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Dynamic spending rules for retirement drawdown pros/cons and alternatives?
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Comments
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sofm said:
I have an out-of-date Voyant report run by an FA, but without any tax optimisations (e.g. partial drawdown to use up personal allowance etc.). Before taking up the Voyant free trial offer, does it actually support such tax finessing?
From what I could see, Voyant did not automatically tax optimise your cash flow but you could overrule what it had done to force it do do that if you saw years where there was no withdrawals from pension wrapper.1 -
To illustrate when to use the cash buffer both links show 20% and over might be a reasonable point. There's no answer really.
FAnlCscXMAAofaK (900×529) (twimg.com)
Slide11.png (960×720) (realinvestmentadvice.com)
Three years of negative returns is a rare event . Green up and black down.
FzlGDBdWcAAzz0I (900×653) (twimg.com)
A fair few of these events have happened when markets boomed over a very short period. Some 1-2 years or less.
Nasdaq Composite dot-com bubble - Dot-com bubble - Wikipedia
FYEmO2gXEAIZcU4 (900×535) (twimg.com)
nikkei_chart.png (845×516) (begintoinvest.com)
What Caused Black Monday, the 1987 Stock Market Crash? (investopedia.com)
Again they show when valuations are sky high. There's clues but how do you react ? Difficult.
EZ_91bOXQAAp1Zo (1400×1169) (twimg.com)
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coastline said:To illustrate when to use the cash buffer both links show 20% and over might be a reasonable point. There's no answer really.
FAnlCscXMAAofaK (900×529) (twimg.com)
Slide11.png (960×720) (realinvestmentadvice.com)
Three years of negative returns is a rare even . Green up and black down.
FzlGDBdWcAAzz0I (900×653) (twimg.com)
There's a fair few of these rare events have happened when markets boomed over a vey short period. Some 1-2 years or less.
Nasdaq Composite dot-com bubble - Dot-com bubble - Wikipedia
FYEmO2gXEAIZcU4 (900×535) (twimg.com)
nikkei_chart.png (845×516) (begintoinvest.com)
What Caused Black Monday, the 1987 Stock Market Crash? (investopedia.com)
Again they show when valuations are sky high. There's clues but how you react ? Difficult.
EZ_91bOXQAAp1Zo (1400×1169) (twimg.com)
For example, my starting retirement portfolio will be 85/15 stock index funds and cash, so year 1 drawdown will be to that same mix of 85% from stocks and 15% from cash and then rebalance at end of the year ahead of the next years drawdown. So, when stocks are down I buy more with the cash in the rebalancing and when stocks are up I sell and move excess to cash.
I plan to build the 15% as cash initially, as, within my pension, I will get the current BOE base rate of 5% but if and when the interest rate drops off I may look at switching the 15% to a bonds index fund.
I may look to increase the cash/bonds percentage over time as and when the portfolio grows during retirement.
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Pat38493 said:sofm said:
I have an out-of-date Voyant report run by an FA, but without any tax optimisations (e.g. partial drawdown to use up personal allowance etc.). Before taking up the Voyant free trial offer, does it actually support such tax finessing?
From what I could see, Voyant did not automatically tax optimise your cash flow but you could overrule what it had done to force it do do that if you saw years where there was no withdrawals from pension wrapper.
Also, I'm not sure it optimises the use of the 2 income tax free allowances of a couple fully. Again will need to look into my detailed data download to see.
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GazzaBloom said:Pat38493 said:sofm said:
I have an out-of-date Voyant report run by an FA, but without any tax optimisations (e.g. partial drawdown to use up personal allowance etc.). Before taking up the Voyant free trial offer, does it actually support such tax finessing?
From what I could see, Voyant did not automatically tax optimise your cash flow but you could overrule what it had done to force it do do that if you saw years where there was no withdrawals from pension wrapper.
Also, I'm not sure it optimises the use of the 2 income tax free allowances of a couple fully. Again will need to look into my detailed data download to see.
I am not convinced that Timeline ever handled the LTA properly, but that's not an issue now. I never saw any LTA tax on the tax report in Timeline but for the same scenario in a Voyant demo, it actually itemised LTA tax. This is for the moment a moot point I guess.
Voyant, as far as I remember, does allow you to configure whether you want to take tax free cash first, or use UFPLS or whatever.
With Timeline, you can partially force it to do that by manually separating your funds into different chunks 25% and 75%. Classify the 25% as account type "other" and then put the tax rate to zero percent in the options for that fund. For the 75%, choose "drawdown" as the account type.
Of course this is not ideal because you will then have to manually rebalance it, but in the end Timeline seems to mainly work only on years, so it's certainly not designed to be updated on a weekly or daily basis.
Also it's worth noting that Voyant also has an option for monte carlo and historical stress testing that you can run against your planning - I think it basically applies just a simple ladder of inflation and growth to your main cash flow model, but you can go into an option behind the scenes and run various types of stress testing on it including historical testing.2 -
Pat38493 said:GazzaBloom said:Pat38493 said:sofm said:
I have an out-of-date Voyant report run by an FA, but without any tax optimisations (e.g. partial drawdown to use up personal allowance etc.). Before taking up the Voyant free trial offer, does it actually support such tax finessing?
