, has the potential to change wealth (per person - the usual measure) depending on the marginal value those people (again in or out) have on society.

If you want to make a legitimate economic argument, or one based around an investment strategy lets hear it. If what you are looking to add is different please take it elsewhere (and bear in mind the clear site rules which are easily found).

Ah yes, the shrill cry of racism whenever you find this sort of criticism distasteful.

As the foreign born population continues to move upwards at a rapid clip the pressure on services increases. Look at the threads on this investment orientated website about trying to see a GP as an example. The extra million in 2021 alone would require services and housing larger than the combined cities of Glasgow and Cardiff.

The administration is failing to provide adequate services just now and I doubt their ability to provide the expanding level required to handle a million extra souls per year. This extra stress on an already strained system is palpable and entirely relevant.

Pointing out that mass immigration has and will continue to make things worse is just as valid an opinion as the belief of the person I quoted.

[dealtn]

Can we stop this ridiculous racism please, particularly on a thread about investment.

Any net movement in people, of any description, be it up or down, has the potential to change wealth (per person - the usual measure) depending on the marginal value those people (again in or out) have on society.

If you want to make a legitimate economic argument, or one based around an investment strategy lets hear it. If what you are looking to add is different please take it elsewhere (and bear in mind the clear site rules which are easily found).

Ah yes, the shrill cry of racism whenever you find this sort of criticism distasteful.

As the foreign born population continues to move upwards at a rapid clip the pressure on services increases. Look at the threads on this investment orientated website about trying to see a GP as an example. The extra million in 2021 alone would require services and housing larger than the combined cities of Glasgow and Cardiff.

The administration is failing to provide adequate services just now and I doubt their ability to provide the expanding level required to handle a million extra souls per year. This extra stress on an already strained system is palpable and entirely relevant.

Pointing out that mass immigration has and will continue to make things worse is just as valid an opinion as the belief of the person I quoted.

Would you care to provide any sources backing up this claim of an extra million in 2021 alone?

https://www.statista.com/statistics/283 ... om-y-on-y/

Firstly it isn't immigration, but net migration, that is relevant with regards to the demand on services. Secondly you need to adjust for the effect of net migration on supply. Oddly, few making such arguments focus on the number of foreign born doctors, for instance, which would be relevant in discussing the example you raise.