What "Enough" Actually Means – and How to Know if You've Got It

0:00How should you invest in retirement? Are annuities actually a good idea again? What if you've only got five years to get to your goal? We put your biggest money questions to my favourite financial advisor, Lisa Conway-Hughes. Thanks for coming back, Lisa. I love your outfit today.

0:14Lisa Conway-Hughes:Thank you. I don't think it quite survived the cycle commute, so sorry for all the... Very, very glamorous. I wish I had some more colours on. Our first listeners' question today is from Steve. Steve asked, how should you invest when you're retired? the mix between the need to at least keep pace with inflation whilst not putting your investments at major risk yeah so i think this is where we can get in our own head if left to our own devices first of all you've got to work out what is it that you actually want so what's the plan if you don't have a plan you're not going to be able to fit the investments around it so you need to think usually in early retirement um i'm going to spend the most amount of money it's when i'm going to have the majority of my fun.

0:55Lisa Conway-Hughes:And if I'm brave, I'm also going to be gifting at that point. I'm going to be gifting my excess money. So you want to work out what that first five years of retirement looks like. But prior to that, you also want to know what's the phase down to retirement? Because people don't just one minute they work full time and on the Monday they don't have a job anymore. So you need to work out what's that progression down to retirement. And also what's your industry like? I mean, a lot of clients want to work till 60, 65, but their industry doesn't seem to permit it. Their careers are sort of cut too short.

1:29Lisa Conway-Hughes:So I think you've got to think about all of those things. And then you've got to think, what's the very long term like? So the very long term, if you're going to live a long time, is usually very expensive. We know care home fees or care in the home fees tend to rise more than inflation. And then you've got this middle period where You're probably not traveling as much, but maybe it costs that little bit more to get to family gatherings because you're getting a taxi rather than driving. So divide it all up and work out what's really important to you. And then you slot the money into these compartments.

2:01Lisa Conway-Hughes:So it might be really easy to think, well, the money that I'm going to spend from 90 to 100, I'm going to take the most risk that I feel really comfortable with. And maybe that's very similar to your accumulation portfolio and the way you felt when you were 40, 50, because you've probably still got 30 years to go. The very short term money is really easy because you need an emergency cash buffer and you need a couple of years worth of really safe stuff. So I still stand by keeping cash right now where rates are as they are. And then it's that middle bit that's usually actually the hardest bit where we really need to drill down and think if markets really fall in the very beginning of your retirement, how are you actually really going to feel about it?

2:46Lisa Conway-Hughes:Because we know most people feel the pain twice as much as the up. So, yeah, I would slot in your investments so you could have two, three or four different risk ratings throughout your retirement portfolio. you are you are you building it so there's like different pots of money with different exposures to say the stock market to last so oh this is the money for when you're 80 90 here's the money for the next 10 years so you're not approaching retirement as one big stretch you're basically saying here's tranches of money created different ways yeah and i think that's it's a whole completely different skill set that build up to de-accumulation and then the retirement phase because you've got to, in the accumulation phase, you've just got to be emotionless ideally and just let the stock market do its thing.

3:36Lisa Conway-Hughes:In retirement, it's really, really hard. Real emotions come to the fore when markets are falling and there's absolutely nothing you can do about it. You can't earn your way out of it, for example. But also really important milestones. Maybe it's your kid's wedding. Maybe it's that gift you wanted to give them to help them on the property ladder. it's where sort of money cold hard money facts clash with real life events that are very meaningful so you've got to think about it from an emotional point of view because hopefully you're on a beach having fun not really worrying about these things i think a big part of wisdom is realizing that you your views on life change as you get older and the one thing for me is you know i am very much in that kind of oh just the market dropping's good you i can accumulate but that's supported by the fact that I earn money.

4:24Lisa Conway-Hughes:Yeah. But if I retired and the stock market dropped and I lost, say, feasibly, you could lose 80 grand in a couple of days if the market has a melt. Yes. How am I going to feel about that? Yeah. You know, and if I'm quite isolated and there are other people not in that same situation, I would probably struggle to enjoy the beach. Yes. You know. And that's where we earn our money, really. Because the clients ring us up. Yeah. I mean, don't ring us in tears, But you know the point of that call is to give them reassurance that deep down they know they have in their own mind. But when markets are bad, it's that reassurance that don't worry.

