Pension Drawdown Calculators

Pat38493

dunstonh said:

OK but just so I understand - how is this relevant because I assume that you can still choose to invest in funds that have a lot of US assets - not living in the US doesn't mean you can't take advantage of US returns?

Those US returns are historic.   The UK hit mature market and developed market in decline (for some of it) earlier before the US.   The US was still an emerging market for the early part of the 20th century.  it is not anymore.  So, using historic returns that are not applicable to how things are now is not doing your planning any favours.

Ok then but cfire seems to offer the option to only include specific year ranges of date so is there a year range I should use that would be a better fit and/or is there a (UK) specific model or software that I could use that allows me to model mixed DB and DC scenarios like cfire?

OldScientist

Pat38493 said:

BritishInvestor said:

Thrugelmir said:

OldScientist said:

Thrugelmir said:

OldScientist said:

Pat38493 said:

Albermarle said:

Some may "front load" their drawdowns at 4, 5 maybe even 6%: I feel it is important to have a plan how you will manage if (when!) you do need to pull up the drawbridge if (when!) markets fall on you.   

You will know there is a regular ( long and detailed ) poster on the forum ( although has been quiet for a few weeks now ) who says that by using Guyton-Klinger rules ( which basically seems to mean adjusting withdrawal rates regularly as markets rise and fall ) you can easily and safely take 5% pa increasing with inflation , and even a bit more .

However the poster above says 2% might even be a struggle in certain circumstances. Or Dunstons graphs saying 4% with no inflation could mean disaster .

As you say Nobody will know until we have the benefit of 20:20 hindsight, of course - the accurate calculator is only backward looking 

Thankyou to everyone who replied with their different perspectives - this is really helpful for me.

 I had a look at those rules and yes they look quite good.  However, the issue of whether it's a good idea to cash in my DB scheme is somewhat of a side issue if I look at the most obvious scenario.

According to my calculations, my current DB and state pension combined, would give me an pension of about 31K in today's terms, from age 67.  By an amazing coincidence, although this is a massive cut compared to what I earn now, it's almost exactly the amount to cover my current planned outgoings, assuming that we downsize the house and pay off the mortgage, (which we are planning to do anyway).   This includes "savings" for holidays and everything that I am spending now except costs that are directly related to holidays.  In fact it also includes quite a few discretionary items that in reality I probably wouldn't miss much.

So if I start from the assumption that this 31K will be sufficient, and taking into account that my wife has a gold plated NHS DB pension fully accrued on MHO status, the key question is - how early can I "risk" to retire.

I have 2 DC pots with a combined value today of £303K.  I am putting £1700 per month into one of them right now and intend to continue doing so until I retire (unless I think I will breach the LFA whereupon I will study the situation again, but there is 7% matching so for sure I would at least continue with that).

Therefore the key question is, with a 303K pot expected to grow to £348K by the time I am 55 (assuming 0 growth during next 2 years) could this be enough to already stop work at 55, or if not, when would it be safe to do so?

I would hope to have something like the £31K per year from 55 to 67, so I would have to withdraw roughly £31K in first 10 years then about 10K in the following 2 years if I cash in the DB scheme at 65.

All the above would have to be adjusted for inflation I guess - it's all in today's terms.

It would also be nice to have 100K or so on retirement to buy a new car and a few luxury things but it's not a must.

Further - I am open to the idea that during first 10 years, I might still do some consulting work or need to earn some money in some other way if I want to have a more expensive holiday or the economy looks bad or whatever - I am not necessarily planning to never work again. 

However to be honest, I've been working for the same company for 30 years and although I am financially secure and have a really good job, I don't really enjoy it anymore - I just need the money   .  Therefore the other way I look at it is that if I have that baseline comfort that I can cover my expenses by retirement funds, I can then take some risks to do what I want to do rather than staying in the same job because I am very well paid.

If you are happy to potentially completely spend down your DC pot in those 12 years, then plugging in £350k for pot size, 31k for annual withdrawal and using 60% stocks, 20% bonds, and 20% cash portfolio, the 2020finance calculator gives a historical failure rate of just over 20%. If you can chip the spending down to £26k then this halves the historical failure rate to 10% (I note that the failure rates don't change a lot with asset allocations between 40% an 80% stocks). Another alternative is to retire later, a 10 year spend (with £31k on a £350k pot) survived 90% of the time, 9 year spend 94% of the time, and 7 years nearly 100% of the time (of course, you would have longer to build up the pot, so if markets are kind might have more than £350k). Of course, this excludes any consideration of taxes or fees and the 2020finance calculator assumes solely UK stocks (a more diverse portfolio may have improved things).

