How low to take accessible cash after retirement?

enthusiasticsaver

Deleted_User wrote: »

Personally, I wouldn’t be comfortable with someone (anyone) saying “you can draw 20k a year”. What if he/she is wrong? Will he/she struggle in the old age? No. It would be you. Costs them nothing to say s-t.

Nor would I like to spend on big items early on without a budget. You may well be doing the right thing, but how do you know?

What you need is a spreadsheet which tells you the maximum amount you can spend annually from now on. Here is one I like. https://www.bogleheads.org/wiki/Variable_percentage_withdrawal. Check it out.

We have a spreadsheet showing the figures but I will check out the link you have put too. We also are only drawing on our accessible savings for now not the portfolio the IFA looks after. I have done my own forecast just using the accessible savings and our monthly income and plan to top them up by drawing on our SIPPs before our state pensions pay out leaving the stocks and shares isas untouched.

I think the annual spending figure is the problem. We will not be doing a new kitchen or bathroom every year. We wont need to replace a car or buy e bikes and long haul holidays are being booked for now as we are fit and healthy. The situation will be different in 2021 onwards as our house will only need one room decorating a year for the next five years so that won't cost a lot and a European holiday and a UK holiday a year will be a fraction of what we are paying next year for the two long haul holidays and the family holiday to celebrate my 60th birthday. It is just now and next year that the spending is going through the roof compared to most years. Affordable but not sitting well with me.

enthusiasticsaver

mgdavid wrote: »

With DB pensions of £37k and base outgoings of £12k I'm surprised you felt the need to ask! If you want some help in switching to a spend spend mindset, you're welcome to come and stay with us for a week or two, that should sort it

Ah yes I remember a post from you saying the early years of retirement are expensive and you weren't wrong. The base outgoings are really base and we would not like to be in a position where we were living off that although I know some seem to be comfortable with that. We don't actually seem to be having problems with spending it just a niggle in the back of our minds that sees the savings balance dropping month on month after a lifetime of saving. We did not even really deprive ourselves in our working years it is just when you do a holiday when you work generally most people stick to two weeks. We are feeling the urge to make the holidays longer now we are retired and putting all sorts of bucket list experiences on the itineraries on the grounds we will probably not do these places again.

enthusiasticsaver

Thrugelmir wrote: »

Do (did) you have a plan? Large items of expenditure should be budgeted for.





Portfolio should still be reviewed regularly to see it's meeting expectations/objectives. There's no certainty as to what the future holds. Were the assumptions used pessimistic or optimistic?

Yes our plan was that the lump sum from DH and my pension should be half invested alongside our other investments so they went into our ISAs over 2 tax years and that half should be used to replace the kitchen, DHs car, bathrooms and pay for two to four long haul holidays. That is what we are spending at the moment as well as our accessible cash. The portfolio is calculated as giving 4% returns and withdrawing £20k a year from this year. Our plan is to deplete the relatively small SIPPs by the time the state pensions pay out leaving our stocks and shares ISAs as a reserve. Also when we get our state pensions I do not think we will need to draw on it at all so the assumptions were pessimistic. We will next need to replace the kitchen and bathrooms in about 20 years and won't be doing long haul holidays in our 80s so these are one offs.

We will not go lower than £20k in accessible cash so that is my cut off point.

enthusiasticsaver

redmalc wrote: »

CFW i have had numerous meetings with the IFA and i keep being told to carry on investing because i have a number of cash Isa,s which i can call on first if required and dip into the S&S Isa,s and Pension later

We deliberately held back from investing everything as we knew we were going to be doing some serious spending. Not just on us I hasten to add but family holidays with grandchildren etc etc. I don't want to touch our ISAs as they are tax free and although I am a non tax payer for the next six years my state pension will take me over the basic rate threshold unless it goes up significantly by 2026 and DH has a large DB pension so his state pension will take him up or near to the higher rate threshold again unless the threshold goes up. It seems to make sense therefore to draw on SIPPs which are taxable (beyond the first 25% for mine) and DHS DC pension which is already crystallised and will be totally taxable so he needs to get that out before he hits the 40% rate.

