750k Drawdown at 58

Thrugelmir

GSP said:

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.

No one is forced.  More a question of jam today or jam tomorrow.  Markets can be both savage and disappointing places to be invested. With investor sentiment being extremely fickle. 

GSP

Thrugelmir said:

GSP said:

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.

No one is forced.  More a question of jam today or jam tomorrow.  Markets can be both savage and disappointing places to be invested. With investor sentiment being extremely fickle. 

Yes, sort of forced were the wrong words to use. £15k wasn’t sustainable unless we worked still. The numbers from drawdown made it possible to give up work, especially as I had been made redundant and just could not get another job.
In truth however, those around me receive their db or state pensions so know what they are receiving each month and is a much more comfortable way to receive rather than relying on markets and instruments to deliver. The drawdown fund is a yo-yo.
If and it’s s big IF annuity rates ever rose back to an acceptable level, I would certainly look to buy some if not all to take out the uncertainty, which isn’t comfortable.
Drawdown does feel very perilous at times.

billy2shots

Rather than a single figure why not have two?

Figure 1 is what you need, a kind of minimum and is drawn during years of poor investment performance (aided by 3 years of cash in the bank so nothing is withdrawn at the bottom(ish) of a crash)

Figure 2 is the nice to have and is withdrawn during the better years. The holiday (or extra one) is factored in on these years etc. 

Flexible drawdown gets its name for a reason. 

BritishInvestor

GSP 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? 

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.

I think it's worth understanding what tool was used to generate the output - it may have been Excel or it may be something like Voyant - the latter would give me a lot more confidence. 

 

Also, as gmO points out, straight-line assumptions are suboptimal.

 In an ideal world, your adviser would take you through the following steps:

1. Build a plan of what your desired lifestyle would cost (using a flat £36k indicates this might not have been done)
2. Build a financial plan in a tool such as Voyant. At a high level this indicates (using straight-line assumptions) whether the plan has a reasonable chance of success and allows optimisations/what-if scenarios
3. Build the investment engine to deliver the returns necessary to deliver the plan (aligned with the risk you need to take and are happy taking)
4. Create a withdrawal plan (using something like https://www.timelineapp.co/) ensuring your desired lifestyle can survive historical worst-case outcomes. 
5. Iterate as required

Thrugelmir

GSP said:

Thrugelmir said:

GSP said:

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.

No one is forced.  More a question of jam today or jam tomorrow.  Markets can be both savage and disappointing places to be invested. With investor sentiment being extremely fickle. 

Yes, sort of forced were the wrong words to use. £15k wasn’t sustainable unless we worked still. The numbers from drawdown made it possible to give up work, especially as I had been made redundant and just could not get another job.
In truth however, those around me receive their db or state pensions so know what they are receiving each month and is a much more comfortable way to receive rather than relying on markets and instruments to deliver. The drawdown fund is a yo-yo.
If and it’s s big IF annuity rates ever rose back to an acceptable level, I would certainly look to buy some if not all to take out the uncertainty, which isn’t comfortable.
Drawdown does feel very perilous at times.

With new 30 year Gilt issuance yielding less than 1%.  Annuities will continue to reflect reality for some considerable time. 

ffacoffipawb

Thrugelmir said:

GSP said:

Thrugelmir said:

GSP said:

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.

No one is forced.  More a question of jam today or jam tomorrow.  Markets can be both savage and disappointing places to be invested. With investor sentiment being extremely fickle. 

Yes, sort of forced were the wrong words to use. £15k wasn’t sustainable unless we worked still. The numbers from drawdown made it possible to give up work, especially as I had been made redundant and just could not get another job.
In truth however, those around me receive their db or state pensions so know what they are receiving each month and is a much more comfortable way to receive rather than relying on markets and instruments to deliver. The drawdown fund is a yo-yo.
If and it’s s big IF annuity rates ever rose back to an acceptable level, I would certainly look to buy some if not all to take out the uncertainty, which isn’t comfortable.
Drawdown does feel very perilous at times.

With new 30 year Gilt issuance yielding less than 1%.  Annuities will continue to reflect reality for some considerable time. 

More like surreality.

[Deleted User]

I am a fan of the Variable Percentage Withdrawal method. As long as our financial system works, VPW assures that:
1. You will not die penniless
2. You will not die at 90 with way too much left in the pot. 

https://www.finiki.org/wiki/Variable_percentage_withdrawal

SouthCoastBoy

You have asked the question nobody can really answer. It is one of the main disadvantages of a DC scheme, there will always be a risk of running out of money. Personally I have modelled 3.5% growth rate, inflation at 2.5%, and then projected out on a yearly basis until I am 90. Then alter the variables and understand the impact. Ultimately all guesswork, nobody can guarantee anything. I think the key is to be flexible and have a cash reserve so you never draw down to 0. One thing I have noticed, with inlaws and my mother, is that when you get to post 80 the amount of required disposable income appears to decrease, so drawdown may not necessarily be linear. Also if you plan to give/leave money to kids etc. maybe do it earlier rather than later (not advice, just a thought) as if you go into a home all assets could be potentially swallowed up in care home fees. Unfortunately my mum has dementia and is now in a care home so we have first hand experience of this. Same happened to my grand parents.

GSP

Thanks very much for your replies, thoughts and links all.
Just like people and their journey through life, no two are the same. Seems its the same for plans also!

Gary1984

How old are the kids? Would it be more beneficial for them if you took some of your tax free cash and gifted it to them now rather than getting it decades down the line when they may not have as much need for it? As you say they'll inherit the house anyway.