Given the current uncertainties that exist. Better to spend time looking out of the window. Than getting too buried in historical probability for a short term forecast. The risks are weighted heavily to the downside. Events in Ukraine haven't changed the other major issues on the agenda. Just compounded the complexity in addressing them. 

There are always uncertainties -

There are known challenges, the uncertainty lies in their resolution.  Historic datasets unfortunately don't guide you where it's best to invest for the future. Use of US centric websites is where many people trip up as well. 

"Use of US centric websites is where many people trip up as well. "

Yep, and even more so if it's a 100% equity dataset such as the S&P.

OK but just so I understand - how is this relevant because I assume that you can still choose to invest in funds that have a lot of US assets - not living in the US doesn't mean you can't take advantage of US returns?

Yes you can, but historically there are two differences:

1) US assets have their returns in dollars - over the last century or so, the gradual fall of the pound against the dollar has meant that pound returns of US assets are slightly higher (less than 10 basis points).

2) Much more importantly, UK inflation has averaged about 5% compared to about 3% for the US and means you don't quite get the inflation-adjusted withdrawal rates you'd hope. Taking the UK results as a lower bound and the US ones as an upper bound is likely to be sensible enough in interpreting historical results.

Kim1965

Pat, retire when you want. Do some simple maths, put away the crystall ball. Be prepared to reduce spending in a major downturn and if the worse happens get a part time job.
 The alternative is stay put and hate what your doing. Your still relatively young and better set than the vast majority. 

Pat38493

OldScientist said:

Pat38493 said:

BritishInvestor said:

Thrugelmir said:

OldScientist said:

Thrugelmir said:

OldScientist said:

Pat38493 said:

Albermarle said:

Some may "front load" their drawdowns at 4, 5 maybe even 6%: I feel it is important to have a plan how you will manage if (when!) you do need to pull up the drawbridge if (when!) markets fall on you.   

You will know there is a regular ( long and detailed ) poster on the forum ( although has been quiet for a few weeks now ) who says that by using Guyton-Klinger rules ( which basically seems to mean adjusting withdrawal rates regularly as markets rise and fall ) you can easily and safely take 5% pa increasing with inflation , and even a bit more .

However the poster above says 2% might even be a struggle in certain circumstances. Or Dunstons graphs saying 4% with no inflation could mean disaster .

As you say Nobody will know until we have the benefit of 20:20 hindsight, of course - the accurate calculator is only backward looking 

Thankyou to everyone who replied with their different perspectives - this is really helpful for me.

 I had a look at those rules and yes they look quite good.  However, the issue of whether it's a good idea to cash in my DB scheme is somewhat of a side issue if I look at the most obvious scenario.

According to my calculations, my current DB and state pension combined, would give me an pension of about 31K in today's terms, from age 67.  By an amazing coincidence, although this is a massive cut compared to what I earn now, it's almost exactly the amount to cover my current planned outgoings, assuming that we downsize the house and pay off the mortgage, (which we are planning to do anyway).   This includes "savings" for holidays and everything that I am spending now except costs that are directly related to holidays.  In fact it also includes quite a few discretionary items that in reality I probably wouldn't miss much.

So if I start from the assumption that this 31K will be sufficient, and taking into account that my wife has a gold plated NHS DB pension fully accrued on MHO status, the key question is - how early can I "risk" to retire.

I have 2 DC pots with a combined value today of £303K.  I am putting £1700 per month into one of them right now and intend to continue doing so until I retire (unless I think I will breach the LFA whereupon I will study the situation again, but there is 7% matching so for sure I would at least continue with that).

Therefore the key question is, with a 303K pot expected to grow to £348K by the time I am 55 (assuming 0 growth during next 2 years) could this be enough to already stop work at 55, or if not, when would it be safe to do so?

I would hope to have something like the £31K per year from 55 to 67, so I would have to withdraw roughly £31K in first 10 years then about 10K in the following 2 years if I cash in the DB scheme at 65.

All the above would have to be adjusted for inflation I guess - it's all in today's terms.

It would also be nice to have 100K or so on retirement to buy a new car and a few luxury things but it's not a must.

Further - I am open to the idea that during first 10 years, I might still do some consulting work or need to earn some money in some other way if I want to have a more expensive holiday or the economy looks bad or whatever - I am not necessarily planning to never work again. 

