£780k pot how much would you drawdown each year

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  • Linton
    Linton Posts: 17,172 Forumite
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    edited 8 January 2018 at 6:22PM
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    pensionpawn wrote: »
    ......
    In my calculations I also intend to run down my pot completely by 85 (if I make it as far as my father...). I want to have most money available from 60 - 70, then slightly less from 70 - 80 and then if I have made it that far have just enough to keep me (and the wife hopefully) warm, dry and fed during the run in.... Again, if all goes to plan, there should be plenty in ISAs from the early withdrawals to draw on in emergencies especially with a full new state pension to take up quite a lot of the slack from 67 onward.

    ......

    I think you need to plan for having more money in extreme old age as expenses may well rise eg modifications to the house, private care beyond what the council may be able to provide, taxis.

    Note that 85 is less than your life expectancy (assuming you are of average health) so there is a more than 50% chance your pot will be empty before you die.
  • pensionpawn
    pensionpawn Posts: 946 Forumite
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    Thanks for your reply, I really do appreciate observations on my strategy as I know I don't know everything about finance (although more than most of my peers) and may have overlooked something.

    I appreciate what you are saying and that's why my strategy includes saving a fair percentage of draw down into cash / sas ISAs therefore I should have a slush fund for life's hidden expenditures. I realise there is a balance to be struck between the better (hopefully) growth rate of the pension fund compared to having immediately available 'cash on tap' / minimising exposure to higher rates of tax through regular draw down / protecting against poor growth. Also, money in the fund can pass to relatives tax free on death.

    Regarding life after 85, well I know predictions suggest that those who are in good health should all live a little longer however that doesn't necessary equate to a high quality of life. Even if I make 85 fully healthy I'm not going to be burning my candle at both ends. I did that in my teens and 20's and I'll have a final crack in my 60's, after that I be taking it easy financially as well as activity wise. Of my relatives that made it past 80, none of them were leading the lifestyle of a rock star and were happy just to be able to eat well, stay warm and comfortable and not want for anything. I think the state pension and 25 years of drawing out of a personal pension pot will provide that (unless I've overlooked something...)
  • pensionpawn
    pensionpawn Posts: 946 Forumite
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    bostonerimus wrote: »
    The 4% (probably 3.5% for the UK) starting drawdown levels are derived so you can survive 95% of possible combinations of historical market scenarios, so it's a conservative number, as it should be for retirement. Dividends are given per share and are so pretty stable with price fluctuation. Your approach to income planning is not one I'd adopt. It sounds sensible, but you're not planning for the worst case which is dangerous; some combination of bad market returns, a long life and long term care costs could put you in the poor house. There is US research that shows retirement spending inflation to be less than the general inflation rate by 1% or 2%, but I haven't seen any UK numbers and it's hard to do a comparison because of costs for healthcare being so different. Still if you intend to front load tour spending make sure you have a plan to reduce spending in bad years. A previously mentioned the Guyton Klinger rules are useful for that, but also identify places in your budget where you can save.

    I'll look into this further, thanks!
  • bostonerimus
    bostonerimus Posts: 5,617 Forumite
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    pensionpawn wrote: »
    T

    Regarding life after 85, well I know predictions suggest that those who are in good health should all live a little longer however that doesn't necessary equate to a high quality of life.

    There's about a 50% chance you'll reach 85 so you must plan to live longer. Using the numbers from the ONS I'd advise every one to plan for at least 95.
    I Even if I make 85 fully healthy I'm not going to be burning my candle at both ends. I that in my teens and 20's and I'll have a final crack in my 60's, after that I be taking it easy financially as well as activity wise. Of my relatives that made it past 80, none of them were leading the lifestyle of a rock star and were happy just to be able to eat well, stay warm and comfortable and not want for anything. I think the state pension and 25 years of drawing out of a personal pension pot will provide that (unless I've overlooked something...)

