am I being naive about the risks?
Something to also reflect on with your financial planning is the psychological aspects of accumulation (
i.e. the pre-retirement phase of life focused on saving and investment) and decumulation (
i.e. the post-retirement phase of life managing those savings to last through retirement).
During the accumulation stage, when you are building up your retirement assets and have a good distance to go to accessing the pot (taking your lump sum and transferring the balance to an ARF) and using it as a replacement source of income, you can be more sanguine about market drops and even delight in them, as potentially "stocks are on sale". Furthermore, you are still earning a salary and so are not dependent on the assets yet and can be stoic about market moves and respond to them with equanimity.
This all changes when you are in the decumulation stage; by definition, there's no more earned income coming in to the household. Where previously you benefited from market drops in the accumulation stage when retirees were selling off assets to provide income and you were on the other side of that trade picking up cheaper and cheaper assets; that now flips, where instead you are now selling assets at depressed prices. If you also operate with the paradigm that the market always bounces back, how nervous would you be or how likely to panic if that recovery took longer than you would like or previously understood, and meanwhile the car needs replacing and the house needs a new roof and you are dipping more and more into the pot?
Also, to reiterate the point about a market recovery after a drop - if you look at the graphs we are all used to (market dips and subsequent recoveries), it comes at it from the approach of a buy and hold investor. So, if the index level is at 100 and drops to 60 (40% drop) over a period of, let's say 2 years, and subsequently recovers to 100; it takes a 67% increase from the index level of 60 to get back to the previous level of 100.
However, if one overlays another line on that chart with a portfolio value (which requires an income to be drawn out of it, say 5p.a.), after 2 years, where the buy and hold portfolio is at 60, the retirement portfolio may be at ~50, requiring a
100% increase from 50 to get back to a level of 100. So, if the paradigm one operates is that a 67% increase has happened before and will happen again, and indeed does deliver a 67% rally, the retirement portfolio is falling behind (value of only 83).
One other headwind is that if you have a pension pot worth 100 all in the market and close to retirement it drops to 60 and you have to access it at that point, then 25% of the value of it may be due to you as a lump sum (15) with the balance (45) going into an ARF. If you have the financial means to recycle the lump sum back into global equities, it will have to work that bit harder now that it is outside a pension wrapper. In the accumulation stage, the tax benefits afforded to a pension structure enhanced the ability of the monies to compound, but that advantage is not present if investments are now subject to income tax, CGT, LAET, deemed disposal provisions etc.
Again, this is not a general logic question and is very personal to your financial situation. If your retirement savings are all gravy whereby your wider financial situation is in top shape: no debt, no dependents to still provide for, a full Irish State Pension (or maybe a UK one as well if you worked there), a spouse with their own pension provision, a frugal approach to spending, rental properties etc then the above discussion is all a bit academic.
As the Greeks say, "Know Thyself."