UFPLS approach to retirement

NedS

older_and_no_wiser said:

I think one should always factor in that your annual withdrawal will naturally decrease as you get into your 80s (for those luckily enough to have a long life span). As you get older, there is more likelihood of ill health. Do you want to use your remaining money to fund care home fees (if required) or simply use the equity from selling up your home? Personally, I'd love to have completely used up my retirement pot by this time if it came to that.

I disagree. My parents retired at 60 with relatively low pensions (less than £20k combined) and lived frugally and within their means for the last 30 years, but their outgoings have steadily risen since age 80, having to pay people to do many of the routine tasks they were previously able to do themselves. They now pay for a cleaner, window cleaner, gardener, painter & decorator, podiatrist (can't reach to cut their own nails!), food delivery services (can't cook), carer etc.

I would suggest spending is more U shaped, high at beginning of retirement whilst you enjoy expensive hobbies / foreign travel, then dips as you become older and are less able to partake in such activities but still in relatively good health, and finally increases again as you become less able to do things for yourself and have to pay someone for help with every last thing.

dunstonh

I think one should always factor in that your annual withdrawal will naturally decrease as you get into your 80s (for those luckily enough to have a long life span). As you get older, there is more likelihood of ill health. Do you want to use your remaining money to fund care home fees (if required) or simply use the equity from selling up your home? Personally, I'd love to have completely used up my retirement pot by this time if it came to that.

Many may well find their discretionary spend goes down.   However, the increased cost of utilities for being at home more can offset that.   Along with the employment of professionals to carry out tasks that may have been undertaken by themselves previously.  Such as gardening and decorating.

And most people underestimate inflation.  So, not factoring a decline in spending in later years may help offset that.

SouthCoastBoy

I have witnessed relatives getting old (78, 82, and 90) and in my experience as they reach their 80s spending has definitely diminished, for example my 90 year old father in law no longer drives, has downsized from a 3 bed detached house into a 1 bedroom flat, very rarely travels outside a 3 or 4 mile radius of his home and his income (final db pension + state pension) outstrips his spending by a large amount.

Personally, if I'm still around I am expecting spending to start to tail off from around 75 to 80.

MK62

One issue here is looking at the people we know and assuming their experience will apply to us.....it might, but then again.....

It's a tough one though.......do you hold back spending in your 60s just in case, but run the risk of then having too much in later life.......or do you open that spending tap in your 60s, and run the risk of not having enough......it's hard to square that circle.

As I read once, "Only in retirement planning is an early death the winning ticket".........

older_and_no_wiser

NedS said:

older_and_no_wiser said:

I think one should always factor in that your annual withdrawal will naturally decrease as you get into your 80s (for those luckily enough to have a long life span). As you get older, there is more likelihood of ill health. Do you want to use your remaining money to fund care home fees (if required) or simply use the equity from selling up your home? Personally, I'd love to have completely used up my retirement pot by this time if it came to that.

I disagree. My parents retired at 60 with relatively low pensions (less than £20k combined) and lived frugally and within their means for the last 30 years, but their outgoings have steadily risen since age 80, having to pay people to do many of the routine tasks they were previously able to do themselves. They now pay for a cleaner, window cleaner, gardener, painter & decorator, podiatrist (can't reach to cut their own nails!), food delivery services (can't cook), carer etc.

I would suggest spending is more U shaped, high at beginning of retirement whilst you enjoy expensive hobbies / foreign travel, then dips as you become older and are less able to partake in such activities but still in relatively good health, and finally increases again as you become less able to do things for yourself and have to pay someone for help with every last thing.

My father is lucky. He has me to do those things haha!

older_and_no_wiser

I understand about the toenails though! Dad is the same. Luckily we have a local nail place who do them for around a fiver every few weeks. 

pensionpawn

older_and_no_wiser said:

I think one should always factor in that your annual withdrawal will naturally decrease as you get into your 80s (for those luckily enough to have a long life span). As you get older, there is more likelihood of ill health. Do you want to use your remaining money to fund care home fees (if required) or simply use the equity from selling up your home? Personally, I'd love to have completely used up my retirement pot by this time if it came to that.

Hopefully you have a full state pension coming in to fund the later years. 