However to be honest, I've been working for the same company for 30 years and although I am financially secure and have a really good job, I don't really enjoy it anymore - I just need the money   .  Therefore the other way I look at it is that if I have that baseline comfort that I can cover my expenses by retirement funds, I can then take some risks to do what I want to do rather than staying in the same job because I am very well paid.

If you are happy to potentially completely spend down your DC pot in those 12 years, then plugging in £350k for pot size, 31k for annual withdrawal and using 60% stocks, 20% bonds, and 20% cash portfolio, the 2020finance calculator gives a historical failure rate of just over 20%. If you can chip the spending down to £26k then this halves the historical failure rate to 10% (I note that the failure rates don't change a lot with asset allocations between 40% an 80% stocks). Another alternative is to retire later, a 10 year spend (with £31k on a £350k pot) survived 90% of the time, 9 year spend 94% of the time, and 7 years nearly 100% of the time (of course, you would have longer to build up the pot, so if markets are kind might have more than £350k). Of course, this excludes any consideration of taxes or fees and the 2020finance calculator assumes solely UK stocks (a more diverse portfolio may have improved things).

Given the current uncertainties that exist. Better to spend time looking out of the window. Than getting too buried in historical probability for a short term forecast. The risks are weighted heavily to the downside. Events in Ukraine haven't changed the other major issues on the agenda. Just compounded the complexity in addressing them. 

There are always uncertainties -

There are known challenges, the uncertainty lies in their resolution.  Historic datasets unfortunately don't guide you where it's best to invest for the future. Use of US centric websites is where many people trip up as well. 

"Use of US centric websites is where many people trip up as well. "

Yep, and even more so if it's a 100% equity dataset such as the S&P.

OK but just so I understand - how is this relevant because I assume that you can still choose to invest in funds that have a lot of US assets - not living in the US doesn't mean you can't take advantage of US returns?

Yes you can, but historically there are two differences:

1) US assets have their returns in dollars - over the last century or so, the gradual fall of the pound against the dollar has meant that pound returns of US assets are slightly higher (less than 10 basis points).

2) Much more importantly, UK inflation has averaged about 5% compared to about 3% for the US and means you don't quite get the inflation-adjusted withdrawal rates you'd hope. Taking the UK results as a lower bound and the US ones as an upper bound is likely to be sensible enough in interpreting historical results.

Hmm ok thanks.  Is anyone on this thread aware of any UK centric  calculators (or even software that you can buy) which allow you to program mixed scenarios of DB and DC benefits like cfire does?  I’m pretty sure there must be software that IFAs use for that but I’ve now idea how expensive it is to use.   That said, cfire seems to expose enough of its workings in csv files that you could reverse engineer a spreadsheet and then plug in higher inflation values on some of the years.

Also, if the US simulation in cfire is 100%, this effectively means the lower bound is ok?

OldScientist

Thrugelmir said:

OldScientist said:

Given the current uncertainties that exist. Better to spend time looking out of the window. Than getting too buried in historical probability for a short term forecast. The risks are weighted heavily to the downside. Events in Ukraine haven't changed the other major issues on the agenda. Just compounded the complexity in addressing them. 

There are always uncertainties -

There are known challenges, the uncertainty lies in their resolution.  Historic datasets unfortunately don't guide you where it's best to invest for the future. Use of US centric websites is where many people trip up as well. 

The historic datasets are what they are - historical records of returns for different countries, some with embedded serious events in which would if they occurred again destroy planned retirements. For example, hyperinflation in Germany, war loss in Germany, Japan, Italy and in those European countries most devastated by WWII, regime change Russia in 1917, China in 1949, etc. I would agree that these offer little or no guidance as to where to invest (although I don't think anyone has suggested that here), but, in my view, they do offer guidance as to the amounts that can be withdrawn from investments over time, but to some extent only in a negative sense. For example, using an appropriate dataset, if a proposed plan would have prematurely exhausted the portfolio 50% of the time, then it is highly likely that it will not be a good plan in the future either. If the proposed plan did not prematurely exhaust the portfolio at all in history, then this is exactly what it tells us. In terms of interpreting this for the future, then all we know is that conditions would have to be much worse than any so far encountered for the plan to fail. That such conditions could exist is definitely the case (i.e. the UK could undergo hyperinflation), but trying to quantify that probability is not trivial or, probably, even meaningful.

