Drawdown Psychology and Capital Burn

Triumph13

atush wrote: »

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.

Okay, absolutely my final word on this subject coming up:
I DO NOT NEED TO WORK ANOTHER YEAR!
Based on my planned 2019 retirement numbers, I could easily afford to write each of my children a cheque for £100k on their 18th birthdays and STILL have plenty in the pot. As I have previously stated, I am already working 3 extra years beyond the point of having enough. My savings rate will be around 2/3rds in each of those years so that means I am banking 9 EXTRA YEARS OF SPENDING as a further buffer - 6 years saved and 3 years not drawn down. That's over £300k of extra fat! That is on top of what was already a very cautious / generous budget with DB underpin that fully covers what we probably will actually spend ourselves given our frugal nature. I will already be overprovided to a ridiculous extent!
Also, as previously stated, I already have specific provision for house deposits for the kids within my budget. This is made up from a mixture of DC funds left with my DB to leverage the DB for TFLS and mandatory lump sums on my wife's DB. They are also likely to inherit a six figure sum each from my parents, as I have no need of any inheritance myself as I am so ridiculously overprovided. If my investments perform anywhere near the median cfiresim calculations I am probably going to have to end up buying a lifeboat or two for the RNLI.
I hope that is now clear enough for people.

Triumph13

Snakey wrote: »

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

:rotfl::rotfl::rotfl:

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?

I have wondered about this myself, but come to the conclusion that it probably doesn't make sense for me. I'm already fairly clued-up financially (chartered accountant) and have been doing plenty of research - and getting some fantastic answers to queries from people on here - over the last couple of years. I am now at a place where my issues are definitely more psychological than financial.

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.

That's another of my circular arguments! About once a month I go through the loop of wondering if I could go part time, term time only (I'm not going to work in the only parts of the year when we could be travelling). My employers probably would go for that, so I then start to think about how many hours a week. 20 hrs? 10 hours? I end up concluding that, with enough flexibility, then a small number of hours wouldn't be too bad and I could do that for the 5 years until school is finished. I then total up how much money that would come to. I then find I could get the same by working an extra year or so and that's when I realise that if I wanted more money then actually I would rather just get my head down and work the extra time full time and get it over with - psychologically that's just where my head is at. Then I remember that I don't need to work an extra year (See post 72.)

Triumph13

tacpot12 wrote: »

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.

I've used that same principle myself in many of my models, but you have to beware the seductive attractions of round numbers! For a long time I was wedded to having £500k still in the drawdown pot when all the DB and SP are on line and it took me a long time to break free of the hold it had on me. Good news I finally broke free of that round number. Bad news I replaced it with £4,000 a month net income at the same point! It was a real eye-opener to me how much of a struggle it was to let myself let the capital sum drop from £500k to £480k to do this.


All my projections at this point had all the spending in the bridging period being from cash, other than the income from this £500k odd, for simplicity and to add more prudence. Having firmed up the 2019 date I started to do more realistic modelling and work out what proportion of cash was really needed to manage volatility appropriately, and ended up with more than the £500k again after all.


The round number that really weighed on me, and which led me to start this thread in the first place, was when I realised that the total of all my DC funds and other cash and investments was likely to hit 7 figures just before my planned retirement date. The seductive appeal of just living on the investment growth (and preserving all the capital) from that until the DBs come on line was fairly enormous. So I came here for help!

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

I have played with Cfiresim a few times and it has been useful for getting a feeling for likely outcome ranges and helping pick my withdrawal rate of 3.6% fixed. I really don't like playing with it though, as I always end up fixating on the worst case scenario it comes up with and in danger of making my planning even more cautious!

jimi_man

AnotherJoe wrote: »

Well i intended to do the latter, pack job in, redecorate,, then my mate educated me by saying "why dont you just work an extra week or two?" and he was right. I've had redecoration done several times faster than i could, (and better,) I didn't live in a tip for weeks whilst it was part done, I've currently got some work going on in my garden, what would take me a month of backbreaking toil, they will have done in a week.

Fine if its a hobby or you enjoy it, but I reckon I've done my time on these chores and dont relish the 3 hours doing it and 17 hours driving back forth to B&Q to buy that little thing you discover you need last minute when mid-ladder

I don't necessarily agree with all of that. The one advantage about getting people in to do things, is that they will do it quicker. usually much quicker. However that doesn't necessarily mean better and in fact it quite often doesn't. Doing it yourself and having unlimited time, means that it doesn't need to be rushed and much more time can be devoted to getting a better result. Professionals are always limited by time, that's there biggest enemy. Doing it yourself, you don't have that issue.

