750k Drawdown at 58

GSP

How much would you drawdown each year?
Plan is to leave £50k each for two kids when we die.

Linton

How much do you need to drawdown?  Over a range of life expectancy from now of between say 20 and 40 years £50K X 2 from £750K is well within the margin of error of any plan, either inflation adjusted or not.  One option would be for you to put aside the 2X£50K now either physically or virtually and invest it to at least increase with inflation.  You could then live your life on the remaining £650K. 
For crude planning purposes people often use 3.5% of initial pot size, inflation adjusted as a reasonable sustainable drawdown amount.  Or if you are prepared to significantly reduce draw down in the event of a major crash perhaps 5% may be reasonable.  However this is for planning. By the time you have been drawing down for 10 years reality is likely to have drifted far from plan and reconsideration required.

GSP

Thanks Linton,
So at the top end you suggest £37.5k p.a. That’s a decent amount!
Think we all need crystal balls. We can listen to as much advice as possible, but depends who it is coming from. There are those with a live for today attitude, while some are very cautious warning not to run the pot down, and too soon.

Dazed_and_C0nfused

But only £32.5k after tax.  Or c£34.5k if it is part tax-free and part taxable.

Albermarle

A lot depends on how the money is invested . The 3.5% rule mentioned above makes assumptions on investments returns .If it is invested too cautiously /in cash then you would have to reduce the annual income you could take .
If the money was invested aggressively, in theory you could take more, but you would have to adjust the income each year as your investments yo-yo'd around . I think the 3.5% is based on the investments being medium risk level .
Even here 20 years of relatively flat/poor markets would make a difference compared to a better market performance.

BritishInvestor

Albermarle said:

A lot depends on how the money is invested . The 3.5% rule mentioned above makes assumptions on investments returns .If it is invested too cautiously /in cash then you would have to reduce the annual income you could take .
If the money was invested aggressively, in theory you could take more, but you would have to adjust the income each year as your investments yo-yo'd around . I think the 3.5% is based on the investments being medium risk level .
Even here 20 years of relatively flat/poor markets would make a difference compared to a better market performance.

The 3.5% rule makes a lot of assumptions - longevity, fees, investor behaviour, historical success rate etc. I think the chosen withdrawal rate should be particular to an individual once they fully understand and appreciate the compromises and trade-offs of the various options and only once they've really thought what lifestyle they want in retirement. 

dunstonh

GSP said:

How much would you drawdown each year?
Plan is to leave £50k each for two kids when we die.

How much do you need?  (with pensions, the general rule of thumb is to draw what is needed but no more than that unless there is a justifiable reason)
How will it be invested?  (how it is invested will largely dictate how much it will grow in future and how much you can drawdown).

michaels

Other thing to consider is the state pension, you may have an additional 9k for an individual / 18k for a couple at age 66/67.  It wouldn't make much sense to live on 37.5k for the next 8-9 years and then 46.5k / 55.5k thereafter, better to draw more now and less once state pensions cut in to keep your pension constant.

GSP

Thanks for your replies and thoughts.
Albermarle - It’s invested 5 out of 10 on a risk appetite scale. We understand the need to be cautious, but to allow the chance for growth as well.
dunstonh - In this case, the question is how much would you withdraw to enjoy life without running out of this pot amount too early.
michaels - my state pension should hopefully be at the max come the day, but I can see what you are saying. I am sure we can do more now than we can in ten years time. Maybe those later years are the ones to put money away for the kids if there is an excess we are not using.

Albermarle

At age 58 , you should live on average another 28 years . If your partner is a similar age then one of you has a 25% chance of reaching 95 . 
If then there is £50K left for each of your children then due to inflation each £50K will only be worth round £20K in todays money 

dunstonh

dunstonh - In this case, the question is how much would you withdraw to enjoy life without running out of this pot amount too early.

The problem is that you do not know your date of death or future returns. You also have to factor inflation into it. So, you are always going to have to build in some tolerance to play it safe.   Leaving just £50k at time of death (which would probably be around £150k in today's terms) is not really achievable with planning.

What you could do is ascertain what you would consider an income level you need to be comfortable and do the things you want to do without going crazy on the spending.  Then earmark part of your pension for that purpose.      Then consider any excess over that amount as your play money that can run out.