IFA Withdrawal Request Timing?

BritishInvestor

AlanP_2 said:

Unless it is an unexpected requirement I would have thought most people would be planning their drawdown strategy for at least the next year if not the next 2 or 3 years?

What I would do is in the 12/24 months leading up to starting drawdown sell the next 12/24 months amounts and leave the pension in cash in the SIPP. At the start of drawdown carry on with the same approach so that you always have 12 to 24 months cash available and not subject to vagaries of market.

Holding an amount of cash outside the pension, say another 12 months worth, adds flexibility around halting sales whilst markets are falling and adjusting up again once markets have stabilised and (hopefully) gone back up.

If there are transaction fees per sale / per investment then quarterly or annual selling may be better.

In summary, I wouldn't want to be selling on a whim if I could avoid it.

"adds flexibility around halting sales whilst markets are falling and adjusting up again once markets have stabilised and (hopefully) gone back up."
Just equity markets or bond markets as well?

[Deleted User]

Are you trying to time the market by withdrawing just before a fall?  If so, a delay is more likely to benefit you as stocks have an overall upward trend. Timing the market does not work.
If you are talking about a real drawdown strategy then the answer is in Alan’s post. 

AlanP_2

BritishInvestor said:

AlanP_2 said:

Unless it is an unexpected requirement I would have thought most people would be planning their drawdown strategy for at least the next year if not the next 2 or 3 years?

What I would do is in the 12/24 months leading up to starting drawdown sell the next 12/24 months amounts and leave the pension in cash in the SIPP. At the start of drawdown carry on with the same approach so that you always have 12 to 24 months cash available and not subject to vagaries of market.

Holding an amount of cash outside the pension, say another 12 months worth, adds flexibility around halting sales whilst markets are falling and adjusting up again once markets have stabilised and (hopefully) gone back up.

If there are transaction fees per sale / per investment then quarterly or annual selling may be better.

In summary, I wouldn't want to be selling on a whim if I could avoid it.

"adds flexibility around halting sales whilst markets are falling and adjusting up again once markets have stabilised and (hopefully) gone back up."
Just equity markets or bond markets as well?

I'm not at this point yet so my comment was more generic than specific re asset classes. But to answer your question as my main investments would be in multi-asset funds then both.

GSP

AlanP_2 said:

Unless it is an unexpected requirement I would have thought most people would be planning their drawdown strategy for at least the next year if not the next 2 or 3 years?

What I would do is in the 12/24 months leading up to starting drawdown sell the next 12/24 months amounts and leave the pension in cash in the SIPP. At the start of drawdown carry on with the same approach so that you always have 12 to 24 months cash available and not subject to vagaries of market.

Holding an amount of cash outside the pension, say another 12 months worth, adds flexibility around halting sales whilst markets are falling and adjusting up again once markets have stabilised and (hopefully) gone back up.

If there are transaction fees per sale / per investment then quarterly or annual selling may be better.

In summary, I wouldn't want to be selling on a whim if I could avoid it.

Trying to grapple with all this, yes I’m dead for a drawdown strategy. But won’t the health of your fund determine this come the time? Say at that point in your planning made a year earlier, the markets have suffered a crash of 20%. Would you still carry on withdrawing what you had written down 1-2 years ago, or change and reduce your figure somewhat?

GSP

Deleted_User said:

Are you trying to time the market by withdrawing just before a fall?  If so, a delay is more likely to benefit you as stocks have an overall upward trend. Timing the market does not work.
If you are talking about a real drawdown strategy then the answer is in Alan’s post. 

No, time it when your pot has grown sufficiently. Why take it when the markets are down and your fund is down, unless you really need to?

AlanP_2

GSP said:

AlanP_2 said:

Unless it is an unexpected requirement I would have thought most people would be planning their drawdown strategy for at least the next year if not the next 2 or 3 years?

What I would do is in the 12/24 months leading up to starting drawdown sell the next 12/24 months amounts and leave the pension in cash in the SIPP. At the start of drawdown carry on with the same approach so that you always have 12 to 24 months cash available and not subject to vagaries of market.

Holding an amount of cash outside the pension, say another 12 months worth, adds flexibility around halting sales whilst markets are falling and adjusting up again once markets have stabilised and (hopefully) gone back up.

If there are transaction fees per sale / per investment then quarterly or annual selling may be better.

In summary, I wouldn't want to be selling on a whim if I could avoid it.

Trying to grapple with all this, yes I’m dead for a drawdown strategy. But won’t the health of your fund determine this come the time? Say at that point in your planning made a year earlier, the markets have suffered a crash of 20%. Would you still carry on withdrawing what you had written down 1-2 years ago, or change and reduce your figure somewhat?

First off, our situation is different to yours as we will have DB & SP income that will cover the majority, if not all, our day to day spending. The investments are the icing on the cake, and we will have more choice over when to partake of it than someone dependent on a DC pot but the general principles still apply.

From your comment I think you mean if, at the point of withdrawal, markets were down would you adjust or stick to your plan?

I would stick to the plan as I would have sold the investments to supply Year 2 cash in Year 1, which in your analogy is before the 20% crash.

Sale of assets in Year 2 to fund Year 3 would be put on hold to allow some time for recovery because at that stage I would still have some cash in the SIPP and cash outside the SIPP to tide me over for another 1 -2 years if the recovery took longer than 12 months.