Completely agree with your comment about US centric websites - the problem, for UK retirees, is that currently UK based ones are very few and far between (2020finance is the only free one for which you don't have to sign up for, timeline, which I know some here use, I think has a free demo mode(?) but does need to be signed up for).

Thrugelmir

Pat38493 said:

BritishInvestor said:

Thrugelmir said:

OldScientist said:

Thrugelmir said:

OldScientist said:

Pat38493 said:

Albermarle said:

Some may "front load" their drawdowns at 4, 5 maybe even 6%: I feel it is important to have a plan how you will manage if (when!) you do need to pull up the drawbridge if (when!) markets fall on you.   

You will know there is a regular ( long and detailed ) poster on the forum ( although has been quiet for a few weeks now ) who says that by using Guyton-Klinger rules ( which basically seems to mean adjusting withdrawal rates regularly as markets rise and fall ) you can easily and safely take 5% pa increasing with inflation , and even a bit more .

However the poster above says 2% might even be a struggle in certain circumstances. Or Dunstons graphs saying 4% with no inflation could mean disaster .

As you say Nobody will know until we have the benefit of 20:20 hindsight, of course - the accurate calculator is only backward looking 

Thankyou to everyone who replied with their different perspectives - this is really helpful for me.

 I had a look at those rules and yes they look quite good.  However, the issue of whether it's a good idea to cash in my DB scheme is somewhat of a side issue if I look at the most obvious scenario.

According to my calculations, my current DB and state pension combined, would give me an pension of about 31K in today's terms, from age 67.  By an amazing coincidence, although this is a massive cut compared to what I earn now, it's almost exactly the amount to cover my current planned outgoings, assuming that we downsize the house and pay off the mortgage, (which we are planning to do anyway).   This includes "savings" for holidays and everything that I am spending now except costs that are directly related to holidays.  In fact it also includes quite a few discretionary items that in reality I probably wouldn't miss much.

So if I start from the assumption that this 31K will be sufficient, and taking into account that my wife has a gold plated NHS DB pension fully accrued on MHO status, the key question is - how early can I "risk" to retire.

I have 2 DC pots with a combined value today of £303K.  I am putting £1700 per month into one of them right now and intend to continue doing so until I retire (unless I think I will breach the LFA whereupon I will study the situation again, but there is 7% matching so for sure I would at least continue with that).

Therefore the key question is, with a 303K pot expected to grow to £348K by the time I am 55 (assuming 0 growth during next 2 years) could this be enough to already stop work at 55, or if not, when would it be safe to do so?

I would hope to have something like the £31K per year from 55 to 67, so I would have to withdraw roughly £31K in first 10 years then about 10K in the following 2 years if I cash in the DB scheme at 65.

All the above would have to be adjusted for inflation I guess - it's all in today's terms.

It would also be nice to have 100K or so on retirement to buy a new car and a few luxury things but it's not a must.

Further - I am open to the idea that during first 10 years, I might still do some consulting work or need to earn some money in some other way if I want to have a more expensive holiday or the economy looks bad or whatever - I am not necessarily planning to never work again. 

However to be honest, I've been working for the same company for 30 years and although I am financially secure and have a really good job, I don't really enjoy it anymore - I just need the money   .  Therefore the other way I look at it is that if I have that baseline comfort that I can cover my expenses by retirement funds, I can then take some risks to do what I want to do rather than staying in the same job because I am very well paid.

If you are happy to potentially completely spend down your DC pot in those 12 years, then plugging in £350k for pot size, 31k for annual withdrawal and using 60% stocks, 20% bonds, and 20% cash portfolio, the 2020finance calculator gives a historical failure rate of just over 20%. If you can chip the spending down to £26k then this halves the historical failure rate to 10% (I note that the failure rates don't change a lot with asset allocations between 40% an 80% stocks). Another alternative is to retire later, a 10 year spend (with £31k on a £350k pot) survived 90% of the time, 9 year spend 94% of the time, and 7 years nearly 100% of the time (of course, you would have longer to build up the pot, so if markets are kind might have more than £350k). Of course, this excludes any consideration of taxes or fees and the 2020finance calculator assumes solely UK stocks (a more diverse portfolio may have improved things).

Given the current uncertainties that exist. Better to spend time looking out of the window. Than getting too buried in historical probability for a short term forecast. The risks are weighted heavily to the downside. Events in Ukraine haven't changed the other major issues on the agenda. Just compounded the complexity in addressing them. 