5:01Lisa Conway-Hughes:This is always the plan. We've prepared for this. You enjoy your money. And I guess that you've had other clients go through it. Whereas, you know, if you're by yourself, it's... And clients have usually been through one or two cycles with me before they get to retirement. So those who have been with me a long time actually don't ring. But the ones that join just before retirement and start market crashes five minutes in, of course, they're going to worry. It'd be weird if they didn't worry. I like the point about life events. Like, I think a lot of people, me, definitely think about over time and I just need my pot and I'll be fine.

5:32But you still have your kids doing this or medical bills or you might need a new car. You might need these life events to happen, might need to help with the property. So, yeah, very good tips. similar similar point um following on we often talk about investing over the long term at paul retired early wants to know what if your time horizon is shorter for example five to 15

5:53Lisa Conway-Hughes:years yeah i was thinking about this question in advance really because you think paul's time horizon isn't probably five to 15 years that's probably five to 15 years until he retires so his time horizon might be five to 50 years. And so again, I would be starting to break up and really understand his goals, what makes him tick, what makes him really worried in that five years pre to retirement, and then be dividing it up and slowly building up this pot to sustain him. And I think I'm a very optimistic person about life. But when I plan someone's money, I'm always planning it that there will be a crash in the short term let's prepare for it because if it never happens maybe we missed out on a bit of risk but the client didn't miss out on lots of sleepless nights and I mean as I get older I think I do become more aware actually of the responsibility that is on my shoulders to get it right so I want to also sleep well at night yeah otherwise you're getting a lot of calls on the Monday morning right if we were to say okay then if paul said paul retired earlier if because i see what you're saying you're basically saying he might have five years to retirement but he might be retired for 40 50 years if he's retiring early so actually his time scale is much longer but if someone came to you and said i've got a goal in five years uh pay for a wedding for my kids say how are you then investing that part of money yeah so let's say this client is um really wealthy they've got lots of other assets and they've got a good disposable income and the time horizon was five years probably you can afford to invest that money because the rule is never invest money that you want to spend in the next three to five years so five years is quite an important cusp really if it was all the money they had and if the markets fell five minutes before the daughter's wedding and she's not walking down the aisle um i i would be really nervous to invest that money for them um and i think the counter argument to that is with cash rates now at four over four percent um if you can put that in a tax efficient environment and get four percent then we've got to question what type of investment would we make to beat if if the risk-free reward is four percent um how much extra would we get by investing that money yeah and what's it worth do you need to do it to achieve the goal yeah exactly you know if i need 20 grand and i can save that in a cash savings account no bother why take the risk whereas if it's like i i need a 12 return to get my goal well you you kind of got to take the risk you know you forced to in a sense yeah i'm way too optimistic to be a financial advisor i just that five-year rule is a good rule like don't invest any money that you need in the next five years do you think that's one you can you can stand on yeah three to five i think it when you ask i always think everything's going to keep going up you know me i just always always look on the bright side it has for your life though that's the problem apart from your crypto bitcoin plummeting yeah buying opportunity no it's going to keep going down it just keeps going down um but no you have grown up in an environment where the stock market has probably had its best series of returns almost ever in my career it's mental what's happened of late yeah i went to a conference yesterday and one of the speakers was talking about you've got to get inside the head of the investor to really make their plan perfect for them and a real signifier of getting in someone's head is what what was going on in the world when they were coming of age so people in the 70s um major oil crisis that these kind of people no matter what you do they're the ones complaining about putting the heating on um i mean i'm obsessed with turning the lights off so was there an electricity crisis in the i don't know but the people coming of age now um you've got to think about the pandemic bad things do happen but also high inflation and they they were arguing yesterday that people sort of coming of age now are thinking we've got no choice but to try and go high risk to make things better for us and that's why you're seeing the rise of people turning to the internet for financial advice people investing huge amounts in bitcoin when perhaps they necessarily shouldn't or taking really high levels of risk with their investment portfolios when perhaps they really shouldn't doesn't suit their personality so i think it's really interesting.

