IFA Withdrawal Request Timing?

Audaxer

Prism said:

Audaxer said:

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. 

I think if there was a realistic chance of that happening with a balanced portfolio, I don't think it would be worth the risk of investing. If that happened I don't think that many DC pots would last for a 30 year retirement.

Thats really my point though, a balanced portfolio of equities and bonds with a sensible withdrawal rate has always historically survived it. These long equity downturns are historically survived by having a decent allocation to bonds and a global allocation of equities. The 4% rule with a 60/40 pretty much comes from a starting retirement in 1968 as being the worst time ever with many years of terrible US equity returns

However I see talk of 90-100% equities, with a US focus and a couple of years in cash to ride out a crash. For this all to work as it has before there needs to be investment in something that goes up when equities go down or inflation goes up.

Yes, that makes sense. I agree as lots of people on here seem to think 100% equities will guarantee a better long term returns, and they think there is no place for bonds. I still feel better with approximately a 60/40 portfolio.

NottinghamKnight

There is a bit of a macho culture which looks to a heavy equity allocation which is beyond the risk tolerance of the majority. Over the long term then higher equities will typically lead to better returns though given a diminishing pot in drawdown then its not as clear cut as it would be in accumulation. The flip side is that we are in very odd times, quality government bonds may give negative yields and a possibility of capital loss, so bonds aren't necessarily safer. Moving up the risk curve with binds to increase returns is oxymoronic as that is not what your bond allocation is supposed to be for.

jamesd

GSP said:

The only timing feature I am looking at is withdrawing when my fund has grown rather than withdrawing when it has contracted and delaying that decision on the latter if possible. Is it beneficial to withdraw when your fund has grown, rather than withdraw when your fund balance has fallen?

Yes, there's even a term that covers it: "taking profits".

Doing it is part of the Guyton-Klinger drawdown rules.

[Deleted User]

There is indeed a term. Existence of the term does not make the practice beneficial. Good book: https://en.m.wikipedia.org/wiki/A_Random_Walk_Down_Wall_Street

AnotherJoe

GSP said:

QAnotherJoe said:

GSP said:

AnotherJoe said:

GSP said:

jamesd said:

GSP said:

In drawdown, from your request to your IFA to take x amount from your fund, how long does it take before your fund is debited and your bank account credited

If not using an IFA but instead giving online instructions at a place like HL:

1. sell ETF or investment trust and you'll be quoted a price with about ten seconds to accept. Accept and the deal is done at that price and shows up in lists of recent trades. Outside market hours you can set a minimum price if you want the deal done when the market next opens.
2. give an instruction to sell an ordinary fund by 8AM and the noon price on that day will be used. Later, the next day though you can cancel before 8AM.

In both cases settlement - the cash arriving in the account - is the standard three days later. You can then ask to withdraw the money.

So your exposure to market moves without an IFA in the middle can be none at all to four hours.

Thanks jamesd. I had to look up ETF - Exchange Traded Funds. Think reading through ETF’s aim to track the performance of a specific index such as the FTSE 100, so not sure if this would extend to all the other types of funds, stocks, bonds, equities etc that are usually held across a diverse portfolio.
I would never go it alone with looking after my own finds and would always use an IFA. It seems, if possible that to take out ALL the risk from your overall fund balance, you need to turn everything into cash on the day of instruction to the IFA to withdraw. The market can go up as well as down of course, but at least by doing this, if possible has frozen your balance, there is no risk of ‘wild’ movements? Once the money has been credited to your bank account 1, 2 or 3 weeks later, your fund is then turned back into all the investments you had previously.
Does this all sound feasible, and doable? 

It sounds idiotic and over time will lower the return from your investments because they will be in cash for an appreciable % of time. And its misplaced because all you are covering is the downside risk and forgetting the upside risk (eg it goes up after you sold) and statistically thats more likely to happen and absolutely certain over a long period.

Just keep (say) one years drawdown in cash, drawdown from that and occasionally top it up selling just what you need to top it up.

Really, with the shenanigans you are contemplating i wonder if investing is for you because you are so worried about the downside, and you'd be better with an annuity.

You seem to be soemone who might panic and go to cash every time theres a market drop and then you'll never get up the nerve to reinvest.

