How Much Could I Withdraw Annually

BritishInvestor

Albermarle said:

I would say the cash element is too low . Especially when you get to the point of drawing from the DC pension , you need a bigger cash buffer to get through market downturns.

Why do you "need" a bigger cash buffer? How does it improve overall outcomes?

michaels

BritishInvestor said:

Albermarle said:

I would say the cash element is too low . Especially when you get to the point of drawing from the DC pension , you need a bigger cash buffer to get through market downturns.

Why do you "need" a bigger cash buffer? How does it improve overall outcomes?

I don't think it matters how matters how many times you point out the research on this, people still imagine you can have a nice cash pot to avoid 'drawdown' when markets are low - the same people who would claim they have no intention of ever trying to 'time the markets'....

Linton

michaels said:

BritishInvestor said:

Albermarle said:

I would say the cash element is too low . Especially when you get to the point of drawing from the DC pension , you need a bigger cash buffer to get through market downturns.

Why do you "need" a bigger cash buffer? How does it improve overall outcomes?

I don't think it matters how matters how many times you point out the research on this, people still imagine you can have a nice cash pot to avoid 'drawdown' when markets are low - the same people who would claim they have no intention of ever trying to 'time the markets'....

When you need your drawdown in order to meet your basic expenses, and the market drops 40-50% what would you do?  Continue selling units but at twice the rate?

BritishInvestor

michaels said:

BritishInvestor said:

Albermarle said:

I would say the cash element is too low . Especially when you get to the point of drawing from the DC pension , you need a bigger cash buffer to get through market downturns.

Why do you "need" a bigger cash buffer? How does it improve overall outcomes?

I don't think it matters how matters how many times you point out the research on this, people still imagine you can have a nice cash pot to avoid 'drawdown' when markets are low - the same people who would claim they have no intention of ever trying to 'time the markets'....

Maybe a worked example or two might be useful

BritishInvestor

Linton said:

michaels said:

BritishInvestor said:

Albermarle said:

I would say the cash element is too low . Especially when you get to the point of drawing from the DC pension , you need a bigger cash buffer to get through market downturns.

Why do you "need" a bigger cash buffer? How does it improve overall outcomes?

I don't think it matters how matters how many times you point out the research on this, people still imagine you can have a nice cash pot to avoid 'drawdown' when markets are low - the same people who would claim they have no intention of ever trying to 'time the markets'....

When you need your drawdown in order to meet your basic expenses, and the market drops 40-50% what would you do?  Continue selling units but at twice the rate?

We are fortunate in that we have over a century (edited ) of historical market data to evaluate various strategies and outcomes. For example, imagine if you were an investor with a UK biased portfolio in the 1970s with the drawn out stock market slump and additional pressure being placed on the portfolio with rising interest rates. How much would you allocate to a cash buffer to cater for that?

Linton

BritishInvestor said:

Linton said:

michaels said:

BritishInvestor said:

Albermarle said:

I would say the cash element is too low . Especially when you get to the point of drawing from the DC pension , you need a bigger cash buffer to get through market downturns.

Why do you "need" a bigger cash buffer? How does it improve overall outcomes?

I don't think it matters how matters how many times you point out the research on this, people still imagine you can have a nice cash pot to avoid 'drawdown' when markets are low - the same people who would claim they have no intention of ever trying to 'time the markets'....

When you need your drawdown in order to meet your basic expenses, and the market drops 40-50% what would you do?  Continue selling units but at twice the rate?

We are fortunate in that we have over a decade of historical market data to evaluate various strategies and outcomes. For example, imagine if you were an investor with a UK biased portfolio in the 1970s with the drawn out stock market slump and additional pressure being placed on the portfolio with rising interest rates. How much would you allocate to a cash buffer to cater for that?

No strategy can handle a long term fall in the markets, if that is the scenario you are proposing.  Though rising interest rates would benefit a cash buffer.  If you havent got the returns at some stage you wont be able to pay yourself the income to meet your expenses.  The best you can do is to diversify as much as possible - invest globally, invest in all sectors, invest in as many different types of asset and use as many different sources of income as you reasonably can.

