Only freedom will do

edinburgher

It's generally accepted that if you withdraw 4% of a reasonably balanced portfolio every year you'll 'never' run out of money.

I believe this all stems back to the Trinity study, and it was a 50/50 split. Recent research from Bernstein and others has suggested that this is now too conservative and that living with 70% equities may need to become normal.

Goldiegirl

Secret_Saving_Squirrel wrote: »

Regarding pensions, oh and I have planned to have a fair bit of dosh up to 75 and after that we are not worried as although we have a few relatives who have lived beyond this age, they have not wanted to do any travelling, holidaying or partying, so our basic pensions would have served them finely. Genes will out, so it is really not wise for us to assume that we will need the same at 76 as at 66.

Squirrel:beer:

That's our thinking too - I noticed that as my parents got older they' spent less money, as they didn't go out and about so much.

We've also planned for a more active early retirement, with the thinking that our activity levels will begin to taper off at some point

I know there's an argument that we should have money left over to pay people to do the gardening and house maintenance for us. But if we ever begin to feel this house is too much for us, we'd downsize to a smaller, easy maintenance flat. (Freeing equity at the same time)

judi24

Wow GG - thanks for that - I will have to re read and digest several times but definitely food for thought!

ljaneyr

edinburgher wrote: »

I believe this all stems back to the Trinity study, and it was a 50/50 split. Recent research from Bernstein and others has suggested that this is now too conservative and that living with 70% equities may need to become normal.

Hmmm... I need to do more reading before I understand this! I did fairly well at school, I have a good degree with a fair bit of maths involved (well, statistics ), and I'm still confused! How is the 'average' person supposed to manage :eek:

Am I right in thinking, with the example you used above, if we save £10k a year for 20 years we would have a pot of £200k. We could then withdraw 4% so £8k per year throughout our retirement?

edinburgher

Yes, that's exactly what the maths would suggest. With these things, it's important to remain wary as they are just generalisations. While rules of thumb are useful as indicators and to provoke thought, they won't work for everyone.

For example, a lot of people don't feel comfortable taking the full 4%, I've heard of people only taking 2% (or less!) In my circumstances, I'll never earn enough/cut enough expenses to make that viable, so I expect to have a higher rate to help me bridge the gap between stopping work and pensions.

Based on current models, I'd need to withdraw something like 8% a year for 8 years. I fully expect to kill my ISA before retirement

Also, remember that most people don't need a perpetuity, they just need their money to last for a decent length of time until other arrangements kick in. Mrs E and I will have 3+ personal pensions, a tiny Civil Service pension, a hopefully paid off home, ISAs and any passive income we can rustle up (I see no reason why I couldn't do MB or similar until c. 60 years old)...

gallygirl

ljaneyr wrote: »

Hmmm... I need to do more reading before I understand this! I did fairly well at school, I have a good degree with a fair bit of maths involved (well, statistics ), and I'm still confused! How is the 'average' person supposed to manage :eek:

Am I right in thinking, with the example you used above, if we save £10k a year for 20 years we would have a pot of £200k. We could then withdraw 4% so £8k per year throughout our retirement?

Yes, assuming 0 growth, in reality with 4% growth you'd have a pot of over 300k and be able to withdraw over 12.3k :T and leave the rest to keep growing. You can of course take more early on then scale back as other income comes into play but need to be careful to leave enough in to satisfy future years withdrawals.

elantan

i'm thinking 3.5% as that should work out about the right amount till as Ed already mentions the pensions etc kick in ... every person is different, that why places like here are great to kick ideas around... Ed GG KC Tilly and others have given me much food for thought, which has allowed me to come up with a plan of my own, i'm still tweaking it and will continue to do so as our financial situation changes, but atleast i have a plan


Ed a person i know is intending on putting their house on the market in the place you are looking, from what i understand it should be right up your street... as in what we have talked about ... will let you know if i find any more info ... but keep your eyes peeled just in case

edinburgher

Thanks El. Think we might be scaling in our country aspirations a bit, I have underestimated how much banks might be willing to lend us based on Mrs E's p-t salary with a baby. For reasons of job stability/keeping commuting costs low, I don't think we'll be able to go far from Glasgow city centre.

A shame, but we're only young things.

Having a mare of a week at work, today must be blue Tuesday

elantan

ahh sorry to hear that Ed... things can change in the future though and you never know whats in front of you ... was driving through a wee village the other day and thought it would be ideal for you with your needs actually, but if you both work in Glasgow it would mean either driving or train to commute, and there's no two ways about it that mounts up over the year

edinburgher

That's ok El, I have a real tendency towards pessimism, it means that the upside is always a lovely surprise if it materialises

One hour to go and I can flee Tuesday at the office, today has been a real mix of triumph and failure.

Sometimes I wish I had a rewarding job like KC, the numbers are not speaking to me today.