Tapering drawdown: - frontloaded whilst still young

ams25

NeilC1965 wrote: »

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!

do you have a family history of early mortality? You seem to have low expectations.

In the UK, a 53 year man can expect to live approx another 29 years to 82 according to the National life tables. And if you make it to 65 you can expect to live another 19 years to 84.

We can never know when we will die, but on average, 72 is pretty low, especially to use for retirement planning.

NeilC1965

ams25 wrote: »

do you have a family history of early mortality? You seem to have low expectations.

In the UK, a 53 year man can expect to live approx another 29 years to 82 according to the National life tables. And if you make it to 65 you can expect to live another 19 years to 84.

We can never know when we will die, but on average, 72 is pretty low, especially to use for retirement planning.

yes , I know about the 'norms', and so did my colleagues who didn't get past 50(three of them) and 53 (one of them). My father is still reasonably healthy at 81, but my mother didn't get past 60.
At 72 , I would still have a pension of around 30k (db + state), guaranteed for life.Hence the original post to front load my drawdown, with a guaranteed amount that should be more than adequate in later years.
My lifestyle now is modest, one foreign holiday per year plus two uk breaks in a holiday cottage.30k pa should suffice!

Mr_EDATD

The issues around the stability of your DB scheme certainly need taking into account as does the risk of investments crashing and you kicking the bucket early or when you are 95. Nobody has a crystal ball so I would try and work out the most likely scenario that carries the least risk (i.e. you can cope with the extremes of your assumptions being wrong) and gives you the retirement you would be happy with and aim for that. If that is what you have done then :T

DiggerUK

NeilC1965 wrote:

........Or am I missing something ? I can't see any other references to this line of thought anywhere else on the internet. Is there a better strategy to use?

It seems you have a good income in retirement to look forward to. You also mention cash ISA savings, £20k, but no other equity based investments beyond your DC pension savings. Your DB, and SP pensions (x2) would by themselves be more than adequate.

If you put current surplus income in to gold, you would meet my criteria for such a plan. You would be buying 'as and when' giving you the advantage of 'averaging' in to smooth out the volatility of the gold price. Also you would be within my personal criteria for putting savings in to gold of a minimum 5 year buy and hold, ideally a 10+ year period. That is based on what Digger Mansions have learned, we have 90%+ of our retirement cash savings in physical gold.

You can also hold gold backed ETF's in an S&S ISA, a SIPP, or a new one on me known as a Small Self-Administered Scheme (SSAS)
If you want to buy physical gold then I suggest UK legal tender Sovereigns and Britannias, as they are tax free to buy, and free of all taxes when you sell..._

https://www.hl.co.uk/news/articles/whats-the-best-way-to-invest-in-gold

Mr_EDATD

k6chris wrote: »

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.

Its complicated so not easy to write down (im better with numbers than words) but involved running the year on year impact of the 2 scenarios side by side on a spreadsheet where the draw down is enough to cover the gap between the two DB amounts, calculating the average balance on the remaining DC pots and applying different %s until the long term recurring amount i.e. by about age 75, provided by the growth on the scenario with the bigger AR (+ DB and SP) is more than the other DB, SP and the growth on the smaller DC pot.

BTW using the above with 4% works out bang on if you dont apply any growth on the DC pot in the scenario with the bigger DB.

That probably makes no sense but it doesn't matter anyway as the DB scheme seems to be built on sand and the OP could keel over at any minute (no offence NeilC...just a bit of a joke:rotfl:)

ermine

NeilC1965 wrote: »

I've been to too many funerals of work colleagues who didn't get past their very early 50's . Very sad.

So have I. I am of the view that stress reduces people's resilience in their 50s, and tends to find its way out in physical ways. Perhaps losing resilience is part of the ageing process anyway, so people's ability to cope gets less. Of the occasions where I have stood by the little pile of earth that was once a colleague, it was noticeable that all were quite deeply unhappy at work.

