Safe Withdrawal Rates

maximumgardener

The beauty is you have sufficient cash on hand £110k estimate
to use if you choose not to drawdown funds in any years off poor market return
/ performance to avoid fund depletion.
with the balance of £440k you do not seem to be in serious danger of running out of money
with the spending plans you have at the moment.
i will pitch in with a DD rate of 3.5% and see how it goes .......some years you may not need any!!!!
you seem to have the tax sorted and of course you can DD from ISA funds (tax free) eventually when the cash reserve is depleted....but thats some time off!!!!
I think you are doing well getting £4k + from your £110k , BTW .......the cash is totally liquid
other investments not so liquid ......but some may be worth a small punt
depends on how you see risk and whether you want to deplete your pot or keep for leaving to family etc
so strategy important. have you seen a good IFA......that may be a wise move but you have the option to
diy. good luck

okydoky

mgdavid wrote: »

You have c. £550,000 retirement fund; is the value of your house on top of this?
Across the long term you seem to be planning to live on income alone - how are you managing the IHT situation?

Yes, my retirement fund is about £580k all in, which includes cash and non-pension investments; that's the way I view it.

House value is on top, c.£250k, debt free, and with 5 bedrooms and the kids now disappearing fast, a downsizing exercise is on the cards.


Once I can convince OH to give up her job, I would hope to use the downsizing proceeds to fund some longterm holidays on warmer shores! We would probably rent abroad.

Nothing really done at this stage about IHT, but aware of it😫

atush

I think you are too conservative.

We plan on withdrawing 6%, between retirement and SP. but then will cut way back to at least 3%.

But we will have at least 2/3 years income as cash (at the 6% level) so as to change this plan as needed.

mgdavid

atush wrote: »

I think you are too conservative.
..........

so do i (in case it wasn't obvious!).
You are well-placed; !!!!!! get out there and enjoy it.
You could even risk getting your wife to retire now.....

mania112

Since Flexi-Drawdown has become the norm, I continue to use 100% of GAD Max as a benchmark.

LXdaddy

mania112 wrote: »

Since Flexi-Drawdown has become the norm, I continue to use 100% of GAD Max as a benchmark.

GAD Max? Could you explain that term please.

atush

The rate that used to be set for those drawing down when there was a cap- based on gilts/annuity rates. Approx 6%

westv

This page has current rates

http://www.dentonspensions.co.uk/Technical-info/Retirement/Capped-Drawdown/GAD-Rates/

jamesd

It's worth pointing out that the GAD rates are inappropriate for those entitled to a UK state pension. The problem is that the GAD rates were intended to effectively eliminate the chance of the pot running dry and taxpayers having to subsidise the retirement with means tested benefits. In seeking to achieve that, they also restrict the amount that can be taken out most during the years when taking it out is most needed: before state pension age.

For a person entitled to a UK pension there are at least two different periods to consider for withdrawing:

1. After state pension age and when the state pension is in payment. This is the time when the drawing has to be long term sustainable.
2. Before state pension age when the drawdown pot has to be drawn on much faster to replace the state pension income that isn't yet being received.

Someone who uses the GAD limit for early retirement before state pension age is needlessly reducing a level inflation-adjusted income which they could receive throughout retirement.

For modelling this there are two different pots: the long term one and its drawing rate that has to last from early retirement through death and the short term one that can be completely drained to replace the not yet available state pension income.

gterr

jamesd wrote: »

For more analysis of a range of approaches to safe withdrawal rates it's well worth reading Making Sense Out of Variable Spending Strategies for Retirees.

Thanks for this, jamesd,


I am much taken with the Bengen's Floor-to-Ceiling approach: fixed percentage spending rate of 3.31% current pot, but with spending ceiling equal to 20% of initial (Year 1) spending, and with a floor equal to 15% of initial spending.