Energy Price Cap announcement: Watch Martin Lewis explain what it means for your electricity and gas bills this winter

Drawdown: safe withdrawal rates

edited 14 April 2021 at 8:35PM in Pensions, annuities & retirement planning
228 replies 90.1K views
1171819202123»

Replies

  • ThrugelmirThrugelmir Forumite
    89.5K Posts
    Part of the Furniture 10,000 Posts Name Dropper Photogenic
    Forumite
     It appears that the bull market in bonds that is just finishing was historically unusual.



    If you enjoy data analysis. Then I can recommend a read of a heavyweight book. 

    This Time Is Different: Eight Centuries of Financial Folly - Reinhart and Rogoff


    Events are more predicatable than initially may seem the case. 
  • bostonerimusbostonerimus Forumite
    5.6K Posts
    Fifth Anniversary 1,000 Posts Name Dropper
    Forumite
    coyrls said:
    jamesd said:
    Nice analysis. I assume by "bills" you mean government bonds. 
    Bills means US Treasury bills with duration normally at one year rather than the normally used longer term bonds. It's a cash proxy.

    Further analysis of the results in the US showed that it's the low interest rate/low inflation times when cash/T-bills dominates because reversing of interest rate trends produces a capital loss on the longer term bonds that has minimal to no effect on bills.

    This research is why I write that at present cash beats bonds.
    jamesd has hit the nail on the head here... for two reasons my own position is a target of 50-60% of fixed income in fixed rate savings accounts - firstly because the OH is very conservative and prefers to have a portion of our portfolio with no investment risk to capital (of course, inflation risk is another thing), and the second reason is diversification - I have no idea whether intermediate term bonds (say 10 years, whether government or other AAA bonds) or cash will give the best SWR in the future so a mix of both (which effectively reduces the maturity) suits me.

    A possible issue is getting hold of the 50-60% of fixed income to put it into fixed rate savings accounts.  If the funds are sitting in a crystallised SIPP, then withdrawing a significant amount could attract higher rate tax.  When I crystallised my SIPP I put the 25% tax free into a ladder of fixed rate savings accounts that, with the £85,000 protection per institution, are as safe as Gilts but with a higher return.  That's a one-off opportunity, however.  I have been using the ladder for income and therefore the proportion of fixed income in fixed rate savings accounts is diminishing.

    Cheers - the practical issue you raise is not something I'd appreciated - our own situation is unusual since more than half our net worth is tied up in DB pensions (the exact fraction depends on how you assign a value such pensions) and all our investment portfolio is held in S&S ISAs or fixed rate savings accounts (there are potential tax hits should the total interest go over £1k per year).

    In times of rising inflation SP and index linked DBs really show their worth. My fixed income has developed without much strategic thought and is almost entirely held inside retirement tax wrappers. I have 20% of my portfolio in a bond fund with an average maturity of 10 years, a stable value fund paying 2% and a TIAA Traditional annuity paying 4% this year. I also keep around 2 years of spending in the bank getting 0%. 
    “So we beat on, boats against the current, borne back ceaselessly into the past.”
  • OldScientistOldScientist Forumite
    299 Posts
    100 Posts First Anniversary Name Dropper
    Forumite
     It appears that the bull market in bonds that is just finishing was historically unusual.



    If you enjoy data analysis. Then I can recommend a read of a heavyweight book. 

    This Time Is Different: Eight Centuries of Financial Folly - Reinhart and Rogoff


    Events are more predicatable than initially may seem the case. 
    Cheers - until I retired I hadn't quite appreciated that data analysis as well as having been my work is also my hobby (even better as a hobby since there are no deadlines and I can look at whatever topics I want without having to justify the use of resources!)...

    For cheapskates (sorry, money savers) there's what appears to be a pre-publication version of this book at https://www.nber.org/system/files/working_papers/w13882/w13882.pdf

  • westvwestv Forumite
    5.8K Posts
    Part of the Furniture 1,000 Posts Name Dropper
    Forumite
    I was a bit bored so I thought I'd bump this useful thread.  :)
  • AlbermarleAlbermarle Forumite
    17.3K Posts
    10,000 Posts Fourth Anniversary Name Dropper
    Forumite
    westv said:
    I was a bit bored so I thought I'd bump this useful thread.  :)
    Some old names posting there !
  • DairyQueenDairyQueen Forumite
    1.8K Posts
    Sixth Anniversary 1,000 Posts Name Dropper
    Forumite
    Where is Jamesd? I miss his expertise on this issue. His profile suggests that he hasn't been on the site since Jan.
  • westvwestv Forumite
    5.8K Posts
    Part of the Furniture 1,000 Posts Name Dropper
    Forumite
    Not since Jan last year.
  • DairyQueenDairyQueen Forumite
    1.8K Posts
    Sixth Anniversary 1,000 Posts Name Dropper
    Forumite
    westv said:
    Not since Jan last year.
     Shame :(
Sign In or Register to comment.
Latest MSE News and Guides

Energy Price Cap change

Martin Lewis on what it means for you

MSE News

Best £1 you've ever spent?

Share your most impressive bargains

MSE Forum