Does it matter when you invest for retirement?

This is a good question that many ask as they begin to make the shift from full-time work to at least being partly retired. After all, perhaps the greatest risk in retirement is not losing money, (the thing that most of us tend to focus on) but running out of cash income and still being alive!

To answer this, let us take possibly the 3 worst times to have been retiring in modern history. These were at the absolute peaks in markets in the last 100 years. 1929, 1973 and 2000.

To keep it simple, let us pretend they are 3 generations of the one family - grandmother, father & daughter. They each had the princely sum of $1 million to invest and they invested in the same way as each other - a 60/40 split of shares and bonds; $600k in shares and $400k in government bonds. The grandmother retired in 1929, the father in 1973 and the daughter in 2000.

Each spent whatever 4% of their account balance amounted to each year. This is a commonly agreed, rule-of-thumb that actuaries use as a guideline for a reasonable draw-down amount. At the end of each year, irrespective of how the shares or the bonds rose or fell in value, their investment was re-balanced back to the original 60/40 split of shares and bonds.

The investments were simply passively invested into the index basket of shares and bonds. They did this like clockwork for 29 years (the very high end of ones expected lifespan from age 65), with the daughter still going strong 17 years into her retirement.

Here is how they went....

All 3 still have money in the bank and the money to live securely. At this point, Grandma fared worse. The first two have gone full term (29 years), and the daughter is at the 17-year mark with 12 years to go.

The impact of inflation is important for retirees as it determines how much 'buying power' your money has in purchasing goods and services every year. This next table is the same as the above, only its adjusted for the actual inflation rates each year.

Life remains good for all three. Looking at withdrawals and capital values combined, each now have ended up roughly with the same amounts!

Better still, all 3 made no actual buying or selling decisions. They didn't fret over when to be invested and when not to either. Instead they got on with enjoying life.

None had the advantage however of Milestone's curated collection of managed funds aimed at doing better than the overall market.

They also did not get to utilise Milestone's smart "Bucket Investing" strategy (spoken about under our Sage Advice column in last months edition).

These tactics, deployed under the careful gaze of a skilled licensed financial adviser would have further lifted their overall account balances and spending money.

The answer therefore, is 'no' it does not matter when one retires. Remember, these are the 3 worst times to have retired.

Even if you retire at the worst time - at the highest peaks, things will be OK.

All so long as one remains disciplined, keeps looking toward the horizon and not at the short-term.

Do even better and employ the straight-forward easy to use Milestone advantages noted here.