There are always uncertainties -

There are known challenges, the uncertainty lies in their resolution.  Historic datasets unfortunately don't guide you where it's best to invest for the future. Use of US centric websites is where many people trip up as well. 

"Use of US centric websites is where many people trip up as well. "

Yep, and even more so if it's a 100% equity dataset such as the S&P.

OK but just so I understand - how is this relevant because I assume that you can still choose to invest in funds that have a lot of US assets - not living in the US doesn't mean you can't take advantage of US returns?

In summary. You'd need to account for currency exchange movements on your purchases and sales of investments, likewise on income paid out.  As we don't use $ in the UK. 

Pat38493

Thrugelmir said:

Pat38493 said:

BritishInvestor said:

Thrugelmir said:

OldScientist said:

Thrugelmir said:

OldScientist said:

Pat38493 said:

Albermarle said:

Some may "front load" their drawdowns at 4, 5 maybe even 6%: I feel it is important to have a plan how you will manage if (when!) you do need to pull up the drawbridge if (when!) markets fall on you.   

You will know there is a regular ( long and detailed ) poster on the forum ( although has been quiet for a few weeks now ) who says that by using Guyton-Klinger rules ( which basically seems to mean adjusting withdrawal rates regularly as markets rise and fall ) you can easily and safely take 5% pa increasing with inflation , and even a bit more .

However the poster above says 2% might even be a struggle in certain circumstances. Or Dunstons graphs saying 4% with no inflation could mean disaster .

As you say Nobody will know until we have the benefit of 20:20 hindsight, of course - the accurate calculator is only backward looking 

Thankyou to everyone who replied with their different perspectives - this is really helpful for me.

 I had a look at those rules and yes they look quite good.  However, the issue of whether it's a good idea to cash in my DB scheme is somewhat of a side issue if I look at the most obvious scenario.

According to my calculations, my current DB and state pension combined, would give me an pension of about 31K in today's terms, from age 67.  By an amazing coincidence, although this is a massive cut compared to what I earn now, it's almost exactly the amount to cover my current planned outgoings, assuming that we downsize the house and pay off the mortgage, (which we are planning to do anyway).   This includes "savings" for holidays and everything that I am spending now except costs that are directly related to holidays.  In fact it also includes quite a few discretionary items that in reality I probably wouldn't miss much.

So if I start from the assumption that this 31K will be sufficient, and taking into account that my wife has a gold plated NHS DB pension fully accrued on MHO status, the key question is - how early can I "risk" to retire.

I have 2 DC pots with a combined value today of £303K.  I am putting £1700 per month into one of them right now and intend to continue doing so until I retire (unless I think I will breach the LFA whereupon I will study the situation again, but there is 7% matching so for sure I would at least continue with that).

Therefore the key question is, with a 303K pot expected to grow to £348K by the time I am 55 (assuming 0 growth during next 2 years) could this be enough to already stop work at 55, or if not, when would it be safe to do so?

I would hope to have something like the £31K per year from 55 to 67, so I would have to withdraw roughly £31K in first 10 years then about 10K in the following 2 years if I cash in the DB scheme at 65.

All the above would have to be adjusted for inflation I guess - it's all in today's terms.

It would also be nice to have 100K or so on retirement to buy a new car and a few luxury things but it's not a must.

Further - I am open to the idea that during first 10 years, I might still do some consulting work or need to earn some money in some other way if I want to have a more expensive holiday or the economy looks bad or whatever - I am not necessarily planning to never work again. 

However to be honest, I've been working for the same company for 30 years and although I am financially secure and have a really good job, I don't really enjoy it anymore - I just need the money   .  Therefore the other way I look at it is that if I have that baseline comfort that I can cover my expenses by retirement funds, I can then take some risks to do what I want to do rather than staying in the same job because I am very well paid.

If you are happy to potentially completely spend down your DC pot in those 12 years, then plugging in £350k for pot size, 31k for annual withdrawal and using 60% stocks, 20% bonds, and 20% cash portfolio, the 2020finance calculator gives a historical failure rate of just over 20%. If you can chip the spending down to £26k then this halves the historical failure rate to 10% (I note that the failure rates don't change a lot with asset allocations between 40% an 80% stocks). Another alternative is to retire later, a 10 year spend (with £31k on a £350k pot) survived 90% of the time, 9 year spend 94% of the time, and 7 years nearly 100% of the time (of course, you would have longer to build up the pot, so if markets are kind might have more than £350k). Of course, this excludes any consideration of taxes or fees and the 2020finance calculator assumes solely UK stocks (a more diverse portfolio may have improved things).