This approach may sacrifice some potential gain but minimises the chances of a "must sell now" situation arising. 

BritishInvestor

AlanP_2 said:

BritishInvestor said:

AlanP_2 said:

Unless it is an unexpected requirement I would have thought most people would be planning their drawdown strategy for at least the next year if not the next 2 or 3 years?

What I would do is in the 12/24 months leading up to starting drawdown sell the next 12/24 months amounts and leave the pension in cash in the SIPP. At the start of drawdown carry on with the same approach so that you always have 12 to 24 months cash available and not subject to vagaries of market.

Holding an amount of cash outside the pension, say another 12 months worth, adds flexibility around halting sales whilst markets are falling and adjusting up again once markets have stabilised and (hopefully) gone back up.

If there are transaction fees per sale / per investment then quarterly or annual selling may be better.

In summary, I wouldn't want to be selling on a whim if I could avoid it.

"adds flexibility around halting sales whilst markets are falling and adjusting up again once markets have stabilised and (hopefully) gone back up."
Just equity markets or bond markets as well?

I'm not at this point yet so my comment was more generic than specific re asset classes. But to answer your question as my main investments would be in multi-asset funds then both.

Given that it's the multi-year market drawdowns (potentially coupled with inflation) that tend to put retirement pots under stress I'm not sure that having a year or two in cash is going to deliver what you seek.

Prism

BritishInvestor said:

AlanP_2 said:

BritishInvestor said:

AlanP_2 said:

Unless it is an unexpected requirement I would have thought most people would be planning their drawdown strategy for at least the next year if not the next 2 or 3 years?

What I would do is in the 12/24 months leading up to starting drawdown sell the next 12/24 months amounts and leave the pension in cash in the SIPP. At the start of drawdown carry on with the same approach so that you always have 12 to 24 months cash available and not subject to vagaries of market.

Holding an amount of cash outside the pension, say another 12 months worth, adds flexibility around halting sales whilst markets are falling and adjusting up again once markets have stabilised and (hopefully) gone back up.

If there are transaction fees per sale / per investment then quarterly or annual selling may be better.

In summary, I wouldn't want to be selling on a whim if I could avoid it.

"adds flexibility around halting sales whilst markets are falling and adjusting up again once markets have stabilised and (hopefully) gone back up."
Just equity markets or bond markets as well?

I'm not at this point yet so my comment was more generic than specific re asset classes. But to answer your question as my main investments would be in multi-asset funds then both.

Given that it's the multi-year market drawdowns (potentially coupled with inflation) that tend to put retirement pots under stress I'm not sure that having a year or two in cash is going to deliver what you seek.

Yeah, I see the 1-2 years of cash idea mentioned quite a bit. It doesn't even come close to working in a stress scenario where someone needs to be able to cope with possibly 15-20 years of negative equity returns while being hit with above average inflation. 

[Deleted User]

GSP said:

Deleted_User said:

Are you trying to time the market by withdrawing just before a fall?  If so, a delay is more likely to benefit you as stocks have an overall upward trend. Timing the market does not work.
If you are talking about a real drawdown strategy then the answer is in Alan’s post. 

No, time it when your pot has grown sufficiently. Why take it when the markets are down and your fund is down, unless you really need to?

You are saying “yes, I am trying to time the market”. 

[Deleted User]

Prism said:

BritishInvestor said:

AlanP_2 said:

BritishInvestor said:

AlanP_2 said:

Unless it is an unexpected requirement I would have thought most people would be planning their drawdown strategy for at least the next year if not the next 2 or 3 years?

What I would do is in the 12/24 months leading up to starting drawdown sell the next 12/24 months amounts and leave the pension in cash in the SIPP. At the start of drawdown carry on with the same approach so that you always have 12 to 24 months cash available and not subject to vagaries of market.

Holding an amount of cash outside the pension, say another 12 months worth, adds flexibility around halting sales whilst markets are falling and adjusting up again once markets have stabilised and (hopefully) gone back up.

If there are transaction fees per sale / per investment then quarterly or annual selling may be better.

In summary, I wouldn't want to be selling on a whim if I could avoid it.

"adds flexibility around halting sales whilst markets are falling and adjusting up again once markets have stabilised and (hopefully) gone back up."
Just equity markets or bond markets as well?

I'm not at this point yet so my comment was more generic than specific re asset classes. But to answer your question as my main investments would be in multi-asset funds then both.

Given that it's the multi-year market drawdowns (potentially coupled with inflation) that tend to put retirement pots under stress I'm not sure that having a year or two in cash is going to deliver what you seek.

Yeah, I see the 1-2 years of cash idea mentioned quite a bit. It doesn't even come close to working in a stress scenario where someone needs to be able to cope with possibly 15-20 years of negative equity returns while being hit with above average inflation. 

Two separate issues. 

1) making sure you have plenty of cash and dont need to care about the time it takes to withdraw or to watch the markets before going on a holiday
2) dealing with portfolios going up and down.
For 1 you could withdraw a year’s or two worth of expenditure and put it into a savings account. 

For 2 you need VPW - variable percentage withdrawal, which would define how much you can withdraw on Jan 1st of each year. 

15 -20 years of negative equity returns would be tough.  Never happened for world stock market.