What Drawdown Strategy Would You Do?

GSP

billy2shots said:

Don't take this the wrong way but the terms 'simple' and 'don't overcomplicate ' have been used throughout the thread but they are just words. Actions need to follow. 

Your posting style is giving me vibes of the opposite of those terms mentioned above. 

It's good to have an understanding of various methods before meeting with IFAs but at the end of the day you are paying them good money to construct the best plan they can, given your circumstances. The most important thing is you trust them, you don't need to know the inside leg measurement of Guyton Clinger. 

If you want to take the blue pill then do so and save the IFA costs. 

Simplicity is still your friend. Whilst you may get your rocks off by drilling down in the details, a surviving partner may not. Leaving behind an overly complex strategy could turn out suboptimal in the grand scheme of things. 

Thanks for the advice billy2shots.
Yes you are right in that I should let the professional with the expertise to sort this out the best way for us. I’m over 60 and don’t quite feel retired in that my current adviser after a number of errors on his part has left me monitoring balances and our portfolio’s on a daily basis, which I shouldn’t be doing (some would tell me I should still as it’s my money).

I’m all for simplicity and yes if I depart this world first it’s best kept that way for others to pick up any pieces.

With my SP kicking in in 6.5 years time and the wife’s 5 years after, it’ll be ‘interesting’ what strategy the new IFA constructs (the current one I just take money out of the fund and he originally advised it should all be invested, but I wanted a year’s cash, glad I listened to myself!).

GSP

dunstonh said:

Seems there’s concern that the cash buffer may run empty, or having 5 years cash means less chance of growth.

The cash buffer would be replenished from income (inc units) and periodic rebalancing/refloating of the cash account.  

I suppose that’s where Fixed Term Annuity’s (especially the no income taken but 15% after 3 years) might have a place, but still to figure this out yet.

Probably not when you look at the commercial rates.  

The problem is that you cannot have both the maximum upside potential and maximum downside protection.  Bucketing gives you more downside protection.   Annuities give you even more downside protection.  

Thanks dunstonh,
In the bucket scenario, could Fixed Term Annuity’s more or less make up the middle section with equities and cash either side?

Linton

GSP said:

dunstonh said:

Seems there’s concern that the cash buffer may run empty, or having 5 years cash means less chance of growth.

The cash buffer would be replenished from income (inc units) and periodic rebalancing/refloating of the cash account.  

I suppose that’s where Fixed Term Annuity’s (especially the no income taken but 15% after 3 years) might have a place, but still to figure this out yet.

Probably not when you look at the commercial rates.  

The problem is that you cannot have both the maximum upside potential and maximum downside protection.  Bucketing gives you more downside protection.   Annuities give you even more downside protection.  

Thanks dunstonh,
In the bucket scenario, could Fixed Term Annuity’s more or less make up the middle section with equities and cash either side?

I suppose they could.  However you may want to do bulk transfers into and out of the middle bucket for rebalancing which would be rather difficult if it was tied up in an annuity.  Perhaps better to treat the annuity outside the portfolio alongside State Pension and reduce the income requirement accordingly.

GSP

Linton said:

GSP said:

dunstonh said:

Seems there’s concern that the cash buffer may run empty, or having 5 years cash means less chance of growth.

The cash buffer would be replenished from income (inc units) and periodic rebalancing/refloating of the cash account.  

I suppose that’s where Fixed Term Annuity’s (especially the no income taken but 15% after 3 years) might have a place, but still to figure this out yet.

Probably not when you look at the commercial rates.  

The problem is that you cannot have both the maximum upside potential and maximum downside protection.  Bucketing gives you more downside protection.   Annuities give you even more downside protection.  

Thanks dunstonh,
In the bucket scenario, could Fixed Term Annuity’s more or less make up the middle section with equities and cash either side?

I suppose they could.  However you may want to do bulk transfers into and out of the middle bucket for rebalancing which would be rather difficult if it was tied up in an annuity.  Perhaps better to treat the annuity outside the portfolio alongside State Pension and reduce the income requirement accordingly.

