Is anyone else feeling a bit dizzy as the markets seem to continue to climb ever upwards? For someone like myself, passively investing for years, 100% in equities across my pensions and ISA’s and forever looking forwards to a five or even ten year horizon, these should be heady times. I should be enjoying the ride, but at my back sits dark anxiety. Why? Because I’m nearing the finishing line.
In a few days I will turn 54 and the final year countdown begins toward cashing in the first slug of one of my DC pensions. This is so that I can take my 25% tax free cash from the pot before the government raids this perk as, I feel, they inevitably will at some point. This pension has, frankly, rocketed in the past 18 months. It’s not totally passive, as I have one or two managed funds within it, but I watch it growing well beyond the goal I’d set for it to achieve about three years ago, and increasingly fret about the markets undergoing a massive reversal.
I’ve lived through such things before – I invested over the dotcom boom and the 2008 crisis – stifling a yawn as the markets collapsed. For me, at that point, this was great news. My regular monthly contributions just gained me more units in the funds I was buying, and I never thought twice about converting to cash, buying gold or looking for value in property. “What goes up must come down”’ I told myself, and stuck to my “pound cost averaging” and my long term view.
I’m not so blase now, I can tell you, and hardly a day goes by without me telling myself that the sensible thing to do right now would be to convert all those equity funds into cash or something more stable than shares. Or at least some of it. Then I could set my 25% lump sum in stone. Okay, I might lose out on some growth, but at least I won’t lose out versus my projected lump sum. After I’ve collected, I can switch the remainder of the pension back into equities while I live off the sum that I’ve cashed – which will last me five years, I reckon, so I’m back to a “safe” investing horizon on the remaining funds.
As I write, I ask myself what’s stopping me doing so? I think a lot of it is that I’m frightened of change – I’ve not really altered the way I invest for over twenty years, and it’s served me very well so far. It ain’t broke, so why fix it? And I don’t really “need” that lump sum either. If the markets do collapse in the next 12 months, well, I can ride it out again. As a passive investor at heart, I’ve set my allocations, I’m following a strategy and therefore the best advice I can give myself is to “do nothing”. Stop worrying and go and do something more useful instead.
But this only gives rise to the next question: “If not now, when?” At what point am I going to relax and cash in some of my chips? I set a goal to cash that pension at 55 and I almost feel obliged to achieve it. If nothing else it might force me to look at other aspects of life that involve a bit more spending than saving because time is finite. Reaching pensionable age is a milestone that’s hard to ignore, much as you might want to tell yourself you’ve years and years left to gather the rosebuds. You haven’t.
Please forgive this “Woe is me” navel gazing. I know I’m lucky to have such problems. I can only justify submitting a post like this because I never knew that choosing to sell would be a hundred times harder than choosing to buy. It’s like in the same way that I found choosing to retire to be a lot harder (for me) than choosing to go back to work. And that was why i started to write this blog in the first place.