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AlanP_2

ukdw wrote: »

Is it really the case that you need to subtract the 2% inflation from the 4% income to get real income? - if you multiplied instead then the 2% inflation would make real income a much more healthy 3.92%

That's taking 2% of the 4% not 2% of the 100%.

It's really 4% of the full (100%) amount for Growth less the 2% of the full (100%) amount to cover loss of "value" due to inflation.

You need to get Inflation to stand still.

dwsjarcmcd

Re the SJP aspect of this, I read this analysis of them recently which makes grim reading if you are one of their customers and should make anyone thinking of engaging them to run away....very quickly!

https://www.yodelar.com/insights/st-jamess-place-review

[Deleted User]

AlanP wrote: »

That's taking 2% of the 4% not 2% of the 100%.

It's really 4% of the full (100%) amount for Growth less the 2% of the full (100%) amount to cover loss of "value" due to inflation.

You need to get Inflation to stand still.

- The maths is (roughly) correct. Inflation rate should be applied to the full value after a year, which is 1,040,000 given the assumed rate of return. (assuming 1M portfolio and 4% total return).

- 2% real long-term return on a balanced diversified portfolio of stocks and bonds is EXTREMLY pessimistic. 4% real return forecast is still conservative by historic standards but would account for unusually high asset prices in today’s market.

- Returns will vary from year to year. If one agrees to a variable withdrawal approach, the actual safe rate of withdrawal will be higher if the objective is to guarantee positive balance at the age 100.

bostonerimus

ukdw wrote: »

Is it really the case that you need to subtract the 2% inflation from the 4% income to get real income? - if you multiplied instead then the 2% inflation would make real income a much more healthy 3.92%

The 4% rule includes historical estimates of inflation. In the first year you withdraw 4% and then in the next year you withdraw the 4% plus inflation...so if inflation is 3% you'd withdraw 4*1.03% which is 4.12% and after 30 years of that you'll be withdrawing almost 10% of the initial value of your pension pot.

Spreadsheetman

dwsjarcmcd wrote: »

Re the SJP aspect of this, I read this analysis of them recently which makes grim reading if you are one of their customers and should make anyone thinking of engaging them to run away....very quickly!

https://www.yodelar.com/insights/st-jamess-place-review

Wow! That is a damning report.

They disqualified themselves by bombarding me with junk mail for wealth management as soon as I became a company director. When I was looking for an IFA later they never even got on a list to be rejected on other grounds, they had already failed on the mail equivalent of cold-calling.

BritishInvestor

amazon1234 wrote: »

Cheers for that. We've been put in touch with a wealth manager who will be advising us on how to manage the investment portfolio when the money arrives but until then we just wanted an idea. I suppose we were thinking: would £2 million be enough to secure an annual income of around £60k-£70k without damaging the lump sum. From what you said it seems possible (we had 4% in mind) but the previous poster suggested £40k.

Why do you care about damaging the lump sum? Is there a reason you want £2m remaining when you die?

This may be worth a read

https://www.amazon.co.uk/Beyond-4-Rule-retirement-portfolios-ebook/dp/B07BBTZXWN/ref=sr_1_1?i=the+4%25+rule

and you should be able to find a financial planner that uses the software with the data upon which the book is based.

Managing an investment portfolio is a commodity offering these days (and you should expect and demand more for your money, IMO).

BritishInvestor

Clive_Woody wrote: »

I would recommend doing some reading around the area of investments/pensions/etc as even when you find an IFA you are happy to work with you need to understand the language they are speaking (trust me, it sounds like English but for the uninitiated it could be Russian for all the sense it might make).

A good IFA should be able to explain in layman's terms the products they are proposing, but it doesn't hurt to go in armed with some knowledge.

There are lots of good websites and books you could read through. I am sure it would be worth investing the time now to help secure your future.



https://www.mrmoneymustache.com/

If you speak to an IFA that focuses on the product, find someone else.

BritishInvestor

bostonerimus wrote: »

Being in your 30s you'll want to plan for a 50 or 60 year retirement. That's going to reduce the standard 30year drawdown of 4% or 3.5% rule of thumb. So you might be looking at 3% and then if you pay IFA and platform fees of 1% you are now down to 2% as a starting point. Of course that will increase with inflation, but a safe start on 2M for 50 years might be 40k or 50k.
Of course the chances are that you'll be able to withdraw quite a bit more so you need to actively monitor the performance of your portfolio and adjust your spending. There will also be some capital expenditures like a new roof on the house, a new car etc so they have to be budgeted too.

A 1% fee won't bring the SWR down by the same amount.

BritishInvestor

bostonerimus wrote: »

Saving on fees and independence are the big advantages of not going the IFA/FA route, of course the disadvantages might be making some really stupid decisions.

The OP's most important initial consideration is going to be taxation and an investments strategy should be built around managing those sensibly.

I would suggest the most important initial consideration should be gaining an understanding of what they want to do for the rest of the their lives and what their objectives are.

BritishInvestor

Marine_life wrote: »

Before you meet a financial advisor you should ask yourself how much risk you are prepared to take i.e. it may be perfectly possible to generate 5-7% on average BUT what would you do if after setting up your portfolio is suddenly lost 25% (£500k)? Achieving 3-4% may be more sustainable and enable you to sleep at night if capital preservation is more important than return.

It may well be the case that they don't need to take as much risk as they are happy taking - very difficut to determine in the absence of a financial plan.