Thanks Linton,
I was thinking if ‘multiple’ Fixed Term Annuity’s (3 years with no income taken) were possible in that middle section, attracting on current rates perhaps 5% p.a., and when these mature are added into the cash section?

Linton

GSP said:

Linton said:

GSP said:

dunstonh said:

Seems there’s concern that the cash buffer may run empty, or having 5 years cash means less chance of growth.

The cash buffer would be replenished from income (inc units) and periodic rebalancing/refloating of the cash account.  

I suppose that’s where Fixed Term Annuity’s (especially the no income taken but 15% after 3 years) might have a place, but still to figure this out yet.

Probably not when you look at the commercial rates.  

The problem is that you cannot have both the maximum upside potential and maximum downside protection.  Bucketing gives you more downside protection.   Annuities give you even more downside protection.  

Thanks dunstonh,
In the bucket scenario, could Fixed Term Annuity’s more or less make up the middle section with equities and cash either side?

I suppose they could.  However you may want to do bulk transfers into and out of the middle bucket for rebalancing which would be rather difficult if it was tied up in an annuity.  Perhaps better to treat the annuity outside the portfolio alongside State Pension and reduce the income requirement accordingly.

Thanks Linton,
I was thinking if ‘multiple’ Fixed Term Annuity’s (3 years with no income taken) were possible in that middle section, attracting on current rates perhaps 5% p.a., and when these mature are added into the cash section?

You could do that. You are in charge and can do whatever you want.   However I do see some problems…
 - inflexible compared with funds, you can’t sell them
 - there are other ways of getting 5% dividends/ interest that do not have the disadvantages of annuities
 - why not consider a full life annuity. Current fixed .rates for 65 year olds are nearly 7%. They require no effort and provide monthly income. 
 - tax, you can’t shelter annuities in a SIPP or ISA.

GSP

Linton said:

GSP said:

Linton said:

GSP said:

dunstonh said:

Seems there’s concern that the cash buffer may run empty, or having 5 years cash means less chance of growth.

The cash buffer would be replenished from income (inc units) and periodic rebalancing/refloating of the cash account.  

I suppose that’s where Fixed Term Annuity’s (especially the no income taken but 15% after 3 years) might have a place, but still to figure this out yet.

Probably not when you look at the commercial rates.  

The problem is that you cannot have both the maximum upside potential and maximum downside protection.  Bucketing gives you more downside protection.   Annuities give you even more downside protection.  

Thanks dunstonh,
In the bucket scenario, could Fixed Term Annuity’s more or less make up the middle section with equities and cash either side?

I suppose they could.  However you may want to do bulk transfers into and out of the middle bucket for rebalancing which would be rather difficult if it was tied up in an annuity.  Perhaps better to treat the annuity outside the portfolio alongside State Pension and reduce the income requirement accordingly.

Thanks Linton,
I was thinking if ‘multiple’ Fixed Term Annuity’s (3 years with no income taken) were possible in that middle section, attracting on current rates perhaps 5% p.a., and when these mature are added into the cash section?

You could do that. You are in charge and can do whatever you want.   However I do see some problems…
 - inflexible compared with funds, you can’t sell them
 - there are other ways of getting 5% dividends/ interest that do not have the disadvantages of annuities
 - why not consider a full life annuity. Current fixed .rates for 65 year olds are nearly 7%. They require no effort and provide monthly income. 
 - tax, you can’t shelter annuities in a SIPP or ISA.

Thanks Linton,
- So I understand you can still make 3 withdrawals during a 3 year no income plan.
- What are these other ways for 5% interest?
- I’m 60 so assume my life annuity % is much lower and I would have my wife on there as well, and she is ‘only’ 55. It’ll also have to have some index increasing income payments as well, so I reckon my quote would be just over half the 7% quoted.

westv

GSP said:

Linton said:

GSP said:

Linton said:

GSP said:

dunstonh said:

Seems there’s concern that the cash buffer may run empty, or having 5 years cash means less chance of growth.

The cash buffer would be replenished from income (inc units) and periodic rebalancing/refloating of the cash account.  

I suppose that’s where Fixed Term Annuity’s (especially the no income taken but 15% after 3 years) might have a place, but still to figure this out yet.

Probably not when you look at the commercial rates.  

The problem is that you cannot have both the maximum upside potential and maximum downside protection.  Bucketing gives you more downside protection.   Annuities give you even more downside protection.  

Thanks dunstonh,
In the bucket scenario, could Fixed Term Annuity’s more or less make up the middle section with equities and cash either side?

I suppose they could.  However you may want to do bulk transfers into and out of the middle bucket for rebalancing which would be rather difficult if it was tied up in an annuity.  Perhaps better to treat the annuity outside the portfolio alongside State Pension and reduce the income requirement accordingly.

Thanks Linton,
I was thinking if ‘multiple’ Fixed Term Annuity’s (3 years with no income taken) were possible in that middle section, attracting on current rates perhaps 5% p.a., and when these mature are added into the cash section?

You could do that. You are in charge and can do whatever you want.   However I do see some problems…
 - inflexible compared with funds, you can’t sell them
 - there are other ways of getting 5% dividends/ interest that do not have the disadvantages of annuities
 - why not consider a full life annuity. Current fixed .rates for 65 year olds are nearly 7%. They require no effort and provide monthly income. 
 - tax, you can’t shelter annuities in a SIPP or ISA.

Thanks Linton,
- So I understand you can still make 3 withdrawals during a 3 year no income plan.
- What are these other ways for 5% interest?
- I’m 60 so assume my life annuity % is much lower and I would have my wife on there as well, and she is ‘only’ 55. It’ll also have to have some index increasing income payments as well, so I reckon my quote would be just over half the 7% quoted.

I looked yesterday at the HL annuity calculator and it offered around 3% RPI at 60 with 50% survivor (age 53)

GSP

westv said:

GSP said:

Linton said:

GSP said:

Linton said:

GSP said:

dunstonh said:

Seems there’s concern that the cash buffer may run empty, or having 5 years cash means less chance of growth.

The cash buffer would be replenished from income (inc units) and periodic rebalancing/refloating of the cash account.  

I suppose that’s where Fixed Term Annuity’s (especially the no income taken but 15% after 3 years) might have a place, but still to figure this out yet.

Probably not when you look at the commercial rates.  

The problem is that you cannot have both the maximum upside potential and maximum downside protection.  Bucketing gives you more downside protection.   Annuities give you even more downside protection.  

Thanks dunstonh,
In the bucket scenario, could Fixed Term Annuity’s more or less make up the middle section with equities and cash either side?

I suppose they could.  However you may want to do bulk transfers into and out of the middle bucket for rebalancing which would be rather difficult if it was tied up in an annuity.  Perhaps better to treat the annuity outside the portfolio alongside State Pension and reduce the income requirement accordingly.

Thanks Linton,
I was thinking if ‘multiple’ Fixed Term Annuity’s (3 years with no income taken) were possible in that middle section, attracting on current rates perhaps 5% p.a., and when these mature are added into the cash section?

You could do that. You are in charge and can do whatever you want.   However I do see some problems…
 - inflexible compared with funds, you can’t sell them
 - there are other ways of getting 5% dividends/ interest that do not have the disadvantages of annuities
 - why not consider a full life annuity. Current fixed .rates for 65 year olds are nearly 7%. They require no effort and provide monthly income. 
 - tax, you can’t shelter annuities in a SIPP or ISA.

Thanks Linton,
- So I understand you can still make 3 withdrawals during a 3 year no income plan.
- What are these other ways for 5% interest?
- I’m 60 so assume my life annuity % is much lower and I would have my wife on there as well, and she is ‘only’ 55. It’ll also have to have some index increasing income payments as well, so I reckon my quote would be just over half the 7% quoted.

I looked yesterday at the HL annuity calculator and it offered around 3% RPI at 60 with 50% survivor (age 53)

Yes westv that isn’t too attractive from the starting point once certain extra fields are included.
It makes the Fixed Term Annuity more attractive, in this case at least.