One fellow carried no excess weight, ate healthily and did a fair amount of hiking. He was in better physical shape than I was. But he was deeply resentful of being passed over repeatedly for promotion despite being fairly bright. Another chap, while he used to like his food too much, did lose a fair amount of weight, but was also not happy at work. Heart attacks in both those cases.

Another fellow had two TIAs, and his doctor practically beggied him to take voluntary redundancy saying the stress will get you. This fellow pretty much lived for work and couldn't imagine life without it.

But he did heed the warning, took VR, and is still with us in his sixties. He also at least partly recovered his mojo, once he discovered that there was a world outside work.

Observing this somewhat informed my decision to retire early, my tolerance for modern performance management games wasn't high.

I am not sure your observation of these colleagues falling by the wayside is necessarily a good argument to blow your retirement savings because you expect to cash in your chips by the time you reach three-score years and ten. There is a case to somewhat front-load your drawdown, if only because the arrival of the State pension at 67 will otherwise back-load your income. But your observation is more an argument to retire early IMO

I am burning up my DC pension savings before drawing my DB pensions at about a year before NRA, which will deprive me of 4% of the income p.a and the taxman of 1% p.a. That's largely because I don't want the aggravation of running a DC investment portfolio into old age.

NeilC1965

I'm not planning of 'blowing my retirement savings' ,only my DC part , leaving me with around at least 30k from db + state which seems like a reasonable compromise. Calculations by myself and others have shown delaying my db and using my dc only to start with to reduce the actuarial reduction could improve the situation by around 3-4k pa which is probably the sensible thing to do.I too don't want a DC pension to worry about when I'm in my 70's.

ermine

NeilC1965 wrote: »

Calculations by myself and others have shown delaying my db and using my dc only to start with to reduce the actuarial reduction could improve the situation by around 3-4k pa which is probably the sensible thing to do.

I missed that part- absolutely agree that front-running a DB pension with DC savings lets you get more of the latter out free of tax and facilitates retiring earlier than NRA of the DB pension.

The main thing against that course of action is if people want to leave money to their children and have so much assets their estate is subject to IHT. A DC pension can be outside the estate. I'm not sure the intention of the 2016 pension reforms was so that the rich can featherbed their children even more, but it worked out that way.

Linton

I agree that it makes sense to use your DC pension to fill the gap before getting your other pensions. However I would seriously question any strategy to front load expenditure - better in my view to plan that it will be constant over one's life.

1) Your pessimism at your abilities and need for money in your 70s/80s I think in general is ill-founded. Perhaps your expenditure then will actually increase as you may well take more comfortable holidays.
2) You wont know for a few years how retirement pans out. You may have made pessimistic or optimistic assumptions. It will take a little time for this to become obvious.
3) In extreme old age you may find it very beneficial to pay for care at home. Your future self wont regard the cloudy memories of past extravagences as a satisfactory alternative.

pensionpawn

Linton wrote: »

I agree that it makes sense to use your DC pension to fill the gap before getting your other pensions. However I would seriously question any strategy to front load expenditure - better in my view to plan that it will be constant over one's life.

1) Your pessimism at your abilities and need for money in your 70s/80s I think in general is ill-founded. Perhaps your expenditure then will actually increase as you may well take more comfortable holidays.
2) You wont know for a few years how retirement pans out. You may have made pessimistic or optimistic assumptions. It will take a little time for this to become obvious.
3) In extreme old age you may find it very beneficial to pay for care at home. Your future self wont regard the cloudy memories of past extravagences as a satisfactory alternative.

My plan is also a front loaded pension, which I will run down to zero by 80. For me I know I will be more active in my first half of retirement that my second half. My state pension from 67 provides a acceptable safety net in old age (80+). Although front loaded I don't intend to spend every penny and will use the 'excess to our needs' wisely e.g. helping children onto property ladder with money in the present as opposed to a too late inheritance, of which there will be plenty when we eventually get beamed up. Care home....? A six month and one way trip to Switzerland....?

We all have different priorities and some of mine are forged by the experiences of older family members who are sat on a pile of cash / property and live a frugal lifestyle. To me a pound has no value until it moves from A to B and gives you something in return!