Given the current uncertainties that exist. Better to spend time looking out of the window. Than getting too buried in historical probability for a short term forecast. The risks are weighted heavily to the downside. Events in Ukraine haven't changed the other major issues on the agenda. Just compounded the complexity in addressing them. 

There are always uncertainties -

There are known challenges, the uncertainty lies in their resolution.  Historic datasets unfortunately don't guide you where it's best to invest for the future. Use of US centric websites is where many people trip up as well. 

"Use of US centric websites is where many people trip up as well. "

Yep, and even more so if it's a 100% equity dataset such as the S&P.

OK but just so I understand - how is this relevant because I assume that you can still choose to invest in funds that have a lot of US assets - not living in the US doesn't mean you can't take advantage of US returns?

In summary. You'd need to account for currency exchange movements on your purchases and sales of investments, likewise on income paid out.  As we don't use $ in the UK. 

Wouldn't that only be the case if you were actually dealing yourself?  My current default retirement fund says that it includes 46% of North American equities? 

Pat38493

"Completely agree with your comment about US centric websites - the problem, for UK retirees, is that currently UK based ones are very few and far between (2020finance is the only free one for which you don't have to sign up for, timeline, which I know some here use, I think has a free demo mode(?) but does need to be signed up for)."

Why would I not want to sign up?

Albermarle

Pat38493 said:

OldScientist said:

Pat38493 said:

BritishInvestor said:

Thrugelmir said:

OldScientist said:

Thrugelmir said:

OldScientist said:

Pat38493 said:

Albermarle said:

Some may "front load" their drawdowns at 4, 5 maybe even 6%: I feel it is important to have a plan how you will manage if (when!) you do need to pull up the drawbridge if (when!) markets fall on you.   

You will know there is a regular ( long and detailed ) poster on the forum ( although has been quiet for a few weeks now ) who says that by using Guyton-Klinger rules ( which basically seems to mean adjusting withdrawal rates regularly as markets rise and fall ) you can easily and safely take 5% pa increasing with inflation , and even a bit more .

However the poster above says 2% might even be a struggle in certain circumstances. Or Dunstons graphs saying 4% with no inflation could mean disaster .

As you say Nobody will know until we have the benefit of 20:20 hindsight, of course - the accurate calculator is only backward looking 

Thankyou to everyone who replied with their different perspectives - this is really helpful for me.

 I had a look at those rules and yes they look quite good.  However, the issue of whether it's a good idea to cash in my DB scheme is somewhat of a side issue if I look at the most obvious scenario.

According to my calculations, my current DB and state pension combined, would give me an pension of about 31K in today's terms, from age 67.  By an amazing coincidence, although this is a massive cut compared to what I earn now, it's almost exactly the amount to cover my current planned outgoings, assuming that we downsize the house and pay off the mortgage, (which we are planning to do anyway).   This includes "savings" for holidays and everything that I am spending now except costs that are directly related to holidays.  In fact it also includes quite a few discretionary items that in reality I probably wouldn't miss much.

So if I start from the assumption that this 31K will be sufficient, and taking into account that my wife has a gold plated NHS DB pension fully accrued on MHO status, the key question is - how early can I "risk" to retire.

I have 2 DC pots with a combined value today of £303K.  I am putting £1700 per month into one of them right now and intend to continue doing so until I retire (unless I think I will breach the LFA whereupon I will study the situation again, but there is 7% matching so for sure I would at least continue with that).

Therefore the key question is, with a 303K pot expected to grow to £348K by the time I am 55 (assuming 0 growth during next 2 years) could this be enough to already stop work at 55, or if not, when would it be safe to do so?

I would hope to have something like the £31K per year from 55 to 67, so I would have to withdraw roughly £31K in first 10 years then about 10K in the following 2 years if I cash in the DB scheme at 65.

All the above would have to be adjusted for inflation I guess - it's all in today's terms.

It would also be nice to have 100K or so on retirement to buy a new car and a few luxury things but it's not a must.

Further - I am open to the idea that during first 10 years, I might still do some consulting work or need to earn some money in some other way if I want to have a more expensive holiday or the economy looks bad or whatever - I am not necessarily planning to never work again. 

However to be honest, I've been working for the same company for 30 years and although I am financially secure and have a really good job, I don't really enjoy it anymore - I just need the money   .  Therefore the other way I look at it is that if I have that baseline comfort that I can cover my expenses by retirement funds, I can then take some risks to do what I want to do rather than staying in the same job because I am very well paid.

