Tapering drawdown: - frontloaded whilst still young

atush

NeilC1965 wrote: »

Yes, of course . I already have around 20k in cash ISA's for that purpose . And I should have perhaps mentioned a wife who will also contribute her state pension at 67 plus an already active db pension of £6500 pa.

We can only base answers on t he facts provided lol.

In any case, 20K might be a little low for both car, house, emergencies etc. So you can build that up.

Thrugelmir

MK62 wrote: »

..you can't really just assume say a 4-5% average return per year over say 30 years, as if the bad years all come at the start of the period, the results can be skewed quite dramatically - if you are planning on higher withdrawals at the start, then sequence risk planning is even more important).

Likewise if market returns fail to match inflation. As was the case for a decade in the US markets. There's little incentive to buy Gilts at the current time. Meaning that the only real alternative is holding equities for a reasonable yield. Uncertain times for making long term decisions.

k6chris

Mr_EDATD wrote: »

I can see the logic but how much is the actuarial reduction? For taking it 10 years early i assume it is significant. Would it be worth using some of the DC pot to fund your initial retirement to reduce the impact of the AR?

£34k (less tax) plus your wifes £6.5k is a fair amount. If you don't need it all to enjoy you retirement it would be a shame to have reduced your DB that you have worked hard to build up.

If you give it a go for a year before pulling the trigger on the DB scheme you will only be impacting on the 5 years when you'd get the £42k.

I still can't get my head around drawing down your DC pension to avoid AR of a DB pension vs early taking of a DB pension to allow the DC pension more time to grow? 4% PA would seem to make the decision fairly neutral??

pensionpawn

No member of my family has made it past 85 yet and as my lifestyle is arguably a tad more exuberant I'm staging my pension to drop to 66% of the original withdrawal rate at 74 and down to 33% at 79. I don't intend to have anything left in my pot by 85 (if I get there!) however as I'm also not planning to pi$$ every penny of a front loaded pension up against the wall and hence I'm planning to squirrel a percentage of my drawdown into reserves along the way. I believe that a full state pension and my reserves will be more than enough when 80+

Mr_EDATD

k6chris wrote: »

I still can't get my head around drawing down your DC pension to avoid AR of a DB pension vs early taking of a DB pension to allow the DC pension more time to grow? 4% PA would seem to make the decision fairly neutral??

Given growth in the DC pot would happen in either scenario i think that for both options to result in the same take home for life, the investments would need to beat inflation by an average of c6.5% each year until death. I would rather base my future plans on something index linked and guaranteed.

Keeping the DC pot as high as possible would make sense if the OP were to die early in retirement so there would be more to pass on but they don't seem to be thinking along those lines.

k6chris

Mr_EDATD wrote: »

Given growth in the DC pot would happen in either scenario i think that for both options to result in the same take home for life, the investments would need to beat inflation by an average of c6.5% each year until death. I would rather base my future plans on something index linked and guaranteed.

Genuine question - what is that maths that shows 4% p.a. AR of a DB pension equates to growth requirement of a DC pention of 6.5% + inflation? Thanks.

NoMore

You can do all the maths you want about what growth a DC pension would require to outgrow the AR of a DB, the key point is, unlike the DB pension, its not guaranteed.

I would rather have a larger guaranteed DB as part of my overall portfolio than it being reduced because I took it early instead of a DC pension. Reduces my risk of a shortfall at any point, by having a guaranteed floor for my income.

ffacoffipawb

NoMore wrote: »

You can do all the maths you want about what growth a DC pension would require to outgrow the AR of a DB, the key point is, unlike the DB pension, its not guaranteed.

I would rather have a larger guaranteed DB as part of my overall portfolio than it being reduced because I took it early instead of a DC pension. Reduces my risk of a shortfall at any point, by having a guaranteed floor for my income.

That is my thinking too. I will reduce my DC drawdown amount to match my two DB pensions when they become available.

DC pot is £750k approximately. Planning on drawing down 5% initially for 5 years (£25k post PCLS) reducing to under 3% (say £10k) when my DB (approx £15k) start at 60.

As you can see, I am just over LTA at this stage.

May draw down more as lump sums if required for major expenses.

Three months to possible early retirement date. Yippee.

NeilC1965

Some additional points i should have perhaps added: -
1/I'm aware of the advantages of a large DC pot from an inheritance perspective should I not make it very far into retirement.
2/The db pension, once in payment , cannot be affected by any further actuarial changes that may be imposed by the scheme, e.g 5% pa reduction could be a possibility in the future. The actuaries actually stated that a true cost neutral position was around 4.6%
3/With pension schemes constantly reviewing their deficits the above is certainly a possibility.

4/Also should the scheme go into ppf , then i really am not going to achieve my targets. Again , once in payment that cannot be changed.




4/Sometimes a bird in the hand....

NeilC1965

HappyHarry wrote: »

That's not my experience from advising a large number of retired clients. At 72, they seem to be just as active as at 55, with the added benefit that they know what they want to be spending their money on.

I would suggest that planning a significant pay cut for yourself at age 72 is something you could well regret.

I also might not be alive at 72. I'm hopefully alive for at least the first 15 years of retirement. If I get to 72 , well that is a nice bonus to have!I've been to too many funerals of work colleagues who didn't get past their very early 50's . Very sad.