So 26 months after I actually stopped work I finally pulled some money out of my pension fund …. so I reckon I am now a pensioner ! … wow !
Do I feel any different ? I am not sure. I think while the funds were ticking along it all seemed just in the future sometime, but now I am actually starting to pull some money out I suddenly have to think ‘sequencing risk’ !!
For those that are unclear what sequencing risk is, simply put in a retirment time window of say 30 years, in the first period (arguably between 7-10 years) if overall investments fall back in a market correction, it is very hard to recover that without significant risk leading to lower retirement payments. In short, in the old days we in the UK were forced to purchase an annuity. if the market did a 2008 crash just before I had to retire, I would have lost 40-50% of available income for life.
Sequence risk, is about ensuring capital preservation in the first 25-35% of retirement time to ensure long term income stability and growth. There are lots of other views, but fundamentally that is what it is whatever language is used.
Luckily, the markets have dropped back, flattened over the past 12 months and there is every chance over the next 6-12 months a further correction downward will occur in both Europe and the USA….. this is great news for sequencing risk reduction. There are numerous references showing the bull advances following a crash or correction and why so many are starting to hoard cash.
Do I feel at risk ? Well … vulnerable for sure. It is human nature and while I am only 55 (I essentially retired on my 53rd birthday), I have not given up on the idea of some paid work again. Its an option and an option on my terms if I feel like it. While our outgoings have been a little higher than I predicted in January (not least in coffee as I just wrote), the variance has been within what we engineers view as a ‘noise tolerance’.
In time I guess I might write about lessons and the like, but I really did not have a plan. I finished a long piece of work that was hard, draining and took it out of me. I wanted a few months off and that just carried on to not going back. I had no plan. My life is full and I pretty much am out doing things daily but it does not have to order or calendar certainty I have been so used to.
The real shock to the system, is getting used to a more varied, more ad-hoc and less planned lifestyle …. I guess that is FIRE !
And now I am actually drawing a pension out … I really am retired !