If you are happy to potentially completely spend down your DC pot in those 12 years, then plugging in £350k for pot size, 31k for annual withdrawal and using 60% stocks, 20% bonds, and 20% cash portfolio, the 2020finance calculator gives a historical failure rate of just over 20%. If you can chip the spending down to £26k then this halves the historical failure rate to 10% (I note that the failure rates don't change a lot with asset allocations between 40% an 80% stocks). Another alternative is to retire later, a 10 year spend (with £31k on a £350k pot) survived 90% of the time, 9 year spend 94% of the time, and 7 years nearly 100% of the time (of course, you would have longer to build up the pot, so if markets are kind might have more than £350k). Of course, this excludes any consideration of taxes or fees and the 2020finance calculator assumes solely UK stocks (a more diverse portfolio may have improved things).

Given the current uncertainties that exist. Better to spend time looking out of the window. Than getting too buried in historical probability for a short term forecast. The risks are weighted heavily to the downside. Events in Ukraine haven't changed the other major issues on the agenda. Just compounded the complexity in addressing them. 

There are always uncertainties -

There are known challenges, the uncertainty lies in their resolution.  Historic datasets unfortunately don't guide you where it's best to invest for the future. Use of US centric websites is where many people trip up as well. 

"Use of US centric websites is where many people trip up as well. "

Yep, and even more so if it's a 100% equity dataset such as the S&P.

OK but just so I understand - how is this relevant because I assume that you can still choose to invest in funds that have a lot of US assets - not living in the US doesn't mean you can't take advantage of US returns?

Yes you can, but historically there are two differences:

1) US assets have their returns in dollars - over the last century or so, the gradual fall of the pound against the dollar has meant that pound returns of US assets are slightly higher (less than 10 basis points).

2) Much more importantly, UK inflation has averaged about 5% compared to about 3% for the US and means you don't quite get the inflation-adjusted withdrawal rates you'd hope. Taking the UK results as a lower bound and the US ones as an upper bound is likely to be sensible enough in interpreting historical results.

Hmm ok thanks.  Is anyone on this thread aware of any UK centric  calculators (or even software that you can buy) which allow you to program mixed scenarios of DB and DC benefits like cfire does?  I’m pretty sure there must be software that IFAs use for that but I’ve now idea how expensive it is to use.   That said, cfire seems to expose enough of its workings in csv files that you could reverse engineer a spreadsheet and then plug in higher inflation values on some of the years.

Also, if the US simulation in cfire is 100%, this effectively means the lower bound is ok?

I do not know if these would be any good for you .
Retirement Planning Spreadsheet for Couples (and Individuals) | whatapalaver
Plan for Retirement | Retirement Planner | Planning a Retirement | RetireEasy

Pat38493

Albermarle said:

Pat38493 said:

OldScientist said:

Pat38493 said:

BritishInvestor said:

Thrugelmir said:

OldScientist said:

Thrugelmir said:

OldScientist said:

Pat38493 said:

Albermarle said:

Some may "front load" their drawdowns at 4, 5 maybe even 6%: I feel it is important to have a plan how you will manage if (when!) you do need to pull up the drawbridge if (when!) markets fall on you.   

You will know there is a regular ( long and detailed ) poster on the forum ( although has been quiet for a few weeks now ) who says that by using Guyton-Klinger rules ( which basically seems to mean adjusting withdrawal rates regularly as markets rise and fall ) you can easily and safely take 5% pa increasing with inflation , and even a bit more .

However the poster above says 2% might even be a struggle in certain circumstances. Or Dunstons graphs saying 4% with no inflation could mean disaster .

As you say Nobody will know until we have the benefit of 20:20 hindsight, of course - the accurate calculator is only backward looking 

Thankyou to everyone who replied with their different perspectives - this is really helpful for me.

 I had a look at those rules and yes they look quite good.  However, the issue of whether it's a good idea to cash in my DB scheme is somewhat of a side issue if I look at the most obvious scenario.

According to my calculations, my current DB and state pension combined, would give me an pension of about 31K in today's terms, from age 67.  By an amazing coincidence, although this is a massive cut compared to what I earn now, it's almost exactly the amount to cover my current planned outgoings, assuming that we downsize the house and pay off the mortgage, (which we are planning to do anyway).   This includes "savings" for holidays and everything that I am spending now except costs that are directly related to holidays.  In fact it also includes quite a few discretionary items that in reality I probably wouldn't miss much.

