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Foolishness of the 4% rule
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ukdw said:I personally had a big debate with myself about whether to go for £12.5k drawdowns or £50k drawdowns - I went for £12.5k for a while, but kept thinking I might regret not using any of the 20% band (and risking paying a higher rate in the future), so in the end I changed to £50k for the next few years, with excess drawdowns being reinvested into S&S ISAs.
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Don’t let the tax tail wag the dog. Future taxes are unpredictable. Base your withdrawal schedule on safety and affordability first.0
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Deleted_User said:Don’t let the tax tail wag the dog. Future taxes are unpredictable. Base your withdrawal schedule on safety and affordability first.
But if you're pulling it out of a pension and immediately reinvesting in an ISA, in a similar (if not identical fund) where's the risk?How's it going, AKA, Nutwatch? - 12 month spends to date = 2.60% of current retirement "pot" (as at end May 2025)5 -
Sea_Shell said:Deleted_User said:Don’t let the tax tail wag the dog. Future taxes are unpredictable. Base your withdrawal schedule on safety and affordability first.
But if you're pulling it out of a pension and immediately reinvesting in an ISA, in a similar (if not identical fund) where's the risk?0 -
Deleted_User said:Sea_Shell said:Deleted_User said:Don’t let the tax tail wag the dog. Future taxes are unpredictable. Base your withdrawal schedule on safety and affordability first.
But if you're pulling it out of a pension and immediately reinvesting in an ISA, in a similar (if not identical fund) where's the risk?0 -
Thrugelmir said:Deleted_User said:Sea_Shell said:Deleted_User said:Don’t let the tax tail wag the dog. Future taxes are unpredictable. Base your withdrawal schedule on safety and affordability first.
But if you're pulling it out of a pension and immediately reinvesting in an ISA, in a similar (if not identical fund) where's the risk?
The 4% rule was a media interpretation of Bengen’s research that found 4.15% to be SWR for two asset classes in the US.
However if you someone asks you for a starting target for a retirement pot you could say 25 x your gross salary less any expenses you’ll no longer have in retirement. Hopefully a catalyst to research the options, their expenditure and future budgets. It is the start…1 -
DT2001 said:Thrugelmir said:Deleted_User said:Sea_Shell said:Deleted_User said:Don’t let the tax tail wag the dog. Future taxes are unpredictable. Base your withdrawal schedule on safety and affordability first.
But if you're pulling it out of a pension and immediately reinvesting in an ISA, in a similar (if not identical fund) where's the risk?1 -
Audaxer said:DT2001 said:Thrugelmir said:Deleted_User said:Sea_Shell said:Deleted_User said:Don’t let the tax tail wag the dog. Future taxes are unpredictable. Base your withdrawal schedule on safety and affordability first.
But if you're pulling it out of a pension and immediately reinvesting in an ISA, in a similar (if not identical fund) where's the risk?
The Ultimate Guide to Safe Withdrawal Rates – Part 4: Social Security and Pensions – Early Retirement Now
https://earlyretirementnow.com/2017/07/19/the-ultimate-guide-to-safe-withdrawal-rates-part-17-social-security/
I think....3 -
DT2001 said:Thrugelmir said:Deleted_User said:Sea_Shell said:Deleted_User said:Don’t let the tax tail wag the dog. Future taxes are unpredictable. Base your withdrawal schedule on safety and affordability first.
But if you're pulling it out of a pension and immediately reinvesting in an ISA, in a similar (if not identical fund) where's the risk?
The 4% rule was a media interpretation of Bengen’s research that found 4.15% to be SWR for two asset classes in the US.
However if you someone asks you for a starting target for a retirement pot you could say 25 x your gross salary less any expenses you’ll no longer have in retirement. Hopefully a catalyst to research the options, their expenditure and future budgets. It is the start…Various variable withdrawal methods are far more meaningful and give a better idea of what one might be able to safely withdraw but in terms relative to the ongoing variable portfolio value. VPW table provides such indication for that method (age dependent).
Both SWR and VPW apply to the pre-tax portfolio value. Figuring out the tax efficient withdrawal strategy and net of tax income is the next level of complexity. One really ought to first decide how much to withdraw and only then focus on the most tax efficient way to withdraw that amount. A helpful method of accounting for potential future taxes is to project net as well as gross value of your portfolio. I track the net value by applying an assumed tax rate, depending on the wrapper (30% for pension, 10% for non-registered investments and 0% for ISA).0 -
Since July 2018, our outgoings have averaged 2.3% of the pot total at the start of any given 12 month period, and 2.16% of the pot as it currently stood at the end of each 12 month period. As growth has seen our spends reduce relative to current pot value, compared to where we were 12 months earlier IYSWIM.
So 4% would be a spending bonanza!!!!How's it going, AKA, Nutwatch? - 12 month spends to date = 2.60% of current retirement "pot" (as at end May 2025)2
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