It's time to start digging up those Squirrelled Nuts!!!!

Audaxer

Sea_Shell said:

If we applied the 4% "rule" to our current pot, as if today was "day 1", then we'd be pulling out £23,400!!!       

Our annual spends are looking like about £11,500 this year! - Must try harder!!     (Although I don't think the shackles of CV19 will be fully removed for next year to be a spending bonanza!)

The "rule" also means that you should be able to continue to pull that sort of cash during a downturn, and not be too effected by "pound cost ravaging" * as you should have enough left to regain losses during a recovery.    Although a bad "sequence of returns" * in the early days, with a slow recovery, could put that in jeopardy.     It's not a strategy with zero risk!

However, in that situation, we would (not sure about others) still be looking to "tighten our belts" and not just plough on at 4% regardless.

* I'm not going to explain those terms here...you'll have to google them!

I agree. We would also be wary about selling investments in a downturn. That is why I think in retirement it is important that we keep a good cash buffer to draw upon in bad times.

Bravepants

I think 4% should be considered as a "guideline" on the MAXIMUM amount to withdraw. If one needs to draw less, then certainly draw that. I'm aiming for 3%.

coyrls

Sea_Shell said:

However, in that situation, we would (not sure about others) still be looking to "tighten our belts" and not just plough on at 4% regardless.

I think this is where real life pragmatism takes over, the "rule" is very unlikely to be followed in all circumstances.  In the opposite case where the pot grows over multiple years, and where a new "day 1" would result in a much higher withdrawal rate, it would be hard to argue against taking a bit extra out.

coyrls

Bravepants said:

I think 4% should be considered as a "guideline" on the MAXIMUM amount to withdraw. If one needs to draw less, then certainly draw that. I'm aiming for 3%.

I think you would be very brave to start with the full 4%.  In the original studies, no account was taken of investment costs and charges and subsequent studies reduced the rate for UK investors to, I think, 3 to 3.5%.  There are more sophisticated variable withdrawal rate strategies for which jamesd has provided a lot of references in his Safe Withdrawal Rate thread.

garmeg

coyrls said:

Sea_Shell said:

However, in that situation, we would (not sure about others) still be looking to "tighten our belts" and not just plough on at 4% regardless.

I think this is where real life pragmatism takes over, the "rule" is very unlikely to be followed in all circumstances.  In the opposite case where the pot grows over multiple years, and where a new "day 1" would result in a much higher withdrawal rate, it would be hard to argue against taking a bit extra out.

Especially if an LTA charge beckons!

LHW99

coyrls said:

Bravepants said:

I think 4% should be considered as a "guideline" on the MAXIMUM amount to withdraw. If one needs to draw less, then certainly draw that. I'm aiming for 3%.

I think you would be very brave to start with the full 4%.  In the original studies, no account was taken of investment costs and charges and subsequent studies reduced the rate for UK investors to, I think, 3 to 3.5%.  There are more sophisticated variable withdrawal rate strategies for which jamesd has provided a lot of references in his Safe Withdrawal Rate thread.

Also, it depends on how long you want it to last. If you want to start drawing at 55, 30 years may well leave you short in later old age if things go wrong.

Sea_Shell

LHW99 said:

coyrls said:

Bravepants said:

I think 4% should be considered as a "guideline" on the MAXIMUM amount to withdraw. If one needs to draw less, then certainly draw that. I'm aiming for 3%.

I think you would be very brave to start with the full 4%.  In the original studies, no account was taken of investment costs and charges and subsequent studies reduced the rate for UK investors to, I think, 3 to 3.5%.  There are more sophisticated variable withdrawal rate strategies for which jamesd has provided a lot of references in his Safe Withdrawal Rate thread.

Also, it depends on how long you want it to last. If you want to start drawing at 55, 30 years may well leave you short in later old age if things go wrong.

And what any DB or SP provision is too!

If they cover the basics, then everything else is "gravy".

Anonymous101

Sea_Shell said:

LHW99 said:

coyrls said:

Bravepants said:

I think 4% should be considered as a "guideline" on the MAXIMUM amount to withdraw. If one needs to draw less, then certainly draw that. I'm aiming for 3%.

I think you would be very brave to start with the full 4%.  In the original studies, no account was taken of investment costs and charges and subsequent studies reduced the rate for UK investors to, I think, 3 to 3.5%.  There are more sophisticated variable withdrawal rate strategies for which jamesd has provided a lot of references in his Safe Withdrawal Rate thread.

Also, it depends on how long you want it to last. If you want to start drawing at 55, 30 years may well leave you short in later old age if things go wrong.

And what any DB or SP provision is too!

If they cover the basics, then everything else is "gravy".

SP is a very good point especially for a couple. I do feel like having the SP to fall back on is a huge safety net which pretty much takes care of the basics for us. When I think about being FI in my mid 40's this excludes SP and when in reality even if setting off close to 4% one should be factoring in that from SP age the WR may step down to just 1-2%.

How did you factor in SP when planning your retirement?

Sea_Shell

Anonymous101 said:

Sea_Shell said:

LHW99 said:

coyrls said:

Bravepants said:

I think 4% should be considered as a "guideline" on the MAXIMUM amount to withdraw. If one needs to draw less, then certainly draw that. I'm aiming for 3%.

I think you would be very brave to start with the full 4%.  In the original studies, no account was taken of investment costs and charges and subsequent studies reduced the rate for UK investors to, I think, 3 to 3.5%.  There are more sophisticated variable withdrawal rate strategies for which jamesd has provided a lot of references in his Safe Withdrawal Rate thread.

Also, it depends on how long you want it to last. If you want to start drawing at 55, 30 years may well leave you short in later old age if things go wrong.

And what any DB or SP provision is too!

If they cover the basics, then everything else is "gravy".

SP is a very good point especially for a couple. I do feel like having the SP to fall back on is a huge safety net which pretty much takes care of the basics for us. When I think about being FI in my mid 40's this excludes SP and when in reality even if setting off close to 4% one should be factoring in that from SP age the WR may step down to just 1-2%.

How did you factor in SP when planning your retirement?

To be honest we planned around there not being a state pension at all, so not relying on it.  (Likewise any inheritances)

It's still a long way off for us, and anything could change in that time, but it will probably still exist.   Unless it becomes means tested!!!

shinytop

Anonymous101 said:

Sea_Shell said:

LHW99 said:

coyrls said:

Bravepants said:

I think 4% should be considered as a "guideline" on the MAXIMUM amount to withdraw. If one needs to draw less, then certainly draw that. I'm aiming for 3%.

I think you would be very brave to start with the full 4%.  In the original studies, no account was taken of investment costs and charges and subsequent studies reduced the rate for UK investors to, I think, 3 to 3.5%.  There are more sophisticated variable withdrawal rate strategies for which jamesd has provided a lot of references in his Safe Withdrawal Rate thread.

Also, it depends on how long you want it to last. If you want to start drawing at 55, 30 years may well leave you short in later old age if things go wrong.

And what any DB or SP provision is too!

If they cover the basics, then everything else is "gravy".

SP is a very good point especially for a couple. I do feel like having the SP to fall back on is a huge safety net which pretty much takes care of the basics for us. When I think about being FI in my mid 40's this excludes SP and when in reality even if setting off close to 4% one should be factoring in that from SP age the WR may step down to just 1-2%.

How did you factor in SP when planning your retirement?

Agreed.  That's exactly the situation we're in.  Having just retired the plan is around 4% but in 7 years SP kicks in and it should drop to well under 2%.  If you use the (perhaps optimistic?) 4% rule, each £9k SP is worth £225K 'CETV'.  It's a significant amount for most people and even more so for a couple.