Best investments for a drawdown account?

Aged

In theory, the idea of maintaining one's pension assets in a drawdown setup seems to me to be a good one, assuming that your capital can generate enough income to meet your ongoing withdrawal requirements. With that in mind, would it not make sense to use Inc type units rather than Acc? Then the 'natural yield' would be clear to see. NB account is already in drawdown.

dunstonh

With that in mind, would it not make sense to use Inc type units rather than Acc?

It depends on your investment strategy and drawdown strategy.  

Then the 'natural yield' would be clear to see

Most don't use natural yield nowadays but use total return.   However, if you wish to limit your investment potential and use yield then you would use Inc units. 

Aged

dunstonh said:

With that in mind, would it not make sense to use Inc type units rather than Acc?

It depends on your investment strategy and drawdown strategy.  

Then the 'natural yield' would be clear to see

Most don't use natural yield nowadays but use total return.   However, if you wish to limit your investment potential and use yield then you would use Inc units. 

I understand what you're saying dunstonh. Was just looking for a bit more clarity re how much it's 'safe' to withdraw without risking blowing the whole thing to smithereens. At the end of the day my pension assets are there mainly to ensure I have a sufficient and dependable income. If it's REALLY possible to have your cake and eat it (as I have been led to believe) that's fine, but if not, I'm not sure whether paying adviser fees, platform fees, fund charges etc etc in the hope of 'growth' is worth it, never mind the stress and worry aspect it all brings.

AnotherJoe

Lets say you can get 3% from Inc funds (nearly all income) and 5% from growth funds (by a combination of growth and income),

Why would it be "blowing the whole thing up" to take 3% out of the latter (by selling units as well as taking the income) but it wouldnt by taking just the 3% out of the income?

Thrugelmir

Aged said:

dunstonh said:

With that in mind, would it not make sense to use Inc type units rather than Acc?

It depends on your investment strategy and drawdown strategy.  

Then the 'natural yield' would be clear to see

Most don't use natural yield nowadays but use total return.   However, if you wish to limit your investment potential and use yield then you would use Inc units. 

If it's REALLY possible to have your cake and eat it (as I have been led to believe) 

Annuities were invented for good reason. Not everyone can enjoy a free lunch. Investing comes with risk and uncertainty. Complacency creeping in after an after an extended bull run in the markets isn't surprising. After all what could possibly go wrong when making money is so easy. 

Aged

AnotherJoe said:

Lets say you can get 3% from Inc funds (nearly all income) and 5% from growth funds (by a combination of growth and income),

Why would it be "blowing the whole thing up" to take 3% out of the latter (by selling units as well as taking the income) but it wouldnt by taking just the 3% out of the income?

My point is it's not possible to 'set and forget', it takes constant monitoring to make sure your not depleting your original capital and if you have to do that, it's just not worth all the trouble and charges is it? 

Aged

Thrugelmir said:

Aged said:

dunstonh said:

With that in mind, would it not make sense to use Inc type units rather than Acc?

It depends on your investment strategy and drawdown strategy.  

Then the 'natural yield' would be clear to see

Most don't use natural yield nowadays but use total return.   However, if you wish to limit your investment potential and use yield then you would use Inc units. 

If it's REALLY possible to have your cake and eat it (as I have been led to believe) 

Annuities were invented for good reason. Not everyone can enjoy a free lunch. Investing comes with risk and uncertainty. Complacency creeping in after an after an extended bull run in the markets isn't surprising. After all what could possibly go wrong when making money is so easy. 

I'm sorry but I take exception to your suggestions that I'm looking for a 'free lunch' and think 'making money is so easy'. If only you knew my circumstances you would understand how offensive that is. 

Thrugelmir

Aged said:

Thrugelmir said:

Aged said:

dunstonh said:

With that in mind, would it not make sense to use Inc type units rather than Acc?

It depends on your investment strategy and drawdown strategy.  

Then the 'natural yield' would be clear to see

Most don't use natural yield nowadays but use total return.   However, if you wish to limit your investment potential and use yield then you would use Inc units. 

If it's REALLY possible to have your cake and eat it (as I have been led to believe) 

Annuities were invented for good reason. Not everyone can enjoy a free lunch. Investing comes with risk and uncertainty. Complacency creeping in after an after an extended bull run in the markets isn't surprising. After all what could possibly go wrong when making money is so easy. 

I'm sorry but I take exception to your suggestions that I'm looking for a 'free lunch' and think 'making money is so easy'. If only you knew my circumstances you would understand how offensive that is. 

Unsure why you've taken a generic comment personally.  Some investors will be winners and other losers. Never be any different. 

MarkCarnage

 If it's REALLY possible to have your cake and eat it (as I have been led to believe) 

Presumably a cake salesman led you to believe it......

Many people have benefited and will benefit from using drawdown. There will be others who do not, for whatever reason. There are good reasons why annuity rates are near historic lows, as they demonstrate the challenges of providing contractually guaranteed income for a long and indeterminate time period, often with guaranteed escalation too. 

Having the flexibility to vary the withdrawal rate in difficult times, even for a year or so, is likely to be helpful. Bear in mind too that the expectation is that the capital value of a drawdown account will run down too over time. 

I also don't think that Thrugelmir was aiming his comments specifically at you, but only warning of the generic dangers. 

Prism

Aged said:

AnotherJoe said:

Lets say you can get 3% from Inc funds (nearly all income) and 5% from growth funds (by a combination of growth and income),

Why would it be "blowing the whole thing up" to take 3% out of the latter (by selling units as well as taking the income) but it wouldnt by taking just the 3% out of the income?

My point is it's not possible to 'set and forget', it takes constant monitoring to make sure your not depleting your original capital and if you have to do that, it's just not worth all the trouble and charges is it? 

Is does take a level of monitoring and you are supposed to be depleting your capital if you want to make the most of your pension. Most of the withdrawal strategies you might read about such as the 4% rule or variable withdrawal expect you to eat into capital at the right level, without running out.

Albermarle

Prism said:

Aged said:

AnotherJoe said:

Lets say you can get 3% from Inc funds (nearly all income) and 5% from growth funds (by a combination of growth and income),

Why would it be "blowing the whole thing up" to take 3% out of the latter (by selling units as well as taking the income) but it wouldnt by taking just the 3% out of the income?

My point is it's not possible to 'set and forget', it takes constant monitoring to make sure your not depleting your original capital and if you have to do that, it's just not worth all the trouble and charges is it? 

Is does take a level of monitoring and you are supposed to be depleting your capital if you want to make the most of your pension. Most of the withdrawal strategies you might read about such as the 4% rule or variable withdrawal expect you to eat into capital at the right level, without running out.

It also depends on market conditions during the time of the drawdown . Clearly there will be ups and downs but some long term growth is obviously part of the drawdown process ( we all hope ) If markets perform above the usual historical levels during the drawdown period, you could probably take 4% pa + inflation and still have the same money at the end than at the start.
Conversely if markets underperform you might have not very much left at the end .
I think most projected drawdown scenarios are like you say . They aim at a middle ground , where some of the original capital is gradually spent but some is still left at the end.