750k Drawdown at 58

Time4T_Accounts

I think that what concerns me most about the unknown future is, though it’s all well and good to be enjoying the early years of retirement (I’m 62, having packed in at 60, and, pre-pandemic at least, having a great time), and expecting then to slow down, hopefully in later years rather than sooner, but what happens if one or both of us develops dementia?  5 years being looked after in a specialist (aka v. expensive) home would take some financing - but does need thinking about ...

GSP

Phew! So many worries and concerns. When you think about it there’s not a day that goes by where we don’t worry about one thing or another! Seems it’s part of human life, our make up.
Even this drawdown ‘malarky‘. At the time I was sort of forced to take it over a db pension which offered £15k a year. Yes, that was guaranteed amount, but the prospect and what you could do with a CETV figure this size outweighed that security where just living and getting through would have been a problem.

BritishInvestor

GSP said:

Again, thanks for replies and thoughts.
I suppose everyone’s life is a journey, with no two the same.
billy2shots - quite true at 90 I suspect life if still around will be very different to the time spent now. Just getting up and surviving doing basic things will be the ‘excitement’ and limit of things then.
In coincidence, my FA has in the last few minutes suggested £36k p.a. is too much and I should reign in a bit on that.

In less than two years, my wife can access her fund to drawdown which is currently £170k. As people say do plans, but these are also often altered because of the unknown and different journey’s occurring. On inheritance, which I know you shouldn’t include, we should get something around £750k in three of these, and with state pensions coming onboard as well.
I suppose you should plan with the minimum, but over than that anything received is a bonus. Trouble is, there is that nagging doubt with being too cautious now when you can enjoy things more, and then not being able to enjoy it as you become too old.

What tool is your FA using to determine whether £36k is too much? 

garmeg

BritishInvestor said:

GSP said:

Again, thanks for replies and thoughts.
I suppose everyone’s life is a journey, with no two the same.
billy2shots - quite true at 90 I suspect life if still around will be very different to the time spent now. Just getting up and surviving doing basic things will be the ‘excitement’ and limit of things then.
In coincidence, my FA has in the last few minutes suggested £36k p.a. is too much and I should reign in a bit on that.

In less than two years, my wife can access her fund to drawdown which is currently £170k. As people say do plans, but these are also often altered because of the unknown and different journey’s occurring. On inheritance, which I know you shouldn’t include, we should get something around £750k in three of these, and with state pensions coming onboard as well.
I suppose you should plan with the minimum, but over than that anything received is a bonus. Trouble is, there is that nagging doubt with being too cautious now when you can enjoy things more, and then not being able to enjoy it as you become too old.

What tool is your FA using to determine whether £36k is too much? 

By inspection I suspect. Taking nearly 5% drawdown at age 58 is quite a bit.

BritishInvestor

garmeg said:

BritishInvestor said:

GSP said:

Again, thanks for replies and thoughts.
I suppose everyone’s life is a journey, with no two the same.
billy2shots - quite true at 90 I suspect life if still around will be very different to the time spent now. Just getting up and surviving doing basic things will be the ‘excitement’ and limit of things then.
In coincidence, my FA has in the last few minutes suggested £36k p.a. is too much and I should reign in a bit on that.

In less than two years, my wife can access her fund to drawdown which is currently £170k. As people say do plans, but these are also often altered because of the unknown and different journey’s occurring. On inheritance, which I know you shouldn’t include, we should get something around £750k in three of these, and with state pensions coming onboard as well.
I suppose you should plan with the minimum, but over than that anything received is a bonus. Trouble is, there is that nagging doubt with being too cautious now when you can enjoy things more, and then not being able to enjoy it as you become too old.

What tool is your FA using to determine whether £36k is too much? 

By inspection I suspect. Taking nearly 5% drawdown at age 58 is quite a bit.

I'm not sure how you could do it by inspection without having all the other assumptions in the mix. 

garmeg

BritishInvestor said:

garmeg said:

BritishInvestor said:

GSP said:

Again, thanks for replies and thoughts.
I suppose everyone’s life is a journey, with no two the same.
billy2shots - quite true at 90 I suspect life if still around will be very different to the time spent now. Just getting up and surviving doing basic things will be the ‘excitement’ and limit of things then.
In coincidence, my FA has in the last few minutes suggested £36k p.a. is too much and I should reign in a bit on that.

In less than two years, my wife can access her fund to drawdown which is currently £170k. As people say do plans, but these are also often altered because of the unknown and different journey’s occurring. On inheritance, which I know you shouldn’t include, we should get something around £750k in three of these, and with state pensions coming onboard as well.
I suppose you should plan with the minimum, but over than that anything received is a bonus. Trouble is, there is that nagging doubt with being too cautious now when you can enjoy things more, and then not being able to enjoy it as you become too old.

What tool is your FA using to determine whether £36k is too much? 

By inspection I suspect. Taking nearly 5% drawdown at age 58 is quite a bit.

I'm not sure how you could do it by inspection without having all the other assumptions in the mix. 

It is a 25% greater drawdown than the oft-quoted 4% safe withdrawal rate which in itself is a bit toppy at age 58.

I am 56 and retiring soon with a much smaller SIPP. I wouldn't take 4% as drawdown let alone 5%. I would have to think very hard about how much to actually take. More research needed by myself I think.

