Pensioner Cash in Bonds & move to LS?

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Topic Author
kancell10
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Joined: Thu Jan 09, 2020 4:21 pm

Pensioner Cash in Bonds & move to LS?

Post by kancell10 »

Hi,

My 70 year old mother has decided to cash in some fixed rate bonds and wishes to move her finances into something more liquid to allow her to do some home improvement and take a few nice holidays.

Her headline strategy is to cash in the bonds, put the cash into a general investment account then put £20k each year into an ISA. I have never had a fixed rate bond, just Vanguard Lifestrategy 80, so have no prior experience but from a top level strategy, is this achievable and makes sense?

On the basis that it may, I was thinking Vanguard LS 20 or 40 may be an appropriate low cost global index fund which relatively low risk outlook, what would you advise?

Thanks,

Kevin
Valuethinker
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Re: Pensioner Cash in Bonds & move to LS?

Post by Valuethinker »

kancell10 wrote: Fri Jul 16, 2021 8:25 am Hi,

My 70 year old mother has decided to cash in some fixed rate bonds and wishes to move her finances into something more liquid to allow her to do some home improvement and take a few nice holidays.

Her headline strategy is to cash in the bonds, put the cash into a general investment account then put £20k each year into an ISA. I have never had a fixed rate bond, just Vanguard Lifestrategy 80, so have no prior experience but from a top level strategy, is this achievable and makes sense?

On the basis that it may, I was thinking Vanguard LS 20 or 40 may be an appropriate low cost global index fund which relatively low risk outlook, what would you advise?

Thanks,

Kevin
1. yes it makes sense to have the money in a current account (or 1 year bonds) for the home improvements and the holidays

2. with the rest of the money LS 20 should work fairly well. I would worry about LS 40 because of the volatility. What if the stock market drops 50%? (It dropped around 35% when Covid hit in Feb to early April 2020).
Topic Author
kancell10
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Joined: Thu Jan 09, 2020 4:21 pm

Re: Pensioner Cash in Bonds & move to LS?

Post by kancell10 »

So, after a bit more digging, appears she is already in VG LS60 (much to my surprise, and hers ha) so it should make things relatively simple to set up a GIA and transfer her existing ISA all to Vanguard.

I was thinking we should perhaps notch down the risk level for 1 - 3 year money to LS20 and 3 - 5+ year money to either keep LS60 or derisk to LS40.
Valuethinker
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Re: Pensioner Cash in Bonds & move to LS?

Post by Valuethinker »

kancell10 wrote: Tue Jul 20, 2021 4:12 pm So, after a bit more digging, appears she is already in VG LS60 (much to my surprise, and hers ha) so it should make things relatively simple to set up a GIA and transfer her existing ISA all to Vanguard.

I was thinking we should perhaps notch down the risk level for 1 - 3 year money to LS20 and 3 - 5+ year money to either keep LS60 or derisk to LS40.
3 year money should definitely be LS20. (Lifestyle 20% equity)

I would derisk or combine (LS 60 + LS40 at 50% each = LS 50). That's what I have done with my spouse (somewhat younger).
Valuethinker
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Re: Pensioner Cash in Bonds & move to LS?

Post by Valuethinker »

Valuethinker wrote: Wed Jul 21, 2021 6:28 am
kancell10 wrote: Tue Jul 20, 2021 4:12 pm So, after a bit more digging, appears she is already in VG LS60 (much to my surprise, and hers ha) so it should make things relatively simple to set up a GIA and transfer her existing ISA all to Vanguard.

I was thinking we should perhaps notch down the risk level for 1 - 3 year money to LS20 and 3 - 5+ year money to either keep LS60 or derisk to LS40.
3 year money should definitely be LS20. (Lifestyle 20% equity)

I would derisk or combine (LS 60 + LS40 at 50% each = LS 50). That's what I have done with my spouse (somewhat younger).
Beware of how likely someone is to panic if we have a 50% stock market fall -- or even the 30-35% which is the "normal" bear market. Panic back into cash, watch the market recover and miss it.

It took nerves of steel to ride out times like the Financial Crash from Sept 2008 to March 2009, or March 2020 and the Covid crash. Rebalancing? That's even harder to do.

So probably aim off "reasonable" equity percentages (ie aim down). For someone who has not traditionally invested in the market.
Topic Author
kancell10
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Re: Pensioner Cash in Bonds & move to LS?

Post by kancell10 »

It appears my mum rode through both of them without even blinking an eye, the benefit of having enough cash invested and savings in the bank, a very low spend rate and no interest whatsoever in finances and politics.... The power of doing nothing in action!
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Re: Pensioner Cash in Bonds & move to LS?

Post by Valuethinker »

kancell10 wrote: Wed Jul 21, 2021 2:53 pm It appears my mum rode through both of them without even blinking an eye, the benefit of having enough cash invested and savings in the bank, a very low spend rate and no interest whatsoever in finances and politics.... The power of doing nothing in action!
But did she have stock investments at that time?

I had the impression she did not.

2008-09 was unique in the sense that (in my 30+ years of investing) there was never a time before when one felt one's savings were not safe. I.e. current account + Higher Rate account. 2008-9 really was (I hope) the only time in my life when that was ever in question.
Topic Author
kancell10
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Re: Pensioner Cash in Bonds & move to LS?

Post by kancell10 »

That was my impression too, however the more digging i've done i've discovered more, i didn't realise she already had an isa in addition to the bonds i referred to in my initial post.
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Eagle33
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Re: Pensioner Cash in Bonds & move to LS?

Post by Eagle33 »

kancell10 wrote: Thu Jul 22, 2021 5:17 am That was my impression too, however the more digging i've done i've discovered more, i didn't realise she already had an isa in addition to the bonds i referred to in my initial post.
But based on your earlier statement did she know she had a isa during the major market drops?
So, after a bit more digging, appears she is already in VG LS60 (much to my surprise, and hers ha)
Rocket science is not “rocket science” to a rocket scientist, just as personal finance is not “rocket science” to a Boglehead.
Topic Author
kancell10
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Re: Pensioner Cash in Bonds & move to LS?

Post by kancell10 »

She knew but didn't have a clue what it was in as a financial advisor, who has since been struck off from doing business with my family due to a terrible service, had been 'managing' it for her.
Valuethinker
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Re: Pensioner Cash in Bonds & move to LS?

Post by Valuethinker »

kancell10 wrote: Thu Jul 22, 2021 3:42 pm She knew but didn't have a clue what it was in as a financial advisor, who has since been struck off from doing business with my family due to a terrible service, had been 'managing' it for her.
It might be worrisome if she now takes an interest.

I would be careful to make sure that the first couple of years of spending are in really low risk. Even just notice bonds. Something that *cannot* lose money. Then, whatever happens, you can always say "but the next 2 years are guaranteed".
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