Is leaving an inheritance for family etc important? If so, could you do this during your life so that you get the benefit of seeing your loved ones enjoy the money?

Travel and holidays will probably decrease as you enter the latter years too.

I'm at an age now (50s) where I can see the above actually happening to the generation above me. My own father's financial behaviour now he's in his late 80s is teaching me so much about what potentially my attitude to money and lifestyle could be in 30+ years time 

Quite a lot to take into account and sometimes spreadsheets and calculators won't take these things into account.

The accumulation phase is certainly a lot easier than the withdrawal phase!

For us, the purpose of a decent pension is to support one last 'adventure' after the kids have grown up and moved out and then keeping us nourished, warm and secure in our final years. We're in our mid 50's and we intend to enjoy ourselves, modestly, from 57 - 67 without, and occasionally with, the (grown up) kids. We're both entitled to a full state pension and if we need any additional finance to help with care in our final years, that will come from the value of our house. I really don't see the point of planning for a good pension pot not to enjoy it in the first decade after retirement, when you'll be at your most active (which will also be you're least active in your life to date!) We also intend to pass on as much wealth as possible to our (grown up) kids whilst we're still around. My ideal scenario is to be the poorest person in the graveyard having enjoyed and passed on my wealth whilst I was still able to appreciate it.

pensionpawn

SouthCoastBoy said:

I have witnessed relatives getting old (78, 82, and 90) and in my experience as they reach their 80s spending has definitely diminished, for example my 90 year old father in law no longer drives, has downsized from a 3 bed detached house into a 1 bedroom flat, very rarely travels outside a 3 or 4 mile radius of his home and his income (final db pension + state pension) outstrips his spending by a large amount.

Personally, if I'm still around I am expecting spending to start to tail off from around 75 to 80.

I have witnessed many examples in my family of getting old and having much more money than energy and time to deplete it. This isn't the dress rehearsal. Within reason enjoy your pension, help your kids or be charitable. You can't take it with you...

Skinnydad

Kim1965 said:

What exactly does the op need the sipp to do? Is it the only pension provisions, sp, db pensions? Is it to fund a specific gap? 

Thanks Kim.  I have 2 other pensions and will receive the full state pension at 66.  In just over 2 years. No one knows how long they'll live but I'd be happy if I can get to 90.  Though I don't really think so.  Between 80-85 more realistic..I intend to run the pot down...

Skinnydad

tacpot12 said:

UFPLS vs. Flexi-drawdown won't change how long the pot will last. 

It will make a difference whether you want £15K before tax or after tax, and whether you want/need the £15K to increase with time, so keep pace with inflation. 

Assuming its £15K after tax, and rising as say 2.5% per annum, £250K would last about 22 years, but in reality the sequence of returns is probably going to reduce this a bit. 18 years would be more certain. 

tacpot12 said:

UFPLS vs. Flexi-drawdown won't change how long the pot will last. 

It will make a difference whether you want £15K before tax or after tax, and whether you want/need the £15K to increase with time, so keep pace with inflation. 

Assuming its £15K after tax, and rising as say 2.5% per annum, £250K would last about 22 years, but in reality the sequence of returns is probably going to reduce this a bit. 18 years would be more certain. 

tacpot12 said:

UFPLS vs. Flexi-drawdown won't change how long the pot will last. 

It will make a difference whether you want £15K before tax or after tax, and whether you want/need the £15K to increase with time, so keep pace with inflation. 

Assuming its £15K after tax, and rising as say 2.5% per annum, £250K would last about 22 years, but in reality the sequence of returns is probably going to reduce this a bit. 18 years would be more certain. 

dunstonh said:

As mentioned, your draw rate is unsustainable.  For example, here is what happened if you started with £250k on the 1st Jan 2000:

You have run out by 2016.

You don't know if you are going to have a good period or a weak one but as we have just had a really good period for over decade and with all the things going on that are going on, you should be planning for a much weaker rate of return.   

3.5% is around the mark. About £8750 a year.  If you are in your 50s then less than that.

Thanks Tacpot12.  15K before tax. I'm aiming to take 1K per month for as long as the pot will last.  so trying to determine how long it could/would last.  I know there are many variables, but I've got to start somewhere.

Thanks as always dunstonh