The purpose of a cash buffer is to remove all risk in the medium term.  During the recent COVID mini-crash many people on the savings forum were panicking.  I was able to look on with a serene, possibly smug, smile despite my investments being essential for meeting a significant part of living expenses.

But investment strategies can only go so far, they cannot protect you from everything.  Perhaps the best they can do is to help ensure that should the world as we know it collapse one is in at least as good if not better position as everyone else.  

One detailed point - you talk about a decade of historical market data.  That means absolutely nothing.  The past decade has shown unprecedented rises in share prices and is very different to many previous decades.

BritishInvestor

Linton said:

BritishInvestor said:

Linton said:

michaels said:

BritishInvestor said:

Albermarle said:

I would say the cash element is too low . Especially when you get to the point of drawing from the DC pension , you need a bigger cash buffer to get through market downturns.

Why do you "need" a bigger cash buffer? How does it improve overall outcomes?

I don't think it matters how matters how many times you point out the research on this, people still imagine you can have a nice cash pot to avoid 'drawdown' when markets are low - the same people who would claim they have no intention of ever trying to 'time the markets'....

When you need your drawdown in order to meet your basic expenses, and the market drops 40-50% what would you do?  Continue selling units but at twice the rate?

We are fortunate in that we have over a decade of historical market data to evaluate various strategies and outcomes. For example, imagine if you were an investor with a UK biased portfolio in the 1970s with the drawn out stock market slump and additional pressure being placed on the portfolio with rising interest rates. How much would you allocate to a cash buffer to cater for that?

No strategy can handle a long term fall in the markets, if that is the scenario you are proposing.  Though rising interest rates would benefit a cash buffer.  If you havent got the returns at some stage you wont be able to pay yourself the income to meet your expenses.  The best you can do is to diversify as much as possible - invest globally, invest in all sectors, invest in as many different types of asset and use as many different sources of income as you reasonably can.

The purpose of a cash buffer is to remove all risk in the medium term.  During the recent COVID mini-crash many people on the savings forum were panicking.  I was able to look on with a serene, possibly smug, smile despite my investments being essential for meeting a significant part of living expenses.

But investment strategies can only go so far, they cannot protect you from everything.  Perhaps the best they can do is to help ensure that should the world as we know it collapse one is in at least as good if not better position as everyone else.  

One detailed point - you talk about a decade of historical market data.  That means absolutely nothing.  The past decade has shown unprecedented rises in share prices and is very different to many previous decades.

Sorry, decade should be century .
I agree that you want diversify globally and across sectors but what asset classes did you have in mind other than equities and bonds?
When you say no strategy can survive a long term fall in the markets, we have historical data to suggest that strategies have done and for a given retirement date we can see exactly how each strategy played out
I don't see how the cash buffer removes all risk - how do you know in advance what inflation is likely to be? What is your definition of medium term?
Covid (thus far) was a blip and had minimal income on a robust retirement portfolio (it's the long drawn out downturns that have the biggest impact) - we must be clear to differentiate the impact on the portfolio with the impact on the investor - that's a separate discussion.

numpty_dumpty

michaels said:

About 23-25k pa

Thanks Michaels. That's a little higher than I was thinking.
Anyone else want to offer an opinion on the OP?

AnotherJoe

BritishInvestor said:

Linton said:

BritishInvestor said:

Linton said:

michaels said:

BritishInvestor said:

Albermarle said:

I would say the cash element is too low . Especially when you get to the point of drawing from the DC pension , you need a bigger cash buffer to get through market downturns.

Why do you "need" a bigger cash buffer? How does it improve overall outcomes?

I don't think it matters how matters how many times you point out the research on this, people still imagine you can have a nice cash pot to avoid 'drawdown' when markets are low - the same people who would claim they have no intention of ever trying to 'time the markets'....

When you need your drawdown in order to meet your basic expenses, and the market drops 40-50% what would you do?  Continue selling units but at twice the rate?

We are fortunate in that we have over a decade of historical market data to evaluate various strategies and outcomes. For example, imagine if you were an investor with a UK biased portfolio in the 1970s with the drawn out stock market slump and additional pressure being placed on the portfolio with rising interest rates. How much would you allocate to a cash buffer to cater for that?