10:25I think it speaks to the fact that different generations have completely different views on life just on the circumstances they went through. The kids of the people that lived through the Great Depression saw their parents wiped out by the stock market, so they were adverse to investing in the stock market. You know, my parents will say, just buy a house and you'll be set for life. Probably not that great advice nowadays in certain parts of the country. You know, we're unlikely to see the same growth in house prices that we've seen in the past. so you kind of got to be careful of looking at what your parents say and and following it too closely yeah yeah i do wonder as well you know if we see a proper downturn in the stock market like is normal three years say what that's going to do to the psyche of not you because you see you've got me right to give your head a wobble but to people like us that have only known growth we basically graduated in 2010 and the stock market's just been on a tear since yes and every even covid which felt like it could literally be the end of the world just shook that off in a couple

11:22Lisa Conway-Hughes:of months and iran yeah and the trade wars yeah i mean there's a war going on markets still pumping it almost makes no sense really i i'm i'm lucky in the sense that during my career the stock market has been very interesting to talk about but somehow performed really well yeah um i mean the same for you right it's it's kind of it's good for you and your clients but you do think are we all a bit spoiled yes you know and and how is three years of it makes me reflect on the conversations that i've had during my career like at the beginning of the career my career it was all anyone wants to talk about was property and leveraging um and then and then now obviously people aren't that interested in property and it's how can i get rid of that property portfolio probably why you should be buying property you can be fearful when you're greedy when i was Load up on Bitcoin then.

12:12Not much. Yeah, no, I don't know about that. I got a little bit, mate. I'd stick to my 1 % allocation. I'd stick to my global fund. Even I, though, even I, like with the Bitcoin thing, right, I put my 1 % in, and when it's flying, I'm like, should I put more in? When it's crashing, I'm like, why am I buying this? It's a complete opposite psychology problem to what I should have, but yeah, go on. We're only human. Speaking about risk, Ridian76 asked, how do advisors see the safer part of a portfolio looking beyond bonds is it worth exploring other things like gold commodities or infrastructure what do you mean by infrastructure just to clarify please well it could be like building roads wind farms kind of like when ness said they invested in a wind farm you know like those

12:54Lisa Conway-Hughes:kind of big those kind of things things like that well i did prepare for this question and this isn't advice but i just have got here a client's portfolio that is i've split 50 50 between passive and active the active part has sort of got a tilt away to try to um not have too much exposure to the to um the us and to us tech and we've got him in this is a balanced portfolio 13.6 in real assets so that i've broken that down it's nearly six percent commodities so copper gold those kind of things 3.3 in infrastructure and two percent in property is that because the client asked for that because you said that you lean away from tech is that because the client said i'm worried about tech or um no it's it's mainly that um i want the client to be as well diversified as possible so this this if you don't mind me getting spreadsheets out but this is if a client had no tilt um away from tech and the u.s their top 10 holdings would be nvidia apple alphabet microsoft Amazon, you can guess the rest.

14:05Lisa Conway-Hughes:And so I'm not trying to do anything too fancy or too complicated, but with this client, we just did sort of a 30 % tilt away. And by just doing that 30%, it made it go from exposure to like two and a half thousand companies to seven and a half thousand. And it reduces their exposure to those big, big corporations, especially. And it can includes sort of more value facing investments. And so by doing that, Nvidia just goes from having 3 % of a portfolio down to having 1.25 % of a portfolio. Apple goes from two and a half down to one. So it's not that I'm trying to completely change somebody's portfolio.

14:54Lisa Conway-Hughes:I'm just trying to tweak it and a lot of our clients do work in big tech and they've got these huge holdings in these companies anyway naturally through their rsu so if someone's working in tech that's definitely something i would be thinking about so is that for that client specifically yeah that's not every client this is not like your standard portfolio that you offer people you some people don't want to have don't need want or need to have a tilt because they're still in this accumulation phase or maybe they don't have a huge amount yet. But when you switch from I'm gunning for growth to I also kind of want to protect this as well and have a bit more thought about how the portfolio is structured, that's when I would include something like this for clients.

15:39Yeah. And are you letting the client steer that in the sense of he's... Basically, are you recommending that? You're advising, right? But do you have a conversation? You go, I think you should be doing this because from what I'm gathering from the conversation with you, Or are they coming in going, I hate tech. I don't want a portfolio with tech in it. And you're going, OK, I'll do that.

15:57Lisa Conway-Hughes:The small minority will come in worrying about those things. But I think the majority of clients are just really open-minded. And the reality is their life's busy. They want me to see their investments through their eyes and through their goals and come up with solutions that will just mean that their finances aren't on their agenda anymore. They're only on their agenda when we book in their annual review. And the rest of the time, they're enjoying their money, let's hope. Yeah. So what are the downsides of the 30 % tool? So in this client-specific portfolio, I have to say this is specific to them, not advice.