From what I could see, Voyant did not automatically tax optimise your cash flow but you could overrule what it had done to force it do do that if you saw years where there was no withdrawals from pension wrapper.
Also, I'm not sure it optimises the use of the 2 income tax free allowances of a couple fully. Again will need to look into my detailed data download to see.
I am not convinced that Timeline ever handled the LTA properly, but that's not an issue now. I never saw any LTA tax on the tax report in Timeline but for the same scenario in a Voyant demo, it actually itemised LTA tax. This is for the moment a moot point I guess.
Voyant, as far as I remember, does allow you to configure whether you want to take tax free cash first, or use UFPLS or whatever.
With Timeline, you can partially force it to do that by manually separating your funds into different chunks 25% and 75%. Classify the 25% as account type "other" and then put the tax rate to zero percent in the options for that fund. For the 75%, choose "drawdown" as the account type.
Of course this is not ideal because you will then have to manually rebalance it, but in the end Timeline seems to mainly work only on years, so it's certainly not designed to be updated on a weekly or daily basis.
Also it's worth noting that Voyant also has an option for monte carlo and historical stress testing that you can run against your planning - I think it basically applies just a simple ladder of inflation and growth to your main cash flow model, but you can go into an option behind the scenes and run various types of stress testing on it including historical testing.
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GazzaBloom said:coastline said:To illustrate when to use the cash buffer both links show 20% and over might be a reasonable point. There's no answer really.
FAnlCscXMAAofaK (900×529) (twimg.com)
Slide11.png (960×720) (realinvestmentadvice.com)
Three years of negative returns is a rare even . Green up and black down.
FzlGDBdWcAAzz0I (900×653) (twimg.com)
There's a fair few of these rare events have happened when markets boomed over a vey short period. Some 1-2 years or less.
Nasdaq Composite dot-com bubble - Dot-com bubble - Wikipedia
FYEmO2gXEAIZcU4 (900×535) (twimg.com)
nikkei_chart.png (845×516) (begintoinvest.com)
What Caused Black Monday, the 1987 Stock Market Crash? (investopedia.com)
Again they show when valuations are sky high. There's clues but how you react ? Difficult.
EZ_91bOXQAAp1Zo (1400×1169) (twimg.com)
For example, my starting retirement portfolio will be 85/15 stock index funds and cash, so year 1 drawdown will be to that same mix of 85% from stocks and 15% from cash and then rebalance at end of the year ahead of the next years drawdown. So, when stocks are down I buy more with the cash in the rebalancing and when stocks are up I sell and move excess to cash.
I plan to build the 15% as cash initially, as, within my pension, I will get the current BOE base rate of 5% but if and when the interest rate drops off I may look at switching the 15% to a bonds index fund.
I may look to increase the cash/bonds percentage over time as and when the portfolio grows during retirement.I think....0 -
michaels said:GazzaBloom said:coastline said:To illustrate when to use the cash buffer both links show 20% and over might be a reasonable point. There's no answer really.
FAnlCscXMAAofaK (900×529) (twimg.com)
Slide11.png (960×720) (realinvestmentadvice.com)
Three years of negative returns is a rare even . Green up and black down.
FzlGDBdWcAAzz0I (900×653) (twimg.com)
There's a fair few of these rare events have happened when markets boomed over a vey short period. Some 1-2 years or less.
Nasdaq Composite dot-com bubble - Dot-com bubble - Wikipedia
FYEmO2gXEAIZcU4 (900×535) (twimg.com)
nikkei_chart.png (845×516) (begintoinvest.com)
What Caused Black Monday, the 1987 Stock Market Crash? (investopedia.com)
Again they show when valuations are sky high. There's clues but how you react ? Difficult.
EZ_91bOXQAAp1Zo (1400×1169) (twimg.com)
For example, my starting retirement portfolio will be 85/15 stock index funds and cash, so year 1 drawdown will be to that same mix of 85% from stocks and 15% from cash and then rebalance at end of the year ahead of the next years drawdown. So, when stocks are down I buy more with the cash in the rebalancing and when stocks are up I sell and move excess to cash.
I plan to build the 15% as cash initially, as, within my pension, I will get the current BOE base rate of 5% but if and when the interest rate drops off I may look at switching the 15% to a bonds index fund.
I may look to increase the cash/bonds percentage over time as and when the portfolio grows during retirement.3 -
That 5% means your cash is actually declining in real terms whereas you will be hoping that overall the equities at least keep up with inflation so all things being equal your rebalance will have to go the other way.1
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By the way how are you all defining a "negative year", is it one where your investments lose value during that year, or are you including subsequent periods while it recovers?
For example lets say your value dropped during 2022, recovered during 2023 but did not reach its value from December 2021. Is that one, or two, negative years?1
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