Drawdown Psychology and Capital Burn

justme111

Well if you do die with savings largely untouched then it is not something to fear either. You already accumulated them so whatever downsides to that accumulation were they already happened. I see you trying to extract the maximum yield of happiness and wellbeing for you and future generations which is a fun thing to do as long as do not become upset for being unable to find what feels 100% the best ever solution as it does not exist and on the grand scheme of things it does not matter.
I am not retired but I am in spending phase of my life due to inability to work (self employed ). All my life mapping and plans went upside down and the outcome is not clear still. So I can see my money reducing in a situation where I am not sure I will be able to replace it. Normally I would spend quite a bit monthly and it felt very weird to keep spending while having no income. I reviewed my expenses and decided to keep them as they are as cutting them now would be detrimental to family well being and my (our) future prospects. So while I have money I do not see the point in keeping it for future use if it can be benefitial now.

There are times for scattering stones and times for gathering them.

Often major life events or being close to others who had them make us see life and money topics clearer/differently

atush

Apodemus wrote: »

A +1 from me on the Uni costs. Numbers One and Two are now finished and Number Three is just half-way through. The process seems to just keep getting more expensive! Perhaps a balance between funding them now versus inheritance later, but I really don't like the thought of them starting out with debts in a way that I never had to and it has had a major impact on eventual retirement date!

This is exactly what I w as getting at.

Not having mine be stuck with loans at inflation plus 3% or more. All my 3 are already earning enough they would have had to pay off loans in full, and the Law student did actually have a small loan of 2.5K. If you arent going to earn enough to pay back the loans, you might be on the wrong degree course, or maybe should have gone a different way ie not to Uni?

So they can save for a home if they want (i might help them out if I have enough extra) but at least they are all starting out free of debt.

westv

Oh for the days when "Uni" was an aspiration rather than an expectation!

Fermion

I'm a bit nervous about those "conservative/defensive" funds. You don't say your age, but if you need to plan for a 30 to 40 year retirement I would be concerned at your ability to get high enough returns above inflation long term from funds designed more to preserve nominal wealth.

For info I'm 67 and my drawdown portfolio currently comprises:

27% Newton Global Income
17% Troy Trojan Income
16% CF Woodward Equity Income
15% Newton Asian Income
13% Marlboro Multi Cap Income
4% Invesco Perpetual Monthly Income Plus
8% circa about 10 Blue Chip Defensive Shares (e.g. Nat Grid, Unilever, Utilities, Pharma etc)

Thrugelmir

Fermion wrote: »

This has actually worked out much better than I could have imagined. Not only have many of the "conservative/defensive" funds that I selected have given a much higher income yield (circa 3.8%) but the value of my drawdown pot has actually grown by about 8% as well (mainly due to Brexit & £ devaluation).

The saying "You can't have your cake and eat it too". Springs to mind. Your pot grew but it wasn't all down to an underlying increase in corporate profitability. The weakness of the £ correspondingly will have impacts elsewhere on your budget.

Triumph13

atush wrote: »

If you arent going to earn enough to pay back the loans, you might be on the wrong degree course, or maybe should have gone a different way ie not to Uni?

I think that rather depends on how you view the purpose of a university education. If you are seeing it as a purely economic transaction to maximise material wealth, then maybe you are right. My wife and I see it as rather more than that. They will definitely be encouraged to go to 'good' universities - Oxbridge or Russell Group - but their choice of subject should ideally be something they love more than something specifically tailored to making money.
My expectation is that the loans probably will be paid off in full (largely or entirely by me), but, as I said before, I can foresee several possible scenarios where they wouldn't be - such as them running up so much debt via multiple higher degrees that they would never pay it all off, choosing to work in fields such as academic research or voluntary work that don't attract particularly high pay, becoming stay-at-home dads or the govt may again introduce programmes of loan forgiveness for teachers of specialist subjects where shortages exist. None of these is especially likely, but all are possible and any of them could make paying up front a very expensive mistake.
Even if none of these happens, paying up front rather than investing the cash in equity funds only makes economic sense if the investments return less than RPI plus 3%. It's probably no better than a 50:50 bet, if that, that paying up front would beat investing and I'm perfectly happy betting the other way. The final and deciding factor is that the vast bulk of the loan repayments wouldn't fall due until after all my DB streams are on line, at which point I will almost certainly be able to afford to pay off the loans much more easily than at the time they are studying. Add all that together and I'd say the downside of paying up front greatly outweighs the upside. Your mileage may vary of course.

AnotherJoe

Triumph13 wrote: »

On good days I do think about going even longer, but always end up ruling it out, other than in the case of a market meltdown. I come back to 30 June 2019 every time as that is the first point where I don't have to use a mortgage facility for cashflow purposes (endowment matures 1 July and wife hits 55 in August). I will re-assess next Xmas and may indeed go in 2018 instead, but if I can stick it out I will.

IME once you have set a date, or even a date range, sticking it out is much easier than before when it seemed it would be endless. Danger is, always waiting "just one more year" to build up that buffer a bit more.

I'm currently spending on house and garden renovations to get that big chunk of spending out of the way before pulling the plug next year, its easier to spend on items like this when you know the cost will be replenished by next months wages, and at the same time its very easy to put up with the madness at work given i know I'm going (not that they do).

missile

That is the downside of having kids later in life:o, retirement before they finish their education is scary. :eek:

With young kids at school you can think but it will be little more than a pipe dream. There are so many factors which may change you are too early to plan retirement.

Triumph13

AnotherJoe wrote: »

I'm currently spending on house and garden renovations to get that big chunk of spending out of the way before pulling the plug next year, its easier to spend on items like this when you know the cost will be replenished by next months wages, and at the same time its very easy to put up with the madness at work given i know I'm going (not that they do).

Now that is a whole other topic of debate! Do you stay at work longer and pay someone else to do the renovations, or retire earlier and do them yourself. In my case there are a lot of jobs that I would actually enjoy doing myself and would be able to do much more cheaply, but others that will need the builders and the chequebook. I very difficult balancing act indeed.

Triumph13

missile wrote: »

That is the downside of having kids later in life:o, retirement before they finish their education is scary. :eek:

With young kids at school you can think but it will be little more than a pipe dream. There are so many factors which may change you are too early to plan retirement.

Assuming you have read the thread, I'd be very interested to know on what basis you have come to that conclusion as I'd say I'm being massively over-prudent on any reasonable set of assumptions.
Our current lifestyle was looking eminently sustainable if I'd gone at 50. I'm planning an extra three years work with a savings rate of 60 - 70% even before you add in investment returns. That should make us pretty well bomb proof.