Guyton-Klinger withdrawal model

Linton

Hoenir said:

Doesn't answer the eternal question of where your money should be invested at any given point in time. Get that decision wrong and any amount of planning could soon start to unravel. 

Why should where your money is invested change over time in retirement unless your circumstances completely change, eg going into care? 

LHW99

As long as the wealth at death is not falling significantly nothing needs be done.

Trouble is, you don't know how long you have left in order to estimate "wealth at death"

Linton

LHW99 said:

As long as the wealth at death is not falling significantly nothing needs be done.

Trouble is, you don't know how long you have left in order to estimate "wealth at death"

Use any sensible number you like - I use 95.  It would be prudent for your expenditure to be not much higher than the maximum required to be sustainable over the very long time.  A few years here or there on age at death wont make much difference.  Reliance on significant expenditure of capital to achieve a high income would be highly risky.

If the prudent expenditure level into very old age is too low you may be better advised to remove longevity risk with an annuity.

Hoenir

GazzaBloom said:

Hoenir said:

Doesn't answer the eternal question of where your money should be invested at any given point in time. Get that decision wrong and any amount of planning could soon start to unravel. 

When looking at drawdown from invested assets, holding a mix of low cost diversified global equities (such as a tracker fund) and safer "risk-off" assets such as cash, or maybe bonds/gilts can be back tested in software modelling to see if it would survive a range of scenarios to give a degree of comfort that you have enough in your pot and the right mix to launch into retirement an cover your known expenditure needs.

I'm fully aware of that. It's the data source that's more the issue for me.   Also the very different environment/manner in which investment transactions now take place. History is constantly being rewritten. 

DT2001

I like GK as it offers a different option - starting with a higher drawdown but with the proviso that income might need to be reduced. It is IMO a step on from the 4% SWR. 

In reality if you have some guaranteed income (SP, DB, annuity) it changes the impact of a GK type plan with buffers. 

We all have our own unique set of circumstances and risk tolerances so have to plan accordingly utilising various guidance.
Personally our plans have changed over the last 4 years as OH has continued to work (as she enjoys it) and our pension/ISA pots have increased so we’ll adopt Linton’s rule of continuing to live a similar lifestyle post as pre retirement (expenditure does vary considerably from year to year mainly down to travel).

gm0

@Linton I agree with the general idea that the more complex analysis and methods (and testing of them) are more relevant to planning and confidence building than actually essential to implementation.   Academics have their own incentives.

How much detail you need to wallow in to get comfortable is very personal.

I find it ironic in a way as making imperfect strategy to solution decisions rapidly in a very different problem domain to "get on with it" in a business setting, With imperfect data.  Carrying a risk of being wrong (not safety critical you will be pleased to hear). That was what I spent 30+ years doing in my expert area - somewhat engineering derivative. 

But this more unfamiliar (to me) domain put me in a very different mindset. 
Based on this being the last big financial decision I will take and a lack of urgency
Advice or not. 
Plan avoiding obvious major "bad DIY" screwups across all dimensions. 
Choose the various things
Execute. 
What will be will be but no tears allowed.

What we think politically about the fact this whole setup has been foisted on Joe Public with the advice gap existing alongside for large sections of the population is a subject for another thread another time. 
That will no doubt be along again soon enough.

I needed to read McClung (more than once to understand it properly) to accept the conclusions on how the arithmetic of sequence and MSWR and deaccumulation work mathematically with different well known and high level approaches from academic literature and elsewhere. My arithmetic was not up to it to intuit some of it without slogging through it.  I can be fun at parties but fairly obviously not about pensions.

OP may need to read it (or similar) to get DIY confident - or they may not.

GazzaBloom

Hoenir said:

GazzaBloom said:

Hoenir said:

Doesn't answer the eternal question of where your money should be invested at any given point in time. Get that decision wrong and any amount of planning could soon start to unravel. 

When looking at drawdown from invested assets, holding a mix of low cost diversified global equities (such as a tracker fund) and safer "risk-off" assets such as cash, or maybe bonds/gilts can be back tested in software modelling to see if it would survive a range of scenarios to give a degree of comfort that you have enough in your pot and the right mix to launch into retirement an cover your known expenditure needs.

I'm fully aware of that. It's the data source that's more the issue for me.   Also the very different environment/manner in which investment transactions now take place. History is constantly being rewritten. 

Hang on I thought history never stops repeating itself Thugelmir?

  

Hoenir said:

JohnWinder said:

If you look at Japan in 1990 you can get a sense of why the current enthusiasm for the SP500 on this forum and elsewhere might be a little bit brave.

If the S&P topples. The reasons will be very different as to why. Both however do share the same sense of investor euphoria. The sense of FOMO. As did the Dot Com era and the GFC companies. History never stops repeating itself. 

JohnWinder

Here are someone's thoughts: https://earlyretirementnow.com/2017/02/08/the-ultimate-guide-to-safe-withdrawal-rates-part-9-guyton-klinger/

Bostonerimus1

GK is one of many withdrawal strategies and its guard rails formalize what most people will naturally do for themselves even if they are using something as simple as an inflation linked percentage. Whatever algorithm you apply to your pension pot the basis foundations are budgeting and awareness of your spending relative to the size of your pot.

Hoenir

Hang on I thought history never stops repeating itself?

Market cycles will always repeat themselves.  That's the nature of investing. When in financial history has there previously been QE, for example,  though ?