Pension Cashflow Retirement Planner - Key Info?

garmeg

GSP said:

jamesd said:

If you truly can stop spending or spend with 0% credit cards with no minimum payment you can stop withdrawing. Otherwise you're withdrawing your spending money from somewhere.

Cutting spending will improve long term portfolio health. But it's not free, you were budgeting to spend that money so you have t give up some of your benefit.

Now, I'm routinely and happily spending less than my own SWR without missing out so there's nothing inherently wrong with spending less than you could. It's a very common desire during down markets. It's just not necessary if using a SWR.

Thanks jamesd. While working, I spent over 30 years juggling with money having more money going out than coming in most of the time so am used to doing what needs doing with finances.
If by following rigid rules to time your withdrawal, surely it’s better to choose a better time if your fund was down 20%, say leave it a month or two at least. Yes things might have not recovered and if you really have to get hold of money then needs must (that’s why probably best you have at least a few months cash in your own bank account to hold on a decision). But to protect your fund, keep that balance as high as you can which is paramount, it’s surely all about timing. 

You cannot really time withdrawals if you are taking monthly drawdown (most common choice, salary replacement, tax efficiency once given a tax code) as providers usually pay on one date. I suppose you could time some of the asset sales though, but not likely to have much of an impact.

GSP

garmeg said:

GSP said:

jamesd said:

If you truly can stop spending or spend with 0% credit cards with no minimum payment you can stop withdrawing. Otherwise you're withdrawing your spending money from somewhere.

Cutting spending will improve long term portfolio health. But it's not free, you were budgeting to spend that money so you have t give up some of your benefit.

Now, I'm routinely and happily spending less than my own SWR without missing out so there's nothing inherently wrong with spending less than you could. It's a very common desire during down markets. It's just not necessary if using a SWR.

Thanks jamesd. While working, I spent over 30 years juggling with money having more money going out than coming in most of the time so am used to doing what needs doing with finances.
If by following rigid rules to time your withdrawal, surely it’s better to choose a better time if your fund was down 20%, say leave it a month or two at least. Yes things might have not recovered and if you really have to get hold of money then needs must (that’s why probably best you have at least a few months cash in your own bank account to hold on a decision). But to protect your fund, keep that balance as high as you can which is paramount, it’s surely all about timing. 

You cannot really time withdrawals if you are taking monthly drawdown (most common choice, salary replacement, tax efficiency once given a tax code) as providers usually pay on one date. I suppose you could time some of the asset sales though, but not likely to have much of an impact.

Yes definitely not for monthly withdrawals if you choose to receive like that.
Again once happy to withdraw, what I am discussing is turning the whole of your fund into cash as soon as you contact the IFA. This then should stop any risk in movements between the time of request and the time you actually receive funds in your account. Once you receive the money in your bank account whether it’s 1,2 or 3 weeks later, your fund is returned to the holdings you had prior to withdrawal.

AlanP_2

GSP said:

garmeg said:

GSP said:

jamesd said:

If you truly can stop spending or spend with 0% credit cards with no minimum payment you can stop withdrawing. Otherwise you're withdrawing your spending money from somewhere.

Cutting spending will improve long term portfolio health. But it's not free, you were budgeting to spend that money so you have t give up some of your benefit.

Now, I'm routinely and happily spending less than my own SWR without missing out so there's nothing inherently wrong with spending less than you could. It's a very common desire during down markets. It's just not necessary if using a SWR.

Thanks jamesd. While working, I spent over 30 years juggling with money having more money going out than coming in most of the time so am used to doing what needs doing with finances.
If by following rigid rules to time your withdrawal, surely it’s better to choose a better time if your fund was down 20%, say leave it a month or two at least. Yes things might have not recovered and if you really have to get hold of money then needs must (that’s why probably best you have at least a few months cash in your own bank account to hold on a decision). But to protect your fund, keep that balance as high as you can which is paramount, it’s surely all about timing. 

