Drawdown Psychology and Capital Burn

Triumph13

missile wrote: »

You have misinterpreted my comment.

Prior to this, you had not mentioned making ANY provision for children's further education. I was merely suggesting that you should include this in your financial planning.

Pardon? Are you sure you're reading the right thread? There's a whole back and forth with atush and others where I explain why I will top up their loan income through Uni, but pay the loans off later rather than up front as in my judgement that route has more upsides than downsides. Try post 37 for example.

Triumph13

atush wrote: »

So whatever the OP has put aside, I suggest he doubles it, just to make sure.

I will admit that if I end up having to reimburse them for loan repayments in excess of £1,000 a month each for many years then it might make my budget tighter than I would have liked. As that would require them to each be earning more than £150k a year though, I think they might be able to bear some of the burden themselves. My only real exposure is to increases in the shortfall between loan availability and living costs or to a massive increase from the current 9% graduate tax rate - and I can't see a change big enough to inconvenience me in either of those being politically acceptable. Another of the upsides of not funding up front.




And no I didn't give full details of all my family financial planning in my original post, as they were not relevant to the question I was asking. I only had to go into all of that when everyone started telling me, based on a complete lack of knowledge, that my plans were impossible.

missile

Triumph13 wrote: »

Pardon? Are you sure you're reading the right thread? There's a whole back and forth with atush and others where I explain why I will top up their loan income through Uni, but pay the loans off later rather than up front as in my judgement that route has more upsides than downsides. Try post 37 for example.

No need for your abusive tone. It is you who asked for comment.
Only later did you mention any provision for kids during further education, almost as an afterthought. My concern is you appear to have grossly underestimated. I asked how you had estimated the financial burden, but you have declined to answer.

westv

Is this thread going downhill quicker than a pound cost ravaged pension pot?

Triumph13

Strewth!
In my very first post I said that either my DB streams or my DC funds were of themselves enough for us and as I had both they would "allow for plenty of travel, helping the kids through college etc. " Do people seriously think that funding 2 college educations costs the same as funding a retirement?
Having made it abundantly clear that I was hugely overfunded, I then asked a very specific question about how people adjusted psychologically to the idea of spending capital, and received some very useful and insightful responses.
I then also got people ignoring everything I had said about my financial position and the question I had actually asked, going off on one about how I couldn't possibly have taken account of the cost of university as it was impossible to retire before your kids finish school.
Enough. If people don't have things to add about the original subject and want to talk about something completely irrelevant can they please start their own thread.

atush

Triumph13 wrote: »

I will admit that if I end up having to reimburse them for loan repayments in excess of £1,000 a month each for many years then it might make my budget tighter than I would have liked. As that would require them to each be earning more than £150k a year though, I think they might be able to bear some of the burden themselves. My only real exposure is to increases in the shortfall between loan availability and living costs or to a massive increase from the current 9% graduate tax rate - and I can't see a change big enough to inconvenience me in either of those being politically acceptable. Another of the upsides of not funding up front.




And no I didn't give full details of all my family financial planning in my original post, as they were not relevant to the question I was asking. I only had to go into all of that when everyone started telling me, based on a complete lack of knowledge, that my plans were impossible.

Fine and fair enough not giving all the info/details, but I do think that if you actually expect to get good information esp pointing out things you might not have taken into account, then yes give it all. After all, we dont know who you really are. And you are asking a question on a open forum so will get opinions and questions you didnt expect, or may not like.

My point was, tuition was 1K per annum when I started really planning for 3 boys to go, and 9K+ when my last two went to Uni. not something I could forecast? Student loans were very low and then were high. Not to mention skyrocketing living costs.

So something I wasnt going to contemplate was to leave them saddled with loans (my own parents ran out of ready cash my last year and I funded my last year at a US Uni at $9K- in the 80's. Just think how much that would be in todays terms and I paid 9% interest).

Given we dont know how high fees can go, and how high the rate for SLs will be, I think it is best to think that everything will cost double. And I personally felt (and not saying you are a bad parent for not doing so) that I didnt want any of my son's to take on a loan for an undergraduate degree.

The one who took on one for around 2K, was for 10% of the cost of law school. I let him do this to make sure of his commitment, after fully funding his undergraduate course. As we were delaying retirement for a year or more, I wanted to make sure he was fully committed.

And he was, and he did, and now is earning enough to pay it off next month in full. If he chooses to do so or not, or take on around 5% of interest- it will be interesting to see. He has never had a debt before. So hasnt experienced the cost of borrowing.

michaels

DancingBadger wrote: »

http://www.mrmoneymustache.com

Shouldn't have read that - makes me think that by downsizing (uk version = moving to a cheaper area) and with child tax credits and then pensions I could easily afford to stop working now. I didn't want to know that that was an option

tacpot12

You are not alone. I'm in a very similar position except without the complexity of the kids needing to go to university; mine didn't go.

I think the solution to our dilemma is work out a capital figure that we want to have at the point the DB and state pensions kick in, and to trust that during the drawdown phase there will be time to modify the withdrawal rate to ensure we remain on target.

Have you run your numbers through CSimfire to get a maximum safe withdrawal rate? Mine was about 5.6%, but I expect to start at 4% for the same reasons that you outlined in your question. 4% withdrawal which will give me £19k pa when I need about £14k to cover day to day expenses so I'm prepared to trust that I can withdraw enough to live on and adjust this if things go pear-shaped.

I thought this was a great thread. Thanks

atush

Triumph13 wrote: »

I will admit that if I end up having to reimburse them for loan repayments in excess of £1,000 a month each for many years then it might make my budget tighter than I would have liked. As that would require them to each be earning more than £150k a year though, I think they might be able to bear some of the burden themselves. My only real exposure is to increases in the shortfall between loan availability and living costs or to a massive increase from the current 9% graduate tax rate - and I can't see a change big enough to inconvenience me in either of those being politically acceptable. Another of the upsides of not funding up front.




And no I didn't give full details of all my family financial planning in my original post, as they were not relevant to the question I was asking. I only had to go into all of that when everyone started telling me, based on a complete lack of knowledge, that my plans were impossible.

Well i didnt forsee first the rise to 3K PA, then bumped up to 9K PA ust in time for the twins to start I also budgeted around 6K PA living costs, but the costs were 8K and more on occasion.

there are lots of things you wont foresee, such as the loan rates hitting 6% or higher once rates go up.

like you I quizzed others on costs and added some- but didnt add enough in hindsight. AS there were changes in legislation that caught me out.

Work an extra 6 months to a year and save that. If it turns out they wont need it, give it to them for a house deposit, or keep it for your retirement.

Snakey

One more year, and then one more year, and then just one more year, and then you'll be comfortable...

I am (three months short of) five years away from my dream retirement age (50), and to celebrate that milestone I've decided to splash out on a financial adviser because if I'm missing something I'd like to know while there's still time to do things differently - or, worst case scenario, to get used to the idea of working longer. If she doesn't come up with anything I haven't already thought of, I've at least got peace of mind in return for the fee.

Is it worth you doing the same?

An alternative, I suppose, would be to go part time. That's on the assumption that with kids still at school/home you are going to broadly need to still be "around" for the first 3-4 years anyway. It'll be tax-efficient because you can use up your personal allowance, and if it all goes wrong at least you haven't totally wrecked your CV.