Pension growth question

[Deleted User]

SWR of 4% was developed in mid 90s using a 95% success rate.  Returns obviously varied, they did Monte Carlo sampling and historic distributions over 100 years in the US.

Personally, I don’t like a 5% chance of dying in abject poverty. An even bigger problem is that a new retiree today could live for 40 years. Easy. That’s way too long a period compared to 100 years. 

SWR is a contradiction in terms. Any constant rate of withdrawal from a variable market is inherently unsafe. 

barnstar2077

I wouldn't consider living off of my state pension alone to be abject poverty. 

Money_Mad

I have assumed 5% after inflation during the accumulation phase in my pension projections. I’m currently achieving a much better performance than that. I have also assumed 1% above inflation growth when I draw down the pension, which I consider quite pessimistic as I will be keeping a large portion of my investments in equities.

Thrugelmir

Money_Mad said:

I’m currently achieving a much better performance than that.

Have you achieved that return. Or merely surfed the waves?  Over estimating ones own abilities isn't advisable. 

Sea_Shell

We've been wondering what "ball park" growth figure to use when trying to future forecast pension pots.

So not SWR at such, but more realistic growth potential over 10+ years.

7% seems a mid way punt??  Too optimistic, too pessimistic??

Crystal ball anyone!!?

Money_Mad

Thrugelmir said:

Money_Mad said:

I’m currently achieving a much better performance than that.

Have you achieved that return. Or merely surfed the waves?  Over estimating ones own abilities isn't advisable. 

Maybe, but I figure I can make up any shortfall by either increasing contribution while I’m still working or work longer. Historically the average global stock market return is >7% per year, obviously there is no guarantee that will continue. 

I plan to retire in my early 50s, so if I find I need to work an extra year I don’t consider it a big deal.
I have also included some margin of error in the amount I have assumed to draw down. I currently live on quite a bit less than I have assumed

shinytop

Sea_Shell said:

We've been wondering what "ball park" growth figure to use when trying to future forecast pension pots.

So not SWR at such, but more realistic growth potential over 10+ years.

7% seems a mid way punt??  Too optimistic, too pessimistic??

Crystal ball anyone!!?

Is this before or after inflation?  If after it seems a bit high, although I (and it seems most others on this board) have no real evidence to justify such an opinion.   

Sea_Shell

shinytop said:

Sea_Shell said:

We've been wondering what "ball park" growth figure to use when trying to future forecast pension pots.

So not SWR at such, but more realistic growth potential over 10+ years.

7% seems a mid way punt??  Too optimistic, too pessimistic??

Crystal ball anyone!!?

Is this before or after inflation?  If after it seems a bit high, although I (and it seems most others on this board) have no real evidence to justify such an opinion.   

I guess before (as I hadn't factored it in otherwise).     Just put in a ball-park growth figure to try and work out a plan for the most tax efficient way of drawing DC before DB and SP come into play.    

It may be counter intuitive, but to be able to also withdraw any growth, rather than just the initial capital, we'd need to pull out at a rate above our PA for the first 9 years, paying some tax,(but emptying the pot) which does make the total tax payable over the long term (20 years) less - by about £10k!!  (assuming rates and allowances don't change)