16:40Lisa Conway-Hughes:The downsides to them would be, well, their costs have increased. So if we hadn't got a tilt, it'd be 0.21 for the investments inside versus 0.33. So that's a definite downside. And a downside is of late, it just wouldn't have performed as well. So you've paid a price in performance for that protection. But I see that tilt as more of the forward thinking part of the portfolio. We're not asking it to outperform now. We're asking us to protect it. Like insurance. Yeah, against things changing. And do you find that adding gold and commodities does protect a portfolio? Because some of these are quite volatile in their own right, right?

17:20Lisa Conway-Hughes:Yeah, I think having a bit of everything will help. And it also helps us to match it to your risk rating because we know that on the whole, equities are really volatile. So if they're going to fall by 20, 30 percent, not many people, when it really, really hits, can stomach that and honestly say it doesn't bother me. um but the way we're using in this tilt example we're putting more of clients money into these sort of mid and small cap companies that's helping with that diversification you know the two and two and a half thousand companies versus seven and a half thousand so that's really helping um the portfolio do you get clients coming in going oh i need gold because it's done well recently no because gold they just do it themselves they're buying a little gold on the side if they've got that yeah if they've got that mentality they're probably just doing themselves i think people that come to us just want to be informed but want to outsource that responsibility really yeah so your clients still do side investments you don't say you can only invest with me um i might criticize yeah there you go that sounds right so i mean that clients will have other things that they do on the side but the majority um we would look after awesome scott asked what about taking money out in retirement what do you think about annuities versus drawdown as inheritance tax will take much of any pot left over i'm leaning towards an annuity i love this guy yeah i love annuities um so annuities for those of you don't know you exchange your lump sum for a guaranteed income for life and we're sort of programmed these days to think annuities are just rubbish um and i think when someone is mentioning annuities to as a financial advisor, one thing to consider in your thought process is do they have my best intentions at heart?

19:13Lisa Conway-Hughes:Now, when I'm trading someone's assets under management that I make money off for an annuity that I'm not going to make any money off, then perhaps it's the right thing. Perhaps I'm doing it for the right reasons. Because you're giving up assets under management that you charge a percentage on to get an insurance product that reduces how much you've got. Exactly. so it's not for my it's not my best interest um to suggest an annuity but in this sort of my goal is to help clients sleep at night because if they're sleeping at night i'm sleeping at night i love an annuity for building on someone's um um gas electricity food shop so all the basic bills are covered by the state pension your db pension if you're lucky to have one and if not top it up with an annuity.

20:03Lisa Conway-Hughes:I really like it. And I brought in answer to this question, this is some research that we're doing for a client right now. He's on his way. He's in a lifestyling pension fund. So that pot is gradually coming down to cash. And I don't want all of his money doing that. But we do want some of the money to do that because we intend to buy an annuity at some stage. So we could actually have for that part of his plan, that very cheap work lifestyling plan working for him. And with the knowledge that when he retires, we'll switch that for an annuity. And understanding how much that costs means how much I can move away from the lifestyling approach and mix it in with the rest of his investing pot.

20:43Lisa Conway-Hughes:And he's really high risk and his wife's really low risk. So managing the family rows is really important. And this annuity is a real way of it. So for£10 ,000 a year income for this guy linked to CPI with a 10-year guarantee. So it means if he dies in the first 10 years and he hasn't had all of his money out, they'll pay him the difference. So the best rates, if he was 60, he'd need to give up£222 ,000. So he's got to live 22 years from the age of 60 to be in profit. So 82 years. and if you're 65 194 000 so he's got to give up an extra 28 grand for five years extra of income to take it at 60 so i i do feel that that's quite compelling it's not a bad annuity rate um so for him we as i say we're gonna we're gonna fix well leave some of this money lifestyling um and then switch it away so i think annuities really really do have their place um in somebody's financial plan but obviously once they're done then they're irreversible so really think through it um and really do it for the right reasons with the right amount i'd say what kind of person will you say don't do an annuity to you know is it other people that come to you it's more timing isn't it the rates at the time a couple of i mean when interest rates were so low we didn't talk about annuities this is sort of a conversation that's coming of light to light in the last year or so really um But also somebody who is retiring really, really young, you might not get such a good rate as compared to when you're that bit older.

