Early-retirement wannabe

michaels

mark55man said:

But if the pot is marginally bigger surely that says that gadgetmind has been too conservative in his withdrawals as (no offence intended) none of us live forever and he now has 2 less to go with the same starting pot (with about the same inflation adjusted buying power)

Not at all, avoiding sequence or return risk means choosing a withdrawal rate that will not see the pot fall in nominal terms the vast majority of years.

mark55man

So I do disagree - it seems you re all aiming far too high, if most years your total pot increases (nominally) then when you die you will have too much left over.  I do understand the need for caution, but too much caution leads to not starting retirement early enough and the wasted opportunities for a healthier early start

I'll not argue anymore though as I'm not a pensions expert - just a mathematician.  Plus someone who does worry if the advice issued is to protect the advisors more than to optimise the retirement  

gadgetmind

We're lucky enough to have plenty of assets, but this book is good for those who can handle the maths and who really want to maximise income without taking stupid risks.
https://www.amazon.co.uk/Living-Off-Your-Money-Retirement/dp/0997403411

barnstar2077

gadgetmind said:

We're lucky enough to have plenty of assets, but this book is good for those who can handle the maths and who really want to maximise income without taking stupid risks.
https://www.amazon.co.uk/Living-Off-Your-Money-Retirement/dp/0997403411

It is a shame there isn't a kindle version available though.  I use the app on my tablet so I can change the font size to something that doesn't give me eye strain.

westv

mark55man said:

So I do disagree - it seems you re all aiming far too high, if most years your total pot increases (nominally) then when you die you will have too much left over.  I do understand the need for caution, but too much caution leads to not starting retirement early enough and the wasted opportunities for a healthier early start

I'll not argue anymore though as I'm not a pensions expert - just a mathematician.  Plus someone who does worry if the advice issued is to protect the advisors more than to optimise the retirement  

Just Google "pound cost ravaging".

nirajn123

gadgetmind said:

nirajn123 said:

If you don't mind sharing what do you use for the 50/50 portfolio? Some one decision fund or DIY of all world equity + global aggregate bonds?

VWRL and VGOV for the most part, but I added VFEM and VAPX to the equities to get more emerging/Asia, and added SLXX to to bonds to add some corporate, and also IGLS and IS15 to reduce duration. I also hold some INFR, RIT Capital Partners and Scottish Oriental Smaller Companies, but some of this is historical. I also like picking up Investment Trusts in deeply unloved sectors that are on big discounts and then waiting years/decades for the hot money to pile back into them. This has worked *very* well for me and I wish I'd been bolder with allocations, but that's always the way.

Sorry for ticker codes, but those interested can google them.

OK, so effectively Indexing and some active to boot. Going by your list, I must say we are quite similar in terms of our thinking. I use a combination of VEVE/VAPX/VFEM and AGBP for FI. Moved away from active after the Woodford saga. I do have some VVAL and small cap ETFs which have provided some alpha in the long term. Owning a value factor ETF effectively replicates what you are doing with unloved sectors without taking a sector specific risk - but I guess there is more than one way to skin a cat. 

Things have certainly worked out in the last few years and good to know that a 6% withdrawal is worked through crisis too. My only worry is GBP strengthing further - its fine in the short term but I would worry if it continues when I retire early in 5 years time. 

mark55man

westv said:

mark55man said:

So I do disagree - it seems you re all aiming far too high, if most years your total pot increases (nominally) then when you die you will have too much left over.  I do understand the need for caution, but too much caution leads to not starting retirement early enough and the wasted opportunities for a healthier early start

I'll not argue anymore though as I'm not a pensions expert - just a mathematician.  Plus someone who does worry if the advice issued is to protect the advisors more than to optimise the retirement  

Just Google "pound cost ravaging".

I understand sequence of returns risks, and I understand there are many ways of coping with it, from having part of your total portfolio in cash-like assets, to being more flexible/frugal in your withdrawal needs.

Just pointing out that bad things can happen doesn't mean a pension withdrawal strategy that leaves you with too much in your pot through caution isn't also bad (eg opportunity costs of lost years of retirement, lower standard of living, assets on death with no desired beneficiary).  Your view seems out of place in a thread on early retirement, with implications of good money/risk management and a desire for FIRE

The thinking that says your DC pot shouldn't nominally decrease just feels wrong, I mean the whole process is called drawdown

westv

I don't think anybody is saying your point shouldn't decrease. It's the decrease to zero which is trying to be avoided.

shinytop

westv said:

I don't think anybody is saying your point shouldn't decrease. It's the decrease to zero which is trying to be avoided.

Isn't it the decrease to zero when you are still alive that's to be avoided?  For me, zero at the point of death would be the best outcome.

The problem is that the maths says that if you want a constant income with a near-zero probability of running out before death, the most likely outcome is that you'll end up with more than you started with. The way around this, and what IMO most sensible people will do, is to give a little on the near-zero requirement and be a little bit flexible on income.    

Notepad_Phil

mark55man said:

I do understand the need for caution, but too much caution leads to not starting retirement early enough and the wasted opportunities for a healthier early start

But unfortunately too little caution can lead to cutbacks being forced on your lifestyle when a portfolio fails to match the long term needs.

I early retired a few years ago when in my mid 50's and I'm hoping that I'll be around for a good few years with Mrs Notepad then likely to keep going for another decade or so after that. Consequently I need our funds to potentially last 40+ years - so retiring a few years later than I could perhaps have done is very little in the grand scheme of things.

mark55man said:

The thinking that says your DC pot shouldn't nominally decrease just feels wrong, I mean the whole process is called drawdown

There'll be plenty of times that our DC pots will decrease, e.g. back in the spring our paper losses were pretty spectacular, but I never once worried that our long term plans would need to be reviewed and the DC pots are now back to a much rosier position. Personally, to cover the uncertainties of the market I'm working on the basis that in normal times our portfolio will increase enough each year to pay for the drawdowns we'll take - it probably won't be best way to die with zero in our portfolio, but I'd rather that when I'm no longer around that Mrs Notepad saw a portfolio heading towards a million than to zero