You cannot really time withdrawals if you are taking monthly drawdown (most common choice, salary replacement, tax efficiency once given a tax code) as providers usually pay on one date. I suppose you could time some of the asset sales though, but not likely to have much of an impact.

Yes definitely not for monthly withdrawals if you choose to receive like that.
Again once happy to withdraw, what I am discussing is turning the whole of your fund into cash as soon as you contact the IFA. This then should stop any risk in movements between the time of request and the time you actually receive funds in your account. Once you receive the money in your bank account whether it’s 1,2 or 3 weeks later, your fund is returned to the holdings you had prior to withdrawal.

I'm not sure of your fund size or withdrawal requirement but as an example let's take a 4% rate on a £100k pot.

Using your approach you would sell £100k and go to cash to protect the value of your £4k withdrawal and then use your £96k to rebuy.

Take 2 extreme market movements that could happen - 10% down and 10% up over that couple of weeks.

You have a possible saving - 10% of £4k (so £400) compared to a potential loss - 10% of £96k (so £9.6k).

The Risk / Reward equation you propose doesn't make sense to me.

GSP

AlanP_2 said:

GSP said:

garmeg said:

GSP said:

jamesd said:

If you truly can stop spending or spend with 0% credit cards with no minimum payment you can stop withdrawing. Otherwise you're withdrawing your spending money from somewhere.

Cutting spending will improve long term portfolio health. But it's not free, you were budgeting to spend that money so you have t give up some of your benefit.

Now, I'm routinely and happily spending less than my own SWR without missing out so there's nothing inherently wrong with spending less than you could. It's a very common desire during down markets. It's just not necessary if using a SWR.

Thanks jamesd. While working, I spent over 30 years juggling with money having more money going out than coming in most of the time so am used to doing what needs doing with finances.
If by following rigid rules to time your withdrawal, surely it’s better to choose a better time if your fund was down 20%, say leave it a month or two at least. Yes things might have not recovered and if you really have to get hold of money then needs must (that’s why probably best you have at least a few months cash in your own bank account to hold on a decision). But to protect your fund, keep that balance as high as you can which is paramount, it’s surely all about timing. 

You cannot really time withdrawals if you are taking monthly drawdown (most common choice, salary replacement, tax efficiency once given a tax code) as providers usually pay on one date. I suppose you could time some of the asset sales though, but not likely to have much of an impact.

Yes definitely not for monthly withdrawals if you choose to receive like that.
Again once happy to withdraw, what I am discussing is turning the whole of your fund into cash as soon as you contact the IFA. This then should stop any risk in movements between the time of request and the time you actually receive funds in your account. Once you receive the money in your bank account whether it’s 1,2 or 3 weeks later, your fund is returned to the holdings you had prior to withdrawal.

I'm not sure of your fund size or withdrawal requirement but as an example let's take a 4% rate on a £100k pot.

Using your approach you would sell £100k and go to cash to protect the value of your £4k withdrawal and then use your £96k to rebuy.

Take 2 extreme market movements that could happen - 10% down and 10% up over that couple of weeks.

You have a possible saving - 10% of £4k (so £400) compared to a potential loss - 10% of £96k (so £9.6k).

The Risk / Reward equation you propose doesn't make sense to me.

Great thanks AlanP. You have just highlighted a huge problem. I suppose the only answer is after my withdrawal instruction, that part is turned into cash on the account until is debited from the fund completely, and the rest is left invested.

ukdw

garmeg said:

GSP said:

jamesd said:

If you truly can stop spending or spend with 0% credit cards with no minimum payment you can stop withdrawing. Otherwise you're withdrawing your spending money from somewhere.

Cutting spending will improve long term portfolio health. But it's not free, you were budgeting to spend that money so you have t give up some of your benefit.

Now, I'm routinely and happily spending less than my own SWR without missing out so there's nothing inherently wrong with spending less than you could. It's a very common desire during down markets. It's just not necessary if using a SWR.