BritishInvestor

garmeg said:

BritishInvestor said:

garmeg said:

BritishInvestor said:

GSP said:

Again, thanks for replies and thoughts.
I suppose everyone’s life is a journey, with no two the same.
billy2shots - quite true at 90 I suspect life if still around will be very different to the time spent now. Just getting up and surviving doing basic things will be the ‘excitement’ and limit of things then.
In coincidence, my FA has in the last few minutes suggested £36k p.a. is too much and I should reign in a bit on that.

In less than two years, my wife can access her fund to drawdown which is currently £170k. As people say do plans, but these are also often altered because of the unknown and different journey’s occurring. On inheritance, which I know you shouldn’t include, we should get something around £750k in three of these, and with state pensions coming onboard as well.
I suppose you should plan with the minimum, but over than that anything received is a bonus. Trouble is, there is that nagging doubt with being too cautious now when you can enjoy things more, and then not being able to enjoy it as you become too old.

What tool is your FA using to determine whether £36k is too much? 

By inspection I suspect. Taking nearly 5% drawdown at age 58 is quite a bit.

I'm not sure how you could do it by inspection without having all the other assumptions in the mix. 

It is a 25% greater drawdown than the oft-quoted 4% safe withdrawal rate which in itself is a bit toppy at age 58.

I am 56 and retiring soon with a much smaller SIPP. I wouldn't take 4% as drawdown let alone 5%. I would have to think very hard about how much to actually take. More research needed by myself I think.

It goes back to my earlier point around planning what you want your expenditure to look like - it may be that a decade of 5% might be achievable if spending dramatically dropped in later life and/or there was flexibility in expenditure if markets were bad.

GSP

BritishInvestor said:

GSP said:

Again, thanks for replies and thoughts.
I suppose everyone’s life is a journey, with no two the same.
billy2shots - quite true at 90 I suspect life if still around will be very different to the time spent now. Just getting up and surviving doing basic things will be the ‘excitement’ and limit of things then.
In coincidence, my FA has in the last few minutes suggested £36k p.a. is too much and I should reign in a bit on that.

In less than two years, my wife can access her fund to drawdown which is currently £170k. As people say do plans, but these are also often altered because of the unknown and different journey’s occurring. On inheritance, which I know you shouldn’t include, we should get something around £750k in three of these, and with state pensions coming onboard as well.
I suppose you should plan with the minimum, but over than that anything received is a bonus. Trouble is, there is that nagging doubt with being too cautious now when you can enjoy things more, and then not being able to enjoy it as you become too old.

What tool is your FA using to determine whether £36k is too much? 

I am just looking through now.
From what I can see, it’s on a presentation called retirement planning (simple). In there is a graph and numbers calculated from using what looks like excel.
Appears he has added both mine and my wife’s funds together giving a total of c£915k. Then there’s 9 rows showing annual reductions to the overall figure starting at £35.4k and increasing c£400 each year until the number increases to £38k. From 67, my full state pension of £9k is taken into account, reducing the decline until about 5 years later where my wifes state pension of £9k also gets added. The cumulative effect of both our pensions slows the decline to c£18k each year.
Then drilling further down, the presentation suggests all the money will run out when I am 94 years old.

So in all from my untrained eye quite a crude spreadsheet, but it does include the word simple. It takes away very roughly £36k each year, adds state pensions back in where relevant, but does not include any fund growth it seems, or contraction of funds for that matter either. I’ll try and get the spreadsheet from him.
In all though, surprised as he told me our money would run out so according to his spreadsheet in 15 years, but thought it would be before 94!

This obviously does not take into account any money from inheritance, unless they live until they are 120 years old. Plans, always moving.

Just to add, the kids can have the house which is worth £280k at current valuation.

gm0

There is a problem with all "static" single return spreadsheets in that they fail to capture both the statistical range of possible or probable outcomes and the variability of that or the extra horrors/windfalls of "sequence of return" when in deaccumulation. 
All that gets lost in an assumed average which one can say with confidence is definitely not exactly what will happen even if the long term median case may lie somewhere near it with a vast range either side 40 years out.

I suggest you go and download and play with FlexibleRetirementPlanner on a PC.  Run multiple scenarios in the sensitivity analysis tab to get a feel for "ranges of outcomes" in the presence of sequence of return (it does random return sequences in the ranges you give it) and distributions on actual returns and inflation levels and how that sits with income levels.
With different end points (exhausted fund, age target, 100k +with or without inflation).  Yes it's a US tool in its tax planning but just turn all that off to zero and it's just a modeler of distributions of returns, drawdown and inflation which can visually help you see how your target income SWR holds up under different conditions - whether benign or hostile.

I think the ability to see "success" and failure across ranges of returns and inflation vs a given plan is visually very helpful

https://www.flexibleretirementplanner.com/wp/

This may help you gain comfort with a version of your planned drawdown that most of the time would work, and a percentage of the time would make your heirs very happy and on another set of rare occasions - less so.  It also lets you play with variable income vs target as an outcome. 

Be aware this is complicated and pulls on long forgotten school O-level maths statistics - standard deviation and normal distributions - but the heatmap graphic brings out the variability and gives you a sense of how your plan would work in different conditions.

Good luck

GSP

I’ll take a look at these later. Thanks gm0