    You are overlooking care costs, those could be enormous, and the possibility that you migyt live a long and expensive life....yayyyy! There's a good chance that the last 3 years of your live will be spent in care and that could cost 30k a year at today's prices. You might also want to leave some money to relatives so planning for these eventualities is important. Using a strategy of "I'll be old and sat in a chair so I don't need any money" is really depressing IMHO. When I was planning for retirement I took out a long term care insurance policy to protect the inheritance I hope to leave to my family. Unfortunately such policies are not available in the UK (I live in the US)
    “So we beat on, boats against the current, borne back ceaselessly into the past.”
  • pensionpawn
    pensionpawn Posts: 946 Forumite
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    bostonerimus wrote: »
    There's about a 50% chance you'll reach 85 so you must plan to live longer. Using the numbers from the ONS I'd advise every one to plan for at least 95.



    You are overlooking care costs, those could be enormous, and the possibility that you migyt live a long and expensive life....yayyyy! There's a good chance that the last 3 years of your live will be spent in care and that could cost 30k a year at today's prices. You might also want to leave some money to relatives so planning for these eventualities is important. Using a strategy of "I'll be old and sat in a chair so I don't need any money" is really depressing IMHO. When I was planning for retirement I took out a long term care insurance policy to protect the inheritance I hope to leave to my family. Unfortunately such policies are not available in the UK (I live in the US)

    If I do live longer than 85 I hope I am actually enjoying the extra time and not just 'staying alive' as the Bee Gees would say! Hence why I am front loading my pension to enjoy the 'quality years' from 59 - 70! If I do need care then by my calculations I will have paid over £200k in PAYE since retiring (to 85) and half of the value of my home will become available to foot the bill. At today's rates that's over £400k from my estate which at your value of £30k per year takes me well beyond 95. I think I've paid my fair share of taxes along the way...

    If I make it to 85 I think a 26 year retirement (before wasting away in a chair) at an average net income level comparable to my final salary (if I've done the maths correctly..) will be a good innings, especially as I was only in full time post graduate employment for 37 years!

    My children should inherit at least 50% of the value of our house and whatever I haven't spent from my pension, minus any care home fees.

    Of course I could have made mistakes in my planning and that's why I will always welcome comments on this forum.
  • Gerbert
    Gerbert Posts: 30 Forumite
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    bostonerimus wrote: »
    There's a good chance that the last 3 years of your live will be spent in care and that could cost 30k a year at today's prices.

    My own personal family experience suggests at least £40K pa at today's prices for somewhere not terrible, but far from appealing. You probably have to near double that to get somewhere good, and that's personal care only ie not specialist nursing (ie medical) care. (Though depending on whether the afflictions of old age affect you more physically or mentally, you might not notice or even care whether it's good or not)
  • Thrugelmir
    Thrugelmir Posts: 89,546 Forumite
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    jamesd wrote: »
    It isn't all based on US data,

    The basis of the 4% rule is. Which many people use as the basis of their investment thinking.
  • Thrugelmir
    Thrugelmir Posts: 89,546 Forumite
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    jamesd wrote: »
    The biggest threat isn't a big drop then recovery just after retiring, it's a decade or so of low returns just after retiring.

    The risk posed is that depletion of capital in the early years is never recovered. Long term returns as you often quote. Only average 5% above inflation with income reinvested. You do appear to be falling into "This time is different syndrome". Born out of experiencing a benign bull market.
  • bostonerimus
    bostonerimus Posts: 5,617 Forumite
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    pensionpawn wrote: »
    If I do live longer than 85 I hope I am actually enjoying the extra time and not just 'staying alive' as the Bee Gees would say! Hence why I am front loading my pension to enjoy the 'quality years' from 59 - 70!

    having the money to live a quality life after 85 is a reason to not front load your spending.
    “So we beat on, boats against the current, borne back ceaselessly into the past.”
  • westv
    westv Posts: 6,084 Forumite
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    Thrugelmir wrote: »
    The basis of the 4% rule is. Which many people use as the basis of their investment thinking.

    But you were originally referring to jamesd's thread, not the 4% rule so that isn't really relevant.
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