Drawdown and movement to 'safer' funds

point5clue

Also look at https://earlyretirementnow.com/2016/12/07/the-ultimate-guide-to-safe-withdrawal-rates-part-1-intro/ (nearly 30 parts now)

Another brain crunching read, but very well argued. Focused on very long (early) retirements but incredibly compresensive

cfw1994

kidmugsy wrote: »

You list half a dozen high interest regular savers. You open the current accounts that are necessary to let you open the RSs. You are a couple so you can have a dozen RSs between you. You then open one RS per month. After a year you have a lovely money merry-go-round; as one account matures it provides that month's input money for the other 11, plus its own replacement. You skim the interest off as profit.

Easy peasy.

and:

kidmugsy wrote: »

CPI inflation 2.5% or so.
RS interest 5%.

What erosion? You're winning, and without any investment risk.

Sorry, I apologise for being a bit picky here....
....but that would be easy if you were able to dump a lump of cash into them & store them all year for that nice 5% interest....

......but these are regular savers, often capped to £250-300pcm.
The money you are able to store in any 12 months has only been there an average of half the year....so that appealing 5% interest was actually 2.5%

& then at the end of the year it usually switches to a 'regular saver' rubbish account, and you have to remember to withdraw it and do something else...

(I speak from experience, having done this with Santander 1-2-3 regular saver!).

So overall, for a bit of faff and with pretty limited sums possible, you might hold the 'erosion' at bay....

atush

Pretty sure the poser was talking another RS immediately, and running 10 or so at the same time.

Yes, a bit of faff. but better than 1% surely?

FatherAbraham

Audaxer wrote: »

I think it was more the case they were moved into safer funds nearer retirement in the past when the only option was an annuity at retirement. If taking the drawdown option now with funds remaining invested, to have a safe withdrawal rate of around 4%, I would think you need around 50% to 60% equities and a decent cash buffer for bad years.

Come on, surely noöne believes in that myth that 4% is a safe withdrawal rate!

Prism

FatherAbraham wrote: »

Come on, surely noöne believes in that myth that 4% is a safe withdrawal rate!

It mostly has been safe with a few examples of failures in the last 100 years or so. Dynamic withdrawal starting around 4-5% seems pretty successful.

FatherAbraham

Prism wrote: »

It mostly has been safe with a few examples of failures in the last 100 years or so. Dynamic withdrawal starting around 4-5% seems pretty successful.

So it's not actually safe then?

Prism

FatherAbraham wrote: »

So it's not actually safe then?

Well maybe its the name thats incorrect rather than the percentage. No percentage is safe if there is even the slight chance of failure. Still, 4% seems like a decent enough start based on the statistics work done.

bostonerimus

FatherAbraham wrote: »

So it's not actually safe then?

Safe is a relative term and maybe "sensible" or "sustainable" is better. Anyway in the studies "safe" is usually defined as a 95% probability of success given the input parameters to the model.

FatherAbraham

bostonerimus wrote: »

Safe is a relative term and maybe "sensible" or "sustainable" is better. Anyway in the studies "safe" is usually defined as a 95% probability of success given the input parameters to the model.

4% withdrawal rate doesn't give a 95% chance of success in the UK, though, does it?

westv

FatherAbraham wrote: »

4% withdrawal rate doesn't give a 95% chance of success in the UK, though, does it?

I've never really gathered whether the "UK investor" is someone living in the UK with a diversified portfolio or someone with a portfolio which only includes UK listed equities.