No strategy can handle a long term fall in the markets, if that is the scenario you are proposing.  Though rising interest rates would benefit a cash buffer.  If you havent got the returns at some stage you wont be able to pay yourself the income to meet your expenses.  The best you can do is to diversify as much as possible - invest globally, invest in all sectors, invest in as many different types of asset and use as many different sources of income as you reasonably can.

The purpose of a cash buffer is to remove all risk in the medium term.  During the recent COVID mini-crash many people on the savings forum were panicking.  I was able to look on with a serene, possibly smug, smile despite my investments being essential for meeting a significant part of living expenses.

But investment strategies can only go so far, they cannot protect you from everything.  Perhaps the best they can do is to help ensure that should the world as we know it collapse one is in at least as good if not better position as everyone else.  

One detailed point - you talk about a decade of historical market data.  That means absolutely nothing.  The past decade has shown unprecedented rises in share prices and is very different to many previous decades.

Sorry, decade should be century .
I agree that you want diversify globally and across sectors but what asset classes did you have in mind other than equities and bonds?
When you say no strategy can survive a long term fall in the markets, we have historical data to suggest that strategies have done and for a given retirement date we can see exactly how each strategy played out
I don't see how the cash buffer removes all risk - how do you know in advance what inflation is likely to be? What is your definition of medium term?
Covid (thus far) was a blip and had minimal income on a robust retirement portfolio (it's the long drawn out downturns that have the biggest impact) - we must be clear to differentiate the impact on the portfolio with the impact on the investor - that's a separate discussion.

Strawman. Why does it have to (and who said?) remove all risk?

BritishInvestor

AnotherJoe said:

BritishInvestor said:

Linton said:

BritishInvestor said:

Linton said:

michaels said:

BritishInvestor said:

Albermarle said:

I would say the cash element is too low . Especially when you get to the point of drawing from the DC pension , you need a bigger cash buffer to get through market downturns.

Why do you "need" a bigger cash buffer? How does it improve overall outcomes?

I don't think it matters how matters how many times you point out the research on this, people still imagine you can have a nice cash pot to avoid 'drawdown' when markets are low - the same people who would claim they have no intention of ever trying to 'time the markets'....

When you need your drawdown in order to meet your basic expenses, and the market drops 40-50% what would you do?  Continue selling units but at twice the rate?

We are fortunate in that we have over a decade of historical market data to evaluate various strategies and outcomes. For example, imagine if you were an investor with a UK biased portfolio in the 1970s with the drawn out stock market slump and additional pressure being placed on the portfolio with rising interest rates. How much would you allocate to a cash buffer to cater for that?

No strategy can handle a long term fall in the markets, if that is the scenario you are proposing.  Though rising interest rates would benefit a cash buffer.  If you havent got the returns at some stage you wont be able to pay yourself the income to meet your expenses.  The best you can do is to diversify as much as possible - invest globally, invest in all sectors, invest in as many different types of asset and use as many different sources of income as you reasonably can.

The purpose of a cash buffer is to remove all risk in the medium term.  During the recent COVID mini-crash many people on the savings forum were panicking.  I was able to look on with a serene, possibly smug, smile despite my investments being essential for meeting a significant part of living expenses.

But investment strategies can only go so far, they cannot protect you from everything.  Perhaps the best they can do is to help ensure that should the world as we know it collapse one is in at least as good if not better position as everyone else.  

One detailed point - you talk about a decade of historical market data.  That means absolutely nothing.  The past decade has shown unprecedented rises in share prices and is very different to many previous decades.

Sorry, decade should be century .
I agree that you want diversify globally and across sectors but what asset classes did you have in mind other than equities and bonds?
When you say no strategy can survive a long term fall in the markets, we have historical data to suggest that strategies have done and for a given retirement date we can see exactly how each strategy played out
I don't see how the cash buffer removes all risk - how do you know in advance what inflation is likely to be? What is your definition of medium term?
Covid (thus far) was a blip and had minimal income on a robust retirement portfolio (it's the long drawn out downturns that have the biggest impact) - we must be clear to differentiate the impact on the portfolio with the impact on the investor - that's a separate discussion.

Strawman. Why does it have to (and who said?) remove all risk?

See Linton's comments above