Thrugelmir

enthusiasticsaver wrote: »

Yes I have a cash flow forecast for the next 40 years assuming we draw on the portfolio every year which so far we have not needed to.

That's very impressive. Trouble is the "what if's" make it worthless the further into the distance the projections go.

enthusiasticsaver

Thrugelmir wrote: »

That's very impressive. Trouble is the "what if's" make it worthless the further into the distance the projections go.

Yes, I have taken the IFAs projection with a pinch of salt and as someone said upthread it will need to be reviewed every 5 years just as I reviewed our finances when working out when to retire. Certain things can also throw it out like inheritances (we are assuming none but undoubtedly there will be some). So many things could change like one of us needing expensive care in later life or downsizing the house, inheritances, gifting etc etc. The IFA is only working with the portfolio and not the other stuff like the house, our accessible savings, possible inheritances.

cfw1994

Thrugelmir wrote: »

That's very impressive. Trouble is the "what if's" make it worthless the further into the distance the projections go.

Surely the trouble is, a lack of forecasting means you are just....guessing!
Yes, clearly any long term forecast is subject to being wrong.....but at least with a decent plan, one can at least test out "what if's"....

redmalc wrote: »

CFW i have had numerous meetings with the IFA and i keep being told to carry on investing because i have a number of cash Isa,s which i can call on first if required and dip into the S&S Isa,s and Pension later

Did you IFA leave you with any 'documentation' to explain their logic, or is it just warm words?

I'm genuinely curious to hear what kind of things an IFA gives a client to assure them of a strategy or path ahead.

(kind of related.....I did have a brief look at Timeline as a tool, which gets kudos from many IFAs, but tbh the tool didn't look *that* good to me - I was unable to drop in 2 or 3 small DB pots to factor in from different time periods over the next 10 years......could of course be that I was not 'trained' in it....)

marlot

Thrugelmir wrote: »

Do (did) you have a plan? Large items of expenditure should be budgeted for.

I agree. My monthly budget includes money being allocated for house repairs, car replacement/major repair, major giving to family/charity. If I were planning an especially large holiday that would be in there too.

I've been doing this for about 5 years. when we replaced one of the cars this year, the money was allocated and sitting there.

It makes it easy to spend on large items without losing sight of the day-to-day targets.

Edited to add: I too have a 40-year cash flow forecast. I'm probably being over-pessimistic, but it allows me to alter a few key variables such as investment returns, a stock market crash etc. Ten months in, and I'm ahead of the plan. If only I knew my date of death it would be so much easier!

[Deleted User]

You seem to be in good shape but I understand why you are worried. In general, people tend to underspend which is a better way around but the consequences of overspending are unpleasant.

I like the VPW method because it:

1. Takes account of all your liquid assets and all your incomes
2. Makes sure you don’t grossly overspend or underspend.
3. Ensures 2 regardless of unknown future returns of your portfolio.

The downside is that your annual spending limit varies depending on market performance, and it could decrease as well as increase. I am ok with it because I like the comfort of mathematical certainty that comes with the third bullet.

cfw1994

marlot wrote: »

I agree. My monthly budget includes money being allocated for house repairs, car replacement/major repair, major giving to family/charity. If I were planning an especially large holiday that would be in there too.

I've been doing this for about 5 years. when we replaced one of the cars this year, the money was allocated and sitting there.

It makes it easy to spend on large items without losing sight of the day-to-day targets.

Edited to add: I too have a 40-year cash flow forecast. I'm probably being over-pessimistic, but it allows me to alter a few key variables such as investment returns, a stock market crash etc. Ten months in, and I'm ahead of the plan. If only I knew my date of death it would be so much easier!

You can always check https://www.death-clock.org !!

It's the wedge of death that scares me :eek: