Have 10% inflation and falling markets affected your drawdown plan?

Albermarle

SouthCoastBoy said:

A15% decrease coupled with 10% inflation is a substantial erosion of wealth in 12 months, no wonder some people are concerned.

Of course, and even for the ones who have substantial assets  it still feels painful to think about it too much, even if in reality we are largely only loosing significant paper gains made in the last few years, and also maybe some tax relief.

michaels

Albermarle said:

SouthCoastBoy said:

A15% decrease coupled with 10% inflation is a substantial erosion of wealth in 12 months, no wonder some people are concerned.

Of course, and even for the ones who have substantial assets  it still feels painful to think about it too much, even if in reality we are largely only loosing significant paper gains made in the last few years, and also maybe some tax relief.

As mentioned elsewhere.  Effectively if you had retired on a given pot 12 months ago, doing 'one more year' but not adding any contributions would mean that he same percent 'SWR' would now give you real terms 25% less per year forever. 

(If your planned retirement is over 30 years then adding or reducing by 1 year actually makes negligible difference to any historic SWR even if logic says the funds having to last one year fewer should help)

[Deleted User]

A little surprised you think a typical “medium risk portfolio” went down 15%.  VLS60 is down 11%. Shouldn’t that be representative of “typical medium risk” (whatever medium risk is). 

[Deleted User]

michaels said:

Albermarle said:

SouthCoastBoy said:

A15% decrease coupled with 10% inflation is a substantial erosion of wealth in 12 months, no wonder some people are concerned.

Of course, and even for the ones who have substantial assets  it still feels painful to think about it too much, even if in reality we are largely only loosing significant paper gains made in the last few years, and also maybe some tax relief.

As mentioned elsewhere.  Effectively if you had retired on a given pot 12 months ago, doing 'one more year' but not adding any contributions would mean that he same percent 'SWR' would now give you real terms 25% less per year forever. 

(If your planned retirement is over 30 years then adding or reducing by 1 year actually makes negligible difference to any historic SWR even if logic says the funds having to last one year fewer should help)

A great example of SWR not making any sense. 

michaels

Deleted_User said:

A little surprised you think a typical “medium risk portfolio” went down 15%.  VLS60 is down 11%. Shouldn’t that be representative of “typical medium risk” (whatever medium risk is). 

Are we talking YTD or 12m to D or from peak...how long is a piece of string?

[Deleted User]

YTD. Funds typically peaked around the New Year.  

Cus

Deleted_User said:

YTD. Funds typically peaked around the New Year.  

Vls60 is down 11.8% YTD. The AFI balanced index is down 14.6% YTD. The Baillie Gifford managed balanced fund is down 27%.  There are hundred of mixed- asset managed funds that have between 40 and 85% equity.

Probably best to use the index.

[Deleted User]

Cus said:

Deleted_User said:

YTD. Funds typically peaked around the New Year.  

Vls60 is down 11.8% YTD. The AFI balanced index is down 14.6% YTD. The Baillie Gifford managed balanced fund is down 27%.  There are hundred of mixed- asset managed funds that have between 40 and 85% equity.

Probably best to use the index.

I take your point that an index would be better. Say 60% FTSE All World and 40% Barclays Aggregate Bond index. 60/40 balanced portfolio is fairly standard.  But I am too lazy to look.  An average of U.k intermediaries’ portfolios isn’t a particularly meaningful index other than to reflect in IFA performance. My unscientific gut feel is that given Sterling’s free fall, a properly diversified global portfolio should be around -10%. 

Albermarle

Deleted_User said:

A little surprised you think a typical “medium risk portfolio” went down 15%.  VLS60 is down 11%. Shouldn’t that be representative of “typical medium risk” (whatever medium risk is). 

Two weeks ago VLS60 was down 15% YTD, it has perked up in the meantime.

BarbaraG2000

We retired 15 months ago with a portfolio of ISA’s and pensions from which we were taking 3% annually - initially from the ISA’s.  

We also have several DB pensions plus full state pension entitlement, which will come into play at various points between February 2025 and September 2031 (if all left to normal pension age), the total of which in today’s money, after tax, is roughly equal to the 3% we are currently taking.  That’s why we settled on that figure.

The plan is that as each DB pension comes online, we would reduce the amount we’re taking from the ISA’s so that our total income remains the same, adjusted for inflation.

As things have turned out - we have not increased the amount we’re taking since last year, but the same amount in cash terms now equates to 3.5%. We’re managing fine with the same cash amount though - because there is plenty of slack and we can be more frugal when we need to.

We will carry on as we are for now - we do have some cash reserves as well and haven’t needed to touch them. We’ll leave the monthly withdrawal level the same until we have reason to increase it. It’s 27 months till the first DB pension kicks in, it would be great if we can make it all the way to then without giving ourselves a pay rise.