22:28Lisa Conway-Hughes:So, yeah, it just depends. And for all clients, annual reviews, when they're in this drawdown phase, if they haven't annuitized, we'll just monitor it and bring it up and prepare these quotes like we've just done for this guy to actually a topic of conversation, really. I think the inflation protection is a good component of it as well. Because, you know, if you look at the last couple of years in terms of the inflation impact and what that did to pensioners that weren't, you know, outrunning it, you were stripping off 10 % of their spending power in a single year. Exactly. With no ability to get a pay rise.

23:05Lisa Conway-Hughes:And a bit of confidence, because maybe you wouldn't have spent that much more anyway. maybe your lifestyle will have adjusted but it's the fact that it it's something done to you rather than something yeah you have no control over it and i do think we're in a higher inflation environment for a while i think i think two percent target i think we're going to it's going to be quite lumpy and with three percent four percent you know we see that these shocks so that ability to go well whatever happens at least i get the cpi uplift yeah a bit like state pension isn't it that's kind of an annuity of sorts yes it shows how valuable that is as well that 12k a would be what, like a 300 grand annuity or something like that?

23:43Yeah, exactly that. So if you've got a couple both getting state pension, that's like 600 grand's worth. They would have to hand over 600 grand to get that as an annuity. That's how valuable it is. MAGA, make annuities great again. You really just are trying to get cancelled, mate. I'm just rebranding MAGA, make annuities great again. um we've spoken a bit about drawdown and more 1185 has a question about withdrawal rates i'd be interested in hearing the research-based justification for decumulating at a low rate and the danger of being the richest person in the graveyard with two three or five times more money in the pot than when you retired what about a higher rate of five percent or more with guard rails drawdown approach why are you putting it me because you're gonna be the richest person in the graveyard are still investing so like getting returns when you're dead i know this is a weird thing but like in my older life one thing that i enjoy doing when i go on a city break is going

24:39Lisa Conway-Hughes:to the graveyards it's getting dark no no it's pretty cool like i went to i went to paris and i was just like oh here's oscar wilde's grave you know and he's buried there or edith piaf you know

24:55there's like some good graveyards and you know the people who have the the big tombs like the cover like the big building little tomb buildings yeah the oscar wilde one is like nice but as you walk in there it's like here's the vanderbilt tomb or whatever and it's like huge and they must have spent so much money to have this thing and i'm thinking probably should have spent more on holidays mate you know what i mean like it's like you've got this huge thing edith piast is like quite small but that's the one that's surrounded by people and it speaks to the fact that people care about what you did in life not how big your tombstone is you know i mean her I think the Hitchhiker's Guide to the Galaxy, you know, the author of that.

25:35His is in London and I've been to that. And it's just like full of pens. So the fans go and they leave pens there. And it's just like thousands of pens there. Basically, like you've inspired me to write and things, I think. Oh, that's lovely. I'm not misquoting it, but it's a small little grave. Yeah. And then you've got like other people's that are huge and no one's there. So I think, you know, that makes you, You don't want to be the biggest tombstone in the graveyard. If you do enough in life, people will visit, even if it's just the size of a stamp, right? Anyway, sorry, I digress. It's true.

26:07Lisa Conway-Hughes:And that's why that book, How to Die with Zero, is really popular. Yeah. So really, most clients have a really good view of three, four, five-year time horizon, what they want to do in early retirement. And so it's a case of year-by-year planning. if we could do anything what would we do and I really love that side of the job that um I'll be really vague because I'm holding one client's really um tight secret and he's we started drawing down from the portfolio so he could buy his wife a really cute um anniversary gift I think it's their 50th anniversary and we had to do it in a way so she wouldn't notice and she's all over that pot she knows what's in his investments and so we had to do it really discreetly um and on their annual review this well a couple of weeks back um i was trying to keep a straight face because i felt like i was really lying but i think the point of saying that is money is there for those human really exciting elements that i can't wait to find out how much she's going to love this gift that he's got her because she's wanted it for so long and she would never buy it for herself so yeah I think the answer to that question is you've got to do it year by year but within sensible realms so if a client really wants to overspend for the first two three years and it's the detriment of them being 80 85 does it really matter probably not if we would have a horrid stock market for the rest of their life then of course it's going to matter so i think you've just got to to play it by ear and clients that want to overspend right now they've probably had a decade of amazing returns that i feel we can afford to be a little bit um well extra with what they want to spend i've got a follow-up on that yeah just before i do i want to say it wasn't the vanderbilt's they're american it was rough child yeah yeah it was like the eighth rough child no one knows just inherited all the money and was like i'm going to build a massive to just in case people in the comments go why was a vanderbilt buried in paris but anyway do you get people that get to 80 and go oh god i've got too much money here all the time okay and then what are you saying to those people and the psychology of them in the moment are they like let's go on a cruise or often people with too much money can't it's so hard for them to break that habit and my goal as the advisor is first of all to prove to them that they have too much even at really great cautious growth rates high inflation rates what's that what's what could they go without and live till 100 and have expensive care and it still be all right and we just stress test that to say what if you gifted 250 grand what if you gifted 500 000 And that's really where the conversation will start.