Yes agree, this is a bonkers idea as acknowledged in the Retirement Planner Key Info thread. I am not looking and trying to anticipate falls in the market, just looking at ways that might ‘maximise’ my fund.
Rather than sticking to a plan made 1,2,3 years previous, I am exploring the timing of withdrawals if there was some leeway in when these are done. Better to take from your fund if the balance is healthy rather than one that has contracted. If annuity rates ever picked up to an acceptable level, I’d certainly look at them. No, I would never panic, that bit you have got wrong, this is a marathon not a sprint. Sometimes it can be a case of just sitting tight and trying to make a better call on things rather than staying with a rigid planner.

The answer to that is keep it invested and not try to time the market, which essentially is what you are planning to do however much you try to pretend you arent. "I  am exploring the timing of withdrawals" - how is that not market timing?

Just sell on your regular basis, either each month / three months / six months / yearly / 137 days,  (whatever works for you) unless theres been a  crash (of a magnitude as determined by you)  in which case take some out of your cash buffer instead and dont sell  anything or sell less and take out less, depending how severe a crash and what flexibility you have .

The only timing feature I am looking at is withdrawing when my fund has grown rather than withdrawing when it has contracted and delaying that decision on the latter if possible. Is it beneficial to withdraw when your fund has grown, rather than withdraw when your fund balance has fallen?

Yes it is. Avoids getting into a spiral of decreasing pool with constant amount withdrawal meaning increasingly higher % withdrawal. If you withdrew a constant % it would be b better because that would reduce the amount the pot fell by, however are you withdrawals such that (say) a 30% drop in withdrawal didn't affect you. 

This is why many propose a cash buffer you withdraw from after a decrease in the pot. 

Of course this depends if you didn't wish to decrease the pot, maybe your plans mean that's fine. Either because other pensions mean you can cope or because you,plan to decrease it anyway

GSP

AnotherJoe said:

GSP said:

QAnotherJoe said:

GSP said:

AnotherJoe said:

GSP said:

jamesd said:

GSP said:

In drawdown, from your request to your IFA to take x amount from your fund, how long does it take before your fund is debited and your bank account credited

If not using an IFA but instead giving online instructions at a place like HL:

1. sell ETF or investment trust and you'll be quoted a price with about ten seconds to accept. Accept and the deal is done at that price and shows up in lists of recent trades. Outside market hours you can set a minimum price if you want the deal done when the market next opens.
2. give an instruction to sell an ordinary fund by 8AM and the noon price on that day will be used. Later, the next day though you can cancel before 8AM.

In both cases settlement - the cash arriving in the account - is the standard three days later. You can then ask to withdraw the money.

So your exposure to market moves without an IFA in the middle can be none at all to four hours.

Thanks jamesd. I had to look up ETF - Exchange Traded Funds. Think reading through ETF’s aim to track the performance of a specific index such as the FTSE 100, so not sure if this would extend to all the other types of funds, stocks, bonds, equities etc that are usually held across a diverse portfolio.
I would never go it alone with looking after my own finds and would always use an IFA. It seems, if possible that to take out ALL the risk from your overall fund balance, you need to turn everything into cash on the day of instruction to the IFA to withdraw. The market can go up as well as down of course, but at least by doing this, if possible has frozen your balance, there is no risk of ‘wild’ movements? Once the money has been credited to your bank account 1, 2 or 3 weeks later, your fund is then turned back into all the investments you had previously.
Does this all sound feasible, and doable? 

It sounds idiotic and over time will lower the return from your investments because they will be in cash for an appreciable % of time. And its misplaced because all you are covering is the downside risk and forgetting the upside risk (eg it goes up after you sold) and statistically thats more likely to happen and absolutely certain over a long period.

Just keep (say) one years drawdown in cash, drawdown from that and occasionally top it up selling just what you need to top it up.

Really, with the shenanigans you are contemplating i wonder if investing is for you because you are so worried about the downside, and you'd be better with an annuity.

You seem to be soemone who might panic and go to cash every time theres a market drop and then you'll never get up the nerve to reinvest.

