Market downturn - pause drawdown?

Billxx

Hi,

I take a small monthly drawdown from my private pension.  In the light of the market downturn, is anyone in a similar position considering pausing thier drawdown and relying on their cash reserves?

Albermarle

Billxx said:

Hi,

I take a small monthly drawdown from my private pension.  In the light of the market downturn, is anyone in a similar position considering pausing thier drawdown and relying on their cash reserves?

There is no black and white answer, it is a judgement call.

In theory you should use cash rather than crystallise losses by selling investments. The question is how far down do investments have to go before it is the right time to do this?
The current level of investments may not recover for some time/ may get worse. In which case you would noy want to be using up all your cash too soon.

Depends also on how high your drawdown rate is .

Notepad_Phil

We've little to go on in terms of your age, financial position, when you retired, or how you decided on how much you could drawdown in the first place, so you're likely to get very generic answers.

If you've little cash to fall back on then I'd hold back for now, but if you do have a more substantial cash pot then perhaps you might want to not stop your drawdown in its entirety, but maybe reduce it and use some of the cash.

I'm retired and am lucky in that I can live off the natural income from my personal portfolio, but if ever there was a dividend drought (like during COVID) then I can supplement my dividends from my cash pot and can afford to do that for several years even if the dividends dried up completely.

Perhaps in a similar way you could reduce your drawdown by whatever percentage your portfolio is down from when you retired, and use cash to supplement that, or if cash is limited reduce your drawdown by a smaller amount.

There's also the matter of how much you really need to drawdown. If you could perhaps cut back your budgetary requirements then you could reduce your drawdown but not use your cash reserves if they are limited.

Linton

When you planned your drawdown it would have been sensible to include what happens when prices fall.  My requirement was that drawdown should never be reduced because of external events, but rather investments should be allocated to ensure that it is never necessary.  So I wont be changing things because of the recent fall in prices.

Part of this strategy is ensuring that all normal ongoing expenditure is more than covered by guranteed pension income plus dividend/interest income from funds.

westv

OP, markets have been up at timee but mostly down for a number of months now.
I'm interested to know what you have done so far.

bostonerimus

There are a number of different strategies for drawdown. Some will continue withdrawals because market variations are baked into the approach and there are variable withdrawal strategies like Guyton Klinger. In the old days people might just live on dividends and interest so you might consider that along with some cash. My basic approach would be to do whatever you can to limit having to sell capital while the markets are down.

dunstonh

Billxx said:

Hi,

I take a small monthly drawdown from my private pension.  In the light of the market downturn, is anyone in a similar position considering pausing thier drawdown and relying on their cash reserves?

You haven't mentioned your drawdown strategy.  What is it?

For example, are you yield based, cash float covering x number of years or what?

Without knowing how drawdown strategy it is difficult for anyone to answer.   However, my gut feeling is that there probably isn't a strategy as if there was, you wouldn't need to ask the question as your strategy would have it covered.

Billxx

dunstonh said:

Billxx said:

Hi,

I take a small monthly drawdown from my private pension.  In the light of the market downturn, is anyone in a similar position considering pausing thier drawdown and relying on their cash reserves?

You haven't mentioned your drawdown strategy.  What is it?

For example, are you yield based, cash float covering x number of years or what?

Without knowing how drawdown strategy it is difficult for anyone to answer.   However, my gut feeling is that there probably isn't a strategy as if there was, you wouldn't need to ask the question as your strategy would have it covered.

If you read my original post I was not looking for specific advice, merely asking what other people are considering.

cfw1994

Billxx said:

Hi,

I take a small monthly drawdown from my private pension.  In the light of the market downturn, is anyone in a similar position considering pausing thier drawdown and relying on their cash reserves?

As others point out, do you have some strategy/plan regarding your drawdown?
Have you seen the value drop more than expected?

As above - this is all a judgement call. If you feel markets are concerning, and you can managed without the drawdown, then 
I would suggest the start of the year was perhaps the best time to do it...& the next best time might be now!

Markets do feel rather little all over the place, and that might continue for some time.   

FWIW, I paused my drawdown in January, and will likely continue to use cash reserves for the next 6-18 months if needed.....but this is all a personal decision.

Curious to know whether @dunstonh has paused any of his clients drawdown, or whether he just feels the markets can be ridden out.   Maybe they all have such large pots, it doesn't really matter!!

squirrelpie

Billxx said:

If you read my original post I was not looking for specific advice, merely asking what other people are considering.

But everybody has pointed out that your question doesn't make much sense without more details. What is a 'small monthly drawdown'? Do you have other resources etc etc? What are your strategies?

dunstonh

Billxx said:

dunstonh said:

Billxx said:

Hi,

I take a small monthly drawdown from my private pension.  In the light of the market downturn, is anyone in a similar position considering pausing thier drawdown and relying on their cash reserves?

You haven't mentioned your drawdown strategy.  What is it?

For example, are you yield based, cash float covering x number of years or what?

Without knowing how drawdown strategy it is difficult for anyone to answer.   However, my gut feeling is that there probably isn't a strategy as if there was, you wouldn't need to ask the question as your strategy would have it covered.

If you read my original post I was not looking for specific advice, merely asking what other people are considering.

You have missed the point.   You haven't told us what your strategy is.  So, you are asking what other people are considering, but they will likely be following their chosen strategy.  Which means they don't need to do anything in many cases.

Someone on a yield strategy will do something different to someone that operate a cash float within the pension compared ot someone that operates a cash float outside of the pension, compared to someone that segments their portfolio into timescale segments etc etc.       So, what strategy are you following to meet your requirements?