SWR Question

BritishInvestor

westv said:

Just curious to know whether people count the any cash funds in the total pot from which any withdrawal percentage is calculated or whether their cash funds are totally separate.

I think it would make things a lot simpler to model it as a total pot and base the SWR upon this.

Sea_Shell

westv said:

Just curious to know whether people count the any cash funds in the total pot from which any withdrawal percentage is calculated or whether their cash funds are totally separate.

Total pot including cash.  All in.

Cash is just one part of the overall portfolio, and balances with all the investments, some of which are 100% equities.

michaels

All monies are part of the pot imho.  Of course some that are already ringfenced for specific expenditure would not get included and I tend to model a sperate cash/low volatility pot to cover for state pension between retirement date and state pension age.

coyrls

westv said:

Just curious to know whether people count the any cash funds in the total pot from which any withdrawal percentage is calculated or whether their cash funds are totally separate.

With a classic SWR strategy, the withdrawal percentage is only calculated once, from the total pot.  The calculated sum is then increased each year by inflation; there is no subsequent withdrawal percentage calculation.

westv

coyrls said:

westv said:

Just curious to know whether people count the any cash funds in the total pot from which any withdrawal percentage is calculated or whether their cash funds are totally separate.

With a classic SWR strategy, the withdrawal percentage is only calculated once, from the total pot.  The calculated sum is then increased each year by inflation; there is no subsequent withdrawal percentage calculation.

Yes, I think we all know that.

coyrls

westv said:

coyrls said:

westv said:

Just curious to know whether people count the any cash funds in the total pot from which any withdrawal percentage is calculated or whether their cash funds are totally separate.

With a classic SWR strategy, the withdrawal percentage is only calculated once, from the total pot.  The calculated sum is then increased each year by inflation; there is no subsequent withdrawal percentage calculation.

Yes, I think we all know that.

You'd be surprised.

Sea_Shell

But every day, is day one, of the rest of your life! 😉

michaels

So I have just run another SWR scenario.  In one set or circumstances at year 15 out of 44 the outstanding pot falls to 6 x the annual withdrawal (about 2.5x the total annual spend).  Surely this makes the whole idea of an SWR based on worst historic experience unrealistic as if you were living through such a sequence there is no way you would hold your nerve and continue with what proved with hindsight to be the SWR if your pot was so depleted so early?

Linton

michaels said:

So I have just run another SWR scenario.  In one set or circumstances at year 15 out of 44 the outstanding pot falls to 6 x the annual withdrawal (about 2.5x the total annual spend).  Surely this makes the whole idea of an SWR based on worst historic experience unrealistic as if you were living through such a sequence there is no way you would hold your nerve and continue with what proved with hindsight to be the SWR if your pot was so depleted so early?

As I see it the whole role of SWR, or any other retirement planning approach, is to give you the confidence to retire despite the future being entirely unknown. From my experience of retirement it is difficult to believe that anyone would actually blindly implement it.  Things change too much.

Sea_Shell

Linton said:

michaels said:

So I have just run another SWR scenario.  In one set or circumstances at year 15 out of 44 the outstanding pot falls to 6 x the annual withdrawal (about 2.5x the total annual spend).  Surely this makes the whole idea of an SWR based on worst historic experience unrealistic as if you were living through such a sequence there is no way you would hold your nerve and continue with what proved with hindsight to be the SWR if your pot was so depleted so early?

As I see it the whole role of SWR, or any other retirement planning approach, is to give you the confidence to retire despite the future being entirely unknown. From my experience of retirement it is difficult to believe that anyone would actually blindly implement it.  Things change too much.

You'd need nerves of steel to keep spending at your SWR if your investments are tanking!!!

Personally, I'm sure I'd hunker down and live on beans and rice, just in case!! 😉