Withdrawal Strategies

Iain_For

BLB53 wrote: »

You may be interested in this drawdown article on the diy investor site

http://diyinvestoruk.blogspot.com/2016/08/a-look-at-sustainable-drawdown.html

That’s a good article, thanks.

kidmugsy

Have you considered moving some money from your ISAs into a personal pension of some sort for you, and for your spouse? This will be the last tax year when you may have an opportunity to do it on a large scale.

Audaxer

Iain_For wrote: »

That’s a good point, which I think I’d considered, at least in as much as I recognised that in reality I’d need at least 6% total return p.a. to preserve capital in line with inflation and probably more if I wanted income to grow with inflation as well. In reality, to achieve this Inthink I need to accept a variable income from this portion of my retirement income.

That's why I think for a strategy with a consistent income based on total return, you need a cash buffer of at least a couple of years income.

I also have VLS60 as well as an income portfolio yielding about 4% on my original investment. I like the fact of an income portfolio of funds or ITs, as dividends are less volatile than capital value. For instance City of London IT is currently yielding well over 4% due to the recent drop in share price, and it has a history of increasing dividends for over 50 years. I think ITs and funds like this are more likely to produce a more regular stream of income, and while the capital may be more volatile, I think it should still have some growth, hopefully in line with inflation over the long term.

While I like VLS60 I would be wary of having all my eggs in the one basket. Although Vanguard as a fund house is probably as safe as any, just to advise you that the FSCS limit for a fund house only covers you for £50k (increasing to £85k in April).

Iain_For

kidmugsy wrote: »

Have you considered moving some money from your ISAs into a personal pension of some sort for you, and for your spouse? This will be the last tax year when you may have an opportunity to do it on a large scale.

Indeed, have done something not dissimilar as my DB scheme has a DC component, I have made pretty good use of the annual allowance for the past couple of years, been fortunate in having had salary bonuses. The DC pot will provide a lump sum so I can max the pension benefit on the DB plan by not taking any lump sum from it. As I’m considering continuing to work part time I may yet take out a SIPP, depends on what Hammond annouces later this month.

Audaxer wrote: »

While I like VLS60 I would be wary of having all my eggs in the one basket. Although Vanguard as a fund house is probably as safe as any, just to advise you that the FSCS limit for a fund house only covers you for £50k (increasing to £85k in April).

I like ITs and have considered this approach, though it’s more work. In terms of risk, I can’t help but feel that if the likes of Blackrock or Vanguard get into difficulties our investments may be worth less than any FSCS protection at that point! More seriously, or perhaps just less apocalyptic, some of the other similar funds I’ve looked at use the same custodian bank as Vanguard and I’ve never fully understood the risk associated with that, maybe someone could explain?

StellaN

Linton wrote: »

My drawdown strategy

1) A sizeable cash and low risk investment buffer

2) A portfolio of income shares and funds with all natural income (about 6%) taken as and when it occurs. Additional income taken from cash buffer as required.

3) A 100% equity growth portfolio

4) Each year as part of rebalancing between cash, growth and income withdraw as much as possible from SIPP whilst keeping within basic rate tax bands. Excess cash put into S&S ISAs. Defer SP to enable SIPP to be cleared ASAP and to enhance inflation protection.

Hi Linton, I am currently not in drawdown, because I don't need the income at the moment. However, this could change in the not too distant future so currently I only hold a considerable cash sum as my wealth preservation fund and a 100% equity growth portfolio.

I now feel I need to put some research into a possible income portfolio so I wander if you would mind giving an example of your income portfolio and whether it is mainly in IT's (I already know your wealth preservation and growth portfolios from the passive versus active thread). Not having had an income portfolio before I need to start my research from the beginning so any pointers would be good.

MPN

StellaN wrote: »

Hi Linton, I am currently not in drawdown, because I don't need the income at the moment. However, this could change in the not too distant future so currently I only hold a considerable cash sum as my wealth preservation fund and a 100% equity growth portfolio.

I now feel I need to put some research into a possible income portfolio so I wander if you would mind giving an example of your income portfolio and whether it is mainly in IT's (I already know your wealth preservation and growth portfolios from the passive versus active thread). Not having had an income portfolio before I need to start my research from the beginning so any pointers would be good.

The other alternative is to keep your 100 percent equity portfolio and just sell some shares or funds when they are riding high.

Linton

StellaN wrote: »

Hi Linton, I am currently not in drawdown, because I don't need the income at the moment. However, this could change in the not too distant future so currently I only hold a considerable cash sum as my wealth preservation fund and a 100% equity growth portfolio.

I now feel I need to put some research into a possible income portfolio so I wander if you would mind giving an example of your income portfolio and whether it is mainly in IT's (I already know your wealth preservation and growth portfolios from the passive versus active thread). Not having had an income portfolio before I need to start my research from the beginning so any pointers would be good.

My income portfolio is:


16 midcap and large UK high income shares:30%
High Yield Global Corporate Bond Oiec/UTs - 21%
Far East equity income OIEC/UT- 11%
European Assets Trust (EAT IT) - 10%
EM Bond funds (OEIC/UT) - 10%
Princess Private Equity (IT) - 9%
Global Infrastructure fund (OIEC/UT)- 4%
UK Equity Income fund (OEIC/UT) - 3% will replace individual UK share holdings if/when they are sold as managing 16 shares is too much effort. Carillion and Juridica have not helped.

Property/REITs (IT) - 1%



The objective is to diversify sources of income as much as possible without taking too much risk. In the future I hope to increase property and infrastructure and reduce equity to below 50%.



To answer those who say one should go for drawdown from growth rather than income..... The advantage of an income portfolio is that the income is far more stable than sustainably taking income from growth and requires very little effort. Money automatically turns up in my current account with no ongoing thought or decision making on my part. On the other hand growth investing has been far more lucrative since the GFC. So yet again the answer to either/or is both.

Thrugelmir

MPN wrote: »

The other alternative is to keep your 100 percent equity portfolio and just sell some shares or funds when they are riding high.

In more volatile (normal) markets determining highs and lows maybe more challenging.