So if I start from the assumption that this 31K will be sufficient, and taking into account that my wife has a gold plated NHS DB pension fully accrued on MHO status, the key question is - how early can I "risk" to retire.

I have 2 DC pots with a combined value today of £303K.  I am putting £1700 per month into one of them right now and intend to continue doing so until I retire (unless I think I will breach the LFA whereupon I will study the situation again, but there is 7% matching so for sure I would at least continue with that).

Therefore the key question is, with a 303K pot expected to grow to £348K by the time I am 55 (assuming 0 growth during next 2 years) could this be enough to already stop work at 55, or if not, when would it be safe to do so?

I would hope to have something like the £31K per year from 55 to 67, so I would have to withdraw roughly £31K in first 10 years then about 10K in the following 2 years if I cash in the DB scheme at 65.

All the above would have to be adjusted for inflation I guess - it's all in today's terms.

It would also be nice to have 100K or so on retirement to buy a new car and a few luxury things but it's not a must.

Further - I am open to the idea that during first 10 years, I might still do some consulting work or need to earn some money in some other way if I want to have a more expensive holiday or the economy looks bad or whatever - I am not necessarily planning to never work again. 

However to be honest, I've been working for the same company for 30 years and although I am financially secure and have a really good job, I don't really enjoy it anymore - I just need the money   .  Therefore the other way I look at it is that if I have that baseline comfort that I can cover my expenses by retirement funds, I can then take some risks to do what I want to do rather than staying in the same job because I am very well paid.

If you are happy to potentially completely spend down your DC pot in those 12 years, then plugging in £350k for pot size, 31k for annual withdrawal and using 60% stocks, 20% bonds, and 20% cash portfolio, the 2020finance calculator gives a historical failure rate of just over 20%. If you can chip the spending down to £26k then this halves the historical failure rate to 10% (I note that the failure rates don't change a lot with asset allocations between 40% an 80% stocks). Another alternative is to retire later, a 10 year spend (with £31k on a £350k pot) survived 90% of the time, 9 year spend 94% of the time, and 7 years nearly 100% of the time (of course, you would have longer to build up the pot, so if markets are kind might have more than £350k). Of course, this excludes any consideration of taxes or fees and the 2020finance calculator assumes solely UK stocks (a more diverse portfolio may have improved things).

Given the current uncertainties that exist. Better to spend time looking out of the window. Than getting too buried in historical probability for a short term forecast. The risks are weighted heavily to the downside. Events in Ukraine haven't changed the other major issues on the agenda. Just compounded the complexity in addressing them. 

There are always uncertainties -

There are known challenges, the uncertainty lies in their resolution.  Historic datasets unfortunately don't guide you where it's best to invest for the future. Use of US centric websites is where many people trip up as well. 

"Use of US centric websites is where many people trip up as well. "

Yep, and even more so if it's a 100% equity dataset such as the S&P.

OK but just so I understand - how is this relevant because I assume that you can still choose to invest in funds that have a lot of US assets - not living in the US doesn't mean you can't take advantage of US returns?

Yes you can, but historically there are two differences:

1) US assets have their returns in dollars - over the last century or so, the gradual fall of the pound against the dollar has meant that pound returns of US assets are slightly higher (less than 10 basis points).

2) Much more importantly, UK inflation has averaged about 5% compared to about 3% for the US and means you don't quite get the inflation-adjusted withdrawal rates you'd hope. Taking the UK results as a lower bound and the US ones as an upper bound is likely to be sensible enough in interpreting historical results.

Hmm ok thanks.  Is anyone on this thread aware of any UK centric  calculators (or even software that you can buy) which allow you to program mixed scenarios of DB and DC benefits like cfire does?  I’m pretty sure there must be software that IFAs use for that but I’ve now idea how expensive it is to use.   That said, cfire seems to expose enough of its workings in csv files that you could reverse engineer a spreadsheet and then plug in higher inflation values on some of the years.

Also, if the US simulation in cfire is 100%, this effectively means the lower bound is ok?

I do not know if these would be any good for you .
Retirement Planning Spreadsheet for Couples (and Individuals) | whatapalaver
Plan for Retirement | Retirement Planner | Planning a Retirement | RetireEasy

Thanks I will take a look at those - retireeasy looks interesting but it's not immediately obvious from the "about" pages whether they use historical data modelling as part of the input into the assumed inflation and growth rates.