Apodemus

jimi_man wrote: »

I don't necessarily agree with all of that. The one advantage about getting people in to do things, is that they will do it quicker. usually much quicker. However that doesn't necessarily mean better and in fact it quite often doesn't. Doing it yourself and having unlimited time, means that it doesn't need to be rushed and much more time can be devoted to getting a better result. Professionals are always limited by time, that's there biggest enemy. Doing it yourself, you don't have that issue.

Well said! I DIY most things, seldom rushed (except for things like mid-winter heating repairs, where I still DIY, but under strict time rules from SWMBO!). However the downside is the risk of procrastination...that window my son cracked playing at being a three-year-old Jedi, with a broom handle, is still unfixed and he's now 20!

AnotherJoe

jimi_man wrote: »

I don't necessarily agree with all of that. The one advantage about getting people in to do things, is that they will do it quicker. usually much quicker. However that doesn't necessarily mean better and in fact it quite often doesn't. Doing it yourself and having unlimited time, means that it doesn't need to be rushed and much more time can be devoted to getting a better result. Professionals are always limited by time, that's there biggest enemy. Doing it yourself, you don't have that issue.

I agree you've got to find the right people.

atush

Triumph13 wrote: »

Okay, absolutely my final word on this subject coming up:
I DO NOT NEED TO WORK ANOTHER YEAR!
Based on my planned 2019 retirement numbers, I could easily afford to write each of my children a cheque for £100k on their 18th birthdays and STILL have plenty in the pot. As I have previously stated, I am already working 3 extra years beyond the point of having enough. My savings rate will be around 2/3rds in each of those years so that means I am banking 9 EXTRA YEARS OF SPENDING as a further buffer - 6 years saved and 3 years not drawn down. That's over £300k of extra fat! That is on top of what was already a very cautious / generous budget with DB underpin that fully covers what we probably will actually spend ourselves given our frugal nature. I will already be overprovided to a ridiculous extent!
Also, as previously stated, I already have specific provision for house deposits for the kids within my budget. This is made up from a mixture of DC funds left with my DB to leverage the DB for TFLS and mandatory lump sums on my wife's DB. They are also likely to inherit a six figure sum each from my parents, as I have no need of any inheritance myself as I am so ridiculously overprovided. If my investments perform anywhere near the median cfiresim calculations I am probably going to have to end up buying a lifeboat or two for the RNLI.
I hope that is now clear enough for people.

Imagine the time and trouble (and high blood pressure) you would have saved if you jsut gave more information in the first place.

Not to mention, my post wasnt just for you. But for others who dont realize how things can change in short order.

But if you have that much money set aside, and till expect your children tog get student loans? I dont know what to say really.

Triumph13

atush wrote: »

Imagine the time and trouble (and high blood pressure) you would have saved if you jsut gave more information in the first place.

Imagine the trouble we'd have saved it you hadn't refused to believe me when I kept telling you I had more than enough.

Not to mention, my post wasnt just for you. But for others who dont realize how things can change in short order.

Then saying something like 'You many have enough, but others may not realise' might have been a little more useful than keep saying 'You should work another year'

But if you have that much money set aside, and till expect your children tog get student loans? I dont know what to say really.

That may have something to do with the fact that I've repeatedly said that it makes no sense to fund a university education up front. Try reading Martin Lewis on the subject on this website if you want a second opinion. I have also made it clear that I will be meeting the loan repayments, not them.

Thrugelmir

Triumph13 wrote: »

That's another of my circular arguments! About once a month I go through the loop of wondering if I could go part time, term time only

Life's too short to spend time pondering. Having money is all very well. But it won't buy you time. Make the most of everyday while you can.

atush

Triumph13 wrote: »

Imagine the trouble we'd have saved it you hadn't refused to believe me when I kept telling you I had more than enough.

Then saying something like 'You many have enough, but others may not realise' might have been a little more useful than keep saying 'You should work another year'

That may have something to do with the fact that I've repeatedly said that it makes no sense to fund a university education up front. Try reading Martin Lewis on the subject on this website if you want a second opinion. I have also made it clear that I will be meeting the loan repayments, not them.

I dont refuse to believe you, you refuse to state facts until after questions are asked. More than enough can mean many things.

hen saying something like 'You many have enough, but others may not realise' might have been a little more useful than keep saying 'You should work another year'

And I did say my comments were meant for others here rather than just you with your limited facts stated (each time).

Working an extra 6 months was just to say- if you are retiring when your children havent even finished GCSE much less A level puts you at a disadvantage esp if you experienced the difference in Uni (and living and home buying) costs that escalated over the period I experienced which was extreme and affected my planing greatly (not to mention the 2008 crash).


I am not criticizing you at all (although I do not understand some of your statements as i said so cannot comment further) you are determined to take offence even when none was meant.

If you post a question or theory in an open forum, you have to understand we dont know what you arent saying or even implying. We dont know you.