Thanks jamesd. While working, I spent over 30 years juggling with money having more money going out than coming in most of the time so am used to doing what needs doing with finances.
If by following rigid rules to time your withdrawal, surely it’s better to choose a better time if your fund was down 20%, say leave it a month or two at least. Yes things might have not recovered and if you really have to get hold of money then needs must (that’s why probably best you have at least a few months cash in your own bank account to hold on a decision). But to protect your fund, keep that balance as high as you can which is paramount, it’s surely all about timing. 

You cannot really time withdrawals if you are taking monthly drawdown (most common choice, salary replacement, tax efficiency once given a tax code) as providers usually pay on one date. I suppose you could time some of the asset sales though, but not likely to have much of an impact.

You could simulate a few months suspension of drawdowns by repurchasing identical funds within an ISA each 'suspended' month.

You could also use a similar repurchasing approaches to create a 'monthly fixed number of units' drawdown strategy too if you see benefits in using this drawdown equivalent of 'pound cost averaging'.

 

shinytop

GSP said:

garmeg said:

GSP said:

jamesd said:

If you truly can stop spending or spend with 0% credit cards with no minimum payment you can stop withdrawing. Otherwise you're withdrawing your spending money from somewhere.

Cutting spending will improve long term portfolio health. But it's not free, you were budgeting to spend that money so you have t give up some of your benefit.

Now, I'm routinely and happily spending less than my own SWR without missing out so there's nothing inherently wrong with spending less than you could. It's a very common desire during down markets. It's just not necessary if using a SWR.

Thanks jamesd. While working, I spent over 30 years juggling with money having more money going out than coming in most of the time so am used to doing what needs doing with finances.
If by following rigid rules to time your withdrawal, surely it’s better to choose a better time if your fund was down 20%, say leave it a month or two at least. Yes things might have not recovered and if you really have to get hold of money then needs must (that’s why probably best you have at least a few months cash in your own bank account to hold on a decision). But to protect your fund, keep that balance as high as you can which is paramount, it’s surely all about timing. 

You cannot really time withdrawals if you are taking monthly drawdown (most common choice, salary replacement, tax efficiency once given a tax code) as providers usually pay on one date. I suppose you could time some of the asset sales though, but not likely to have much of an impact.

Yes definitely not for monthly withdrawals if you choose to receive like that.
Again once happy to withdraw, what I am discussing is turning the whole of your fund into cash as soon as you contact the IFA. This then should stop any risk in movements between the time of request and the time you actually receive funds in your account. Once you receive the money in your bank account whether it’s 1,2 or 3 weeks later, your fund is returned to the holdings you had prior to withdrawal.

Why would you do that?  If you weren't in drawdown would you sell all your assets periodically for a short time then buy back? 

The process of taking income - telling the IFA , the IFA asking the provider, the provider processing, etc. might take weeks (and one of my SIPPS only pays income once a month) but the step within that of selling your units/shares and generating the cash you need can be timed to the day.

GSP

shinytop said:

GSP said:

garmeg said:

GSP said:

jamesd said:

If you truly can stop spending or spend with 0% credit cards with no minimum payment you can stop withdrawing. Otherwise you're withdrawing your spending money from somewhere.

Cutting spending will improve long term portfolio health. But it's not free, you were budgeting to spend that money so you have t give up some of your benefit.

Now, I'm routinely and happily spending less than my own SWR without missing out so there's nothing inherently wrong with spending less than you could. It's a very common desire during down markets. It's just not necessary if using a SWR.

Thanks jamesd. While working, I spent over 30 years juggling with money having more money going out than coming in most of the time so am used to doing what needs doing with finances.
If by following rigid rules to time your withdrawal, surely it’s better to choose a better time if your fund was down 20%, say leave it a month or two at least. Yes things might have not recovered and if you really have to get hold of money then needs must (that’s why probably best you have at least a few months cash in your own bank account to hold on a decision). But to protect your fund, keep that balance as high as you can which is paramount, it’s surely all about timing. 