29:05Lisa Conway-Hughes:So a really good example that I'm doing recently is a man, he's widowed, he's got excess money, but he's nervous, he's on his own, he doesn't know how to use a microwave, let alone make a meal. He thinks life's going to get expensive for him because he's going to be eating out a lot. And so for him, I started off by modelling what could he gift away? Because I know his grandchildren are of an age where they really could do with the money. They're like late 20s, early 30s and really could, yeah, really could do with it at that time in life. And he would love to give it them as well. So for him, we've sort of done an asset shift around.

29:44Lisa Conway-Hughes:around pensions are obviously changing next year so you no longer want to really die with your pension in place his kids are high rate taxpayers if he dies with his pension that's going to be 60 odd percent tax on that pension so I've bought an annuity with his pension to match his new expensive lifestyle and then the money that was in cash stocks and shares is the money that we've gifted away and then he's really nervous to gift too much so with the remainder cash buffer I've just bought a whole of life insurance for him to cover the rest so when he dies the inheritance tax is paid by his kids from the insurance and the estate passes directly to them so for him it was about breaking up that plan and breaking down the worries in his mind and finding the the products and the investments that suited it whole of life insurance is just life insurance it's life insurance but as long as you pay for it because you know normal insurance is if you die between now and age 60 or now and your mortgage being paid off will pay out that amount but if you die one day later there's nothing left with a whole of life insurance you've got to keep the policy going but it will as long as you pay the premiums it will pay out whenever you die so cover you for the whole of life and you write that insurance in trust and that trust then pays out to the people who are going to pay your inheritance tax bill and then it's outside of your estate as well that's quite cool yeah wisdom oaks asked i'd like to know more about damo's plan to de-risk as he approaches retirement i'm the same age and love damo's idea of having three years of cash whilst maintaining the rest in equities with no bond allocation however one of your other guests debunk this as a bad idea.

31:36I wonder if you feel the best approach is simply to move into more bonds and cash as you approach retirement. Is that the only way to de-risk? So Moshe Malevsky was the episode where we talked about a waterfall strategy, you might call it, and it's actually, it was you who discussed it and other advisors that I've spoken to. It wasn't my idea. And it's just the idea that you have three years worth of cash-like equivalent bonds, whatever you live off the first year and every year they just shut down and you replace them unless there's a big turn down in the market and then you don't sell the equities you just whittle down the three years and hopefully within the three years the stock market starts to recover that's broadly it he said he back tested it academics love back testing um and it doesn't work all the time i think he said 10 of the time it works but you have experience of doing this

32:29Lisa Conway-Hughes:with clients so yeah i mean it's hard to backtest that with emotion overlaid on it as well and to prepare for this i asked someone who loves bonds what they think um and i'll tell you what he thought as well but i think at the moment while we're getting really decent rates on cash it's making my life quite simple right now when cash rates are terrible of course we've got to go and look for a better rate of return for that short term money. But at the moment, and if the money's in a pension, at least, it's tax efficient. I asked a bond guy what he thought of that question. He said, so I would not say cash buffers are bad, but I would say they're incomplete if they are the whole plan.