Yes agree, this is a bonkers idea as acknowledged in the Retirement Planner Key Info thread. I am not looking and trying to anticipate falls in the market, just looking at ways that might ‘maximise’ my fund.
Rather than sticking to a plan made 1,2,3 years previous, I am exploring the timing of withdrawals if there was some leeway in when these are done. Better to take from your fund if the balance is healthy rather than one that has contracted. If annuity rates ever picked up to an acceptable level, I’d certainly look at them. No, I would never panic, that bit you have got wrong, this is a marathon not a sprint. Sometimes it can be a case of just sitting tight and trying to make a better call on things rather than staying with a rigid planner.

The answer to that is keep it invested and not try to time the market, which essentially is what you are planning to do however much you try to pretend you arent. "I  am exploring the timing of withdrawals" - how is that not market timing?

Just sell on your regular basis, either each month / three months / six months / yearly / 137 days,  (whatever works for you) unless theres been a  crash (of a magnitude as determined by you)  in which case take some out of your cash buffer instead and dont sell  anything or sell less and take out less, depending how severe a crash and what flexibility you have .

The only timing feature I am looking at is withdrawing when my fund has grown rather than withdrawing when it has contracted and delaying that decision on the latter if possible. Is it beneficial to withdraw when your fund has grown, rather than withdraw when your fund balance has fallen?

Yes it is. Avoids getting into a spiral of decreasing pool with constant amount withdrawal meaning increasingly higher % withdrawal. If you withdrew a constant % it would be b better because that would reduce the amount the pot fell by, however are you withdrawals such that (say) a 30% drop in withdrawal didn't affect you. 

This is why many propose a cash buffer you withdraw from after a decrease in the pot. 

Of course this depends if you didn't wish to decrease the pot, maybe your plans mean that's fine. Either because other pensions mean you can cope or because you,plan to decrease it anyway

Thanks AJ. If you mean one year with a 30% drop in withdrawal, I am sure we could live with that or at least do whatever it takes to get through.
I am in the process of running all sorts of scenario’s (perhaps some I haven’t thought of yet) to see how these project forward. Just an example of one of many a contraction every 3 years followed by fairly good growth of 4% and 6% with withdrawal size differing for all 3, with less in fact than the 30% drop you mention when it contracts. With this my fund balance is more or less protected and is bolstered in 9 years when my state pension kicks in.
My plan is that I decrease the pot and enjoy it while I can. Then at a certain level SP covers around a third to a quarter of outgoings, and this “should” keep the fund fairly stable thereafter with less spending also apparently not far after this time.

jamesd

Deleted_User said:

There is indeed a term. Existence of the term does not make the practice beneficial.

This is drawdown so it's just a case of where to take the money from.

Outside that, taking profits is a matter of some debate. I tend to let the profit stay invested, regarding it at least in part as a momentum play..

[Deleted User]

jamesd said:

Deleted_User said:

There is indeed a term. Existence of the term does not make the practice beneficial.

This is drawdown so it's just a case of where to take the money from.

Outside that, taking profits is a matter of some debate. I tend to let the profit stay invested, regarding it at least in part as a momentum play..

Unless the individual’s risk is suddenly reduced, I find it hard to justify changing asset allocation. Keeping the allocation steady in percentage terms does mean selling mostly stocks during the good times and bonds during the bad times. 

Prism

Deleted_User said:

jamesd said:

Deleted_User said:

There is indeed a term. Existence of the term does not make the practice beneficial.

This is drawdown so it's just a case of where to take the money from.

Outside that, taking profits is a matter of some debate. I tend to let the profit stay invested, regarding it at least in part as a momentum play..

Unless the individual’s risk is suddenly reduced, I find it hard to justify changing asset allocation. Keeping the allocation steady in percentage terms does mean selling mostly stocks during the good times and bonds during the bad times. 

I think its pretty hard to beat a static asset allocation between stocks and bonds like you say. Its certainly a simple option and simple being easy to follow is usually best. Some research suggests you might be able to eek an extra 0.5% withdrawal rate by using some form of flexible balancing model - there are quite a few that have been tested historically. I am not sure that its worth it though for the added worry that if the risk level creeps up or down too much people might start to dabble.

Interestingly one of the models that has worked the best historically is sell bonds first and never rebalance. I'm not sure many people could follow it though since you would end up with 100% equities after about 10 years of retirement. 

[Deleted User]

Right. And frankly, a newly minted retiree needs quite a bit of intestinal fortitude to sell bonds to just rebalance in a major downturn - at the very time when all the newspapers and talking heads are discussing  if an imminent apocalypse will happen this year or next.