My rough plan and take on the 4% withdrawl rule

NoMore

The 4% rule to me is useful to help you decide if you have enough to retire, i.e. if 4% of your portfolio would give you your desired income then your probably ok to retire. However I would not blindly follow it for withdrawal, I doubt anybody does. Usually people's desired income is way higher than their essentials income, so you should be able to adjust in fallow years if required.

leosayer

Bostonerimus1 said:

OP, have you thought about the spending side of the equation? You have good DB pension and SP to come and if you can reduce spending you will take a lot of pressure off your drawdown. I'm retired and living off DB pension and rental income and so I don't need to do drawdown and can leave things invested rather aggressively without worry. Can you get yourself to a situation where drawdown is irrelevant by budgeting and if necessary using interest and dividends rather than capital or capital gains?

Why should they avoid spending their own retirement savings in retirement? 

I see no reason for the OP to reduce spending and there's no real pressure on the OP's drawdown plans because they seem to already have more than enough to meet their retirement income needs. 

Investing aggressively seems the opposite of what they should do with their pension savings given that they will largely be used to fund the period in the next 10-14 years between retirement and state pensions.

The concept of living off interest and dividends may seem attractive but it's kind of unnecessary these days given low transaction costs and drawdown flexibility offered by savings platforms.

Sea_Shell

Sounds like you have enough "squirrelled nuts" to go now!!!

Obviously, your sequence of returns may vary, but, we finally gave up work in July 19 (aged 53/47), when we had a total DC/ISA/CASH pot of £536,000

Since then we have spent ~£67,000  (our needs are modest  )

We still have £594,000 left.     (with some DB and SP to come)

That's despite all what the economy has thrown at us in the last 4 years (Covid, War, Energy, Inflation etc.)

As a % of spends v pot, see my sig.

Albermarle

JSL_2 said:

Is 4% the recommended starting point for withdrawal at age 65/66 or can it be slightly higher ?

It can be any figure you like, but in simple terms if you take out too much each year, the pot could well run out before you die.
Starting with 4% and only increasing it with inflation each year should give you a very good chance of it never running out. At 3.5% even less chance. At 5% more chance. 
An alternative is to actually take 4% ( or whatever figure) of the pot value each year. However this would mean quite a variable income.
Or a mix of the two. Have a look at this .

Setting a strategy for retirement withdrawals (vanguard.com)

Mick70

Sea_Shell said:

Sounds like you have enough "squirrelled nuts" to go now!!!

Obviously, your sequence of returns may vary, but, we finally gave up work in July 19 (aged 53/47), when we had a total DC/ISA/CASH pot of £536,000

Since then we have spent ~£67,000  (our needs are modest  )

We still have £594,000 left.     (with some DB and SP to come)

That's despite all what the economy has thrown at us in the last 4 years (Covid, War, Energy, Inflation etc.)

As a % of spends v pot, see my sig.

wow, how have you managed to only spend £67k in 4 years, and how has your pot grew to £594k in that time when you have been withdrawing ?

my 4% withdrawl plan is mainly just for 12 years , then when SP kicks in would reduce it by whatever 2/3 of SP is, and start to increase that amount by 2% per year going forward

Sea_Shell

Mick70 said:

Sea_Shell said:

Sounds like you have enough "squirrelled nuts" to go now!!!

Obviously, your sequence of returns may vary, but, we finally gave up work in July 19 (aged 53/47), when we had a total DC/ISA/CASH pot of £536,000

Since then we have spent ~£67,000  (our needs are modest  )

We still have £594,000 left.     (with some DB and SP to come)

That's despite all what the economy has thrown at us in the last 4 years (Covid, War, Energy, Inflation etc.)