33:18Lisa Conway-Hughes:Equally, 2022 showed that not all bonds are defensive in all environments, but shorter duration, higher quality credit can play a vital role in providing income liquidity and lower volatility than equities. So my answer would be the instinct to keep three years on liquidity is sensible, but I would be cautious about three years plus of cash and then everything else in equities. He feels that there's a place for bonds in that as well. And can I just say, just to sidetrack I think people get bonds mixed up and I've mentioned before but there's sort of three types of bonds you get cash bonds which is just you're locking your cash up for for a time you get bonds like what we're talking about now which is where you lend to governments or companies and then you get investment bonds which are just like a tax wrapper around investments but we're specifically talking about this lending to governments and um for high-rate taxpayers at the moment I'm using um short dated um bonds as a way as a true alternative to cash because they're very very tax efficient so if you're getting four odd percent on a short date guilt right now and the clients are high rate tax pay and keeping most of that because of how tax efficient they are it's a great way I've got so many clients weirdly at the moment who have sold their businesses and are just waiting to know what their next phase of their life is so we've got to get their head around having this much cash and we a lot of their portfolio is held in these short-dated gilts right now because it's it's giving them a good return a very tax efficient return as well but while we're buying time to actually work out what our next plan is for them can you explain why they're tax efficient the government's incentivized to make gilts tax efficient essentially the money's coming to them so the majority of a guilt is tax efficient it's tax free it's just the tiny bit of um sort of interest that you get that is taxable so the majority is tax free guilt to government bonds yeah lending to the english government british government yeah that's what we call the uk version yeah yeah i'm i knew that i'm just clarifying for the audience yeah and i think um again i'm not old enough or near enough retirement to know how i'll think about it at the time that that's just kind of how i look at it now but i also think that what a lot of these plans don't account for is the fact that you can just adjust your spending as well a bit and if if the stock market is pretty bad you might just dial back and go well we're not going to go on two holidays this year or we won't go on a holiday yeah you know you've got a few levers you can pull on it doesn't just have to be well i have to keep spending like i spend and whittle away my three years of cash or bonds yeah and like you say i might get to retirement and have more than i need and be like well i'm not going to take the risk then yeah i'll dial it down to And the market might be very different, a different landscape.

36:08Lisa Conway-Hughes:And so that different lever approach is really important. It's got to come from an informed position. So a client who works in the media industry has had a really tough five years of sort of clinging on to different jobs. And she's sort of bowing out at the top of her career a little bit earlier than she'd really hoped. and um when i forecasted what if you retired now it's sort of if you retire now it's all right it's not what you really wanted it to be but it's all right um but we but what's really important to me to her and i'll basically she likes to go on holiday drink sangria and have calamari oh my gosh that's two out of three for me i prefer rakita sangria or tequila but yeah i love calamari She's knocking back shots and squid, mate.

36:58I was just in Greece drinking Raki, which is like 40%. Yeah, I know, but come on. It's like burnt rubber, mate. I'm bringing you some tomorrow after we film. I don't want that shit, mate. You're having it. You can keep it. Shots and squid. Oh, mate.

37:09Lisa Conway-Hughes:I know that holidays, but the point to say that is I know that holidays are just really important for her and her husband. and so we was she lives in this big house and we say well what if you rented out the house and did went traveling and just had somewhere smaller in the UK for that period of time and that solved a problem it really really helped enhance the plan because it meant that I wasn't having to spend down her pension for three extra years than if she just took it now so there are always different things you can do but as but if i didn't know her goals and what was really really important to her and that throwaway comment about calamari that she probably mentioned to me five years ago it's like we could have made the financial plan that weren't centered on her values and what's fun for her we could have said well you've got to get some sort of job like for the next three years and not known how to yeah pull those different levers to make her happy i think a large part of the audience are really into their finances and they're probably say similar age to me not t because he's an old git um but look 10 years younger than you no you do not no you do not black is starting to crack mate i know i hate to break it to you um and i think they're just like oh i want to know what i'm going to do at that point in my life do you think it's useful to kind of sit there at my you know mid 30s nearly 40 unfortunately and say oh what's my strategy you're going to be for withdrawal in my 60s?

38:44Lisa Conway-Hughes:Well, as someone who's mid-40s and making me feel very old... But you're a little younger than both of us, are you, are you? I would say... He flirts with you. He don't flirt with me, doesn't he? He's not having a... He's complimenting me on my outfit. I know. He does nothing but compliment you. I think you don't need to overthink it because there's so many uncontrollables out there. that you just need to do what you can do. Yeah. And definitely don't overthink it, but do start to think really purposefully about it in that five to 10 years before retirement. Yeah. So just focus on accumulating what you can.