You cannot really time withdrawals if you are taking monthly drawdown (most common choice, salary replacement, tax efficiency once given a tax code) as providers usually pay on one date. I suppose you could time some of the asset sales though, but not likely to have much of an impact.

Yes definitely not for monthly withdrawals if you choose to receive like that.
Again once happy to withdraw, what I am discussing is turning the whole of your fund into cash as soon as you contact the IFA. This then should stop any risk in movements between the time of request and the time you actually receive funds in your account. Once you receive the money in your bank account whether it’s 1,2 or 3 weeks later, your fund is returned to the holdings you had prior to withdrawal.

Why would you do that?  If you weren't in drawdown would you sell all your assets periodically for a short time then buy back? 

The process of taking income - telling the IFA , the IFA asking the provider, the provider processing, etc. might take weeks (and one of my SIPPS only pays income once a month) but the step within that of selling your units/shares and generating the cash you need can be timed to the day.

Thanks. Yes, I have already agreed this is a bad idea and to keep funds invested.

jamesd

GSP said: what I am discussing is turning the whole of your fund into cash as soon as you contact the IFA. This then should stop any risk in movements between the time of request and the time you actually receive funds in your account. Once you receive the money in your bank account whether it’s 1,2 or 3 weeks later, your fund is returned to the holdings you had prior to withdrawal.

It's not worth planning for that because it increases the risk of loss due to everything being out of the market.

To reduce risk you can use multiple instructions for less than the full amount, say weekly instead offmonthly.

jamesd

GSP said:

If by following rigid rules to time your withdrawal, surely it’s better to choose a better time if your fund was down 20%, say leave it a month or two at least. Yes things might have not recovered and if you really have to get hold of money then needs must (that’s why probably best you have at least a few months cash in your own bank account to hold on a decision). But to protect your fund, keep that balance as high as you can which is paramount, it’s surely all about timing. 

It's better to withdraw cash from distributions (dividends and interest) that has accumulated in the account, then bonds if equities are down.

You collect the distributions by using income units. You sell bonds by keeping bond and share holdings independent. Can use multi-asset funds so long as you keep a fair chunk split.

Having a viable plan that meets your objectives is paramount and few people will plan high volatility when they can plan stability.

Using cash and distributions to provide the income can let you delay selling.

GSP

Okay, where I’m at. I have been working on a planner, or rather something I think can be used to gauge the future.
It’s been interesting as I have found a few things out which I think are very important, and have a list of questions for my IFA when I contact him next.
Top of my list of key info is the importance of having a full state pension. This basically stops you running out of money by using a third to a quarter what you would use from your drawdown.
I have run so many scenario’s with different growths, different percentage withdrawals, different amounts of withdrawal. I have put one negative year alongside two growth years, done an average of the 3, basically tried to pull it apart and see what takes me over.
I can provide one of many scenario’s but how about this one:
£750,000 with a withdrawal of £40k. Then,

-3% contraction & +6% growth every other year with constant withdrawal of £40k.
This reduces the fund in 9 years to £450k by the time I’m 67. With SP starting, the rate of decline reduces at a slower rate and is just under £300k by age 75. At that time, I have reduced withdrawals to £30k as it’s been mentioned you spend less as you get older. The money then lasts until aged 99.
That’s my numbers, now other amounts.
My wife’s pension starts or can be drawdown in just less than 2 years and it’s currently at £175k.
If left alone untouched, at 3% growth per year (the last 3 years have been just under 4%), the fund grows to £300k by the time I am 77, £400k by 86 and £500k by 94.
This is without her SP and anticipated inheritance of £500k.
In all, I think my initial withdrawals of £40k per year is achievable. I think my IFA would prefer closer to £30k. Again, we want to enjoy the money and intend to run it down somewhat, but want a bit of a safety net.
Any thoughts welcome at this stage. Thanks