As a % of spends v pot, see my sig.

wow, how have you managed to only spend £67k in 4 years, and how has your pot grew to £594k in that time when you have been withdrawing ?

my 4% withdrawl plan is mainly just for 12 years , then when SP kicks in would reduce it by whatever 2/3 of SP is, and start to increase that amount by 2% per year going forward

Well.   It's a long story if you want a cure for insomnia ! 

https://forums.moneysavingexpert.com/discussion/6019383/its-time-to-start-digging-up-those-squirrelled-nuts

michaels

Albermarle said:

JSL_2 said:

Is 4% the recommended starting point for withdrawal at age 65/66 or can it be slightly higher ?

It can be any figure you like, but in simple terms if you take out too much each year, the pot could well run out before you die.
Starting with 4% and only increasing it with inflation each year should give you a very good chance of it never running out. At 3.5% even less chance. At 5% more chance. 
An alternative is to actually take 4% ( or whatever figure) of the pot value each year. However this would mean quite a variable income.
Or a mix of the two. Have a look at this .

Setting a strategy for retirement withdrawals (vanguard.com)

Worth noting that in today's pounds , the initial pot would have been £678k and it is the 27% inflation that we have seen in the last 4 years that rather obscures the picture.  IN real terms the pot is down by 12.4% which is probably worse than average on a historical basis for a 2.8% withdrawal rate.

Mick70

michaels said:

I would model it as working out how much you need it replace the state pension until it becomes payable and then deducting this from your non DB savings pot total and then adding on 3% of the remaining pot as additional annual income.

EG For state pension replacement, suppose you need to make up 11 years from 56 to 67 and your wife 12; that is a total of 23 years at £10,600pa = £243,800 (this could be invested in an index linked bond ladder to ensure that the amount keeps up with inflation)

Subtract £244k from the £500k pot give £256k.  £256k times 3% = £7.7k per annum

So if you were to retire at 56 and 55 with a 30k db and a 500k pot you could take £30k DB+ £21.2k (drawdown then state pension) + £7.7k (3% SWR) = £58.9k for the rest of your life.

(this assumes you will both get a full state pension)

did try this in excel but if the £10,600 is inflating each year , as it would need to , then the amount needed to bridge the gap is a lot higher, I think anyway , if i did it right at least
I do know what you mean though

michaels

Mick70 said:

michaels said:

I would model it as working out how much you need it replace the state pension until it becomes payable and then deducting this from your non DB savings pot total and then adding on 3% of the remaining pot as additional annual income.

EG For state pension replacement, suppose you need to make up 11 years from 56 to 67 and your wife 12; that is a total of 23 years at £10,600pa = £243,800 (this could be invested in an index linked bond ladder to ensure that the amount keeps up with inflation)

Subtract £244k from the £500k pot give £256k.  £256k times 3% = £7.7k per annum

So if you were to retire at 56 and 55 with a 30k db and a 500k pot you could take £30k DB+ £21.2k (drawdown then state pension) + £7.7k (3% SWR) = £58.9k for the rest of your life.

(this assumes you will both get a full state pension)

did try this in excel but if the £10,600 is inflating each year , as it would need to , then the amount needed to bridge the gap is a lot higher, I think anyway , if i did it right at least
I do know what you mean though

You can build a 'ladder' of index linked bonds, currently these give a real return (above inflation) of about 0.5% pa which means you can effectively arrange to have that 10,600 increasing by inflation each year as a cost of 10,600 time the number of years you need to replace. (agreed this misses the income bit of the triple lock but is probably good enough)

There is a thread on it somewhere on this board.

Audaxer

As you already in receipt of a great DB pension and also have a £500k joint pot, I think you are in a great position to retire now if you want, rather than continue in a stressful job that is taking it's toll. Rather than rely on a 4% rule, I would just ensure you make enough funds available to bridge the gap until you receive your SPs, as you should still have a decent size pot left at SP age.

Another thing to consider when thinking about annual spend, is ensuring you also plan for fairly large occasional purchases like for example buying a car, assuming you don't want to take out an expensive finance deal to pay for it.