SWR Come What May

jim8888

I wondered if there's anyone out there living off a Safe Withdrawal Rate "come what may" - in other words, they're taking 4% of their pot every year, regardless of whether they need the money or not, regardless of what the markets are doing, regardless of all factors in favour or against? It seems to me that there are plenty of us looking at living off a SWR, but I wondered how many actually do in practice? I know I don't (although I could). 

westv

It isn't 4%'in the UK. More like 3-3.5%ish.

Hoenir

Spent too many decades investing to attempt to forecast what the future might hold. 

Sarahspangles

jim8888 said:

regardless of whether they need the money or not 

If you withdraw from your retirement pot, but don’t spend the money, don’t you still have it? 

NedS

[Deleted User] said:

jim8888 said:

I wondered if there's anyone out there living off a Safe Withdrawal Rate "come what may" - in other words, they're taking 4% of their pot every year, regardless of whether they need the money or not, regardless of what the markets are doing, regardless of all factors in favour or against? It seems to me that there are plenty of us looking at living off a SWR, but I wondered how many actually do in practice? I know I don't (although I could). 

I'm sure that there are definitely some brave souls living off their Safe Withdrawal Rate like it's set in stone.

Is it really brave to do something if you don't understand the risks involved in doing it?

I fear a large percentage of people with smaller than average auto-enrolled pensions will have no clue what to do with their pension pots once they reach retirement age.

Sea_Shell

See my signature 😉

We seem to have been hovering between 2.5 - 3%, due to our natural spending patterns, over the last 5 years.

We now have £100k+ more than we started with 😇

We don't set a target or budget, it just is what it is.

Who knows where we'll be in the next 5.

(It's our only source at the moment)

Albermarle

NedS said:

[Deleted User] said:

jim8888 said:

I wondered if there's anyone out there living off a Safe Withdrawal Rate "come what may" - in other words, they're taking 4% of their pot every year, regardless of whether they need the money or not, regardless of what the markets are doing, regardless of all factors in favour or against? It seems to me that there are plenty of us looking at living off a SWR, but I wondered how many actually do in practice? I know I don't (although I could). 

I'm sure that there are definitely some brave souls living off their Safe Withdrawal Rate like it's set in stone.

Is it really brave to do something if you don't understand the risks involved in doing it?

I fear a large percentage of people with smaller than average auto-enrolled pensions will have no clue what to do with their pension pots once they reach retirement age.

Probably they first take the 25% tax free cash whether they need it or not, and then scratch their heads.

Grumpy_chap

[Deleted User] said:

I'm not going to use my thumb to measure anything important.

You would have to if you wanted to know what a thumb's width was

On a serious note, why wouldn't someone do this?

[Deleted User] said:

 living off their Safe Withdrawal Rate like it's set in stone. 

There is nothing brave in living off a SWR.
It is not a SAFE withdrawal rate otherwise.
Now, whether the SWR is correctly set is another matter entirely.

FWIW, I always think that the SWR percentages generally mentioned are too conservative as the typical values referenced (4% or thereabouts) seem to be to preserve the original capital value and only spend growth.  I will be perfectly happy to spend the original capital value over the period of retirement.  At 4% withdrawal rate, growth could be zero and I still last 25 years...

coyrls

Grumpy_chap said:

 At 4% withdrawal rate, growth could be zero and I still last 25 years...

How do you know that when you don't know future inflation rates (SWR is the initial percentage, which is then increased by inflation each year)?

Triumph13

You need to distinguish between those who have meticulously planned and researched their withdrawal strategy, like the regulars on here, and your random retiree who gets to retirement age and hasn't got a clue what to do.  I'm willing to bet that no-one in the former group will be blindly following an  SWR strategy.  We will all have modelled various scenarios for cutting back in a prolonged downturn.

A more interesting question might be what happens if we don't get a series of investment returns as bad as anything in history? That's what SWR was built to survive.  How many of us have a strategy for the point at which we would be comfortable to increase our drawings in the historically more likely scenario that our investments grow significantly post retirement?  
. 

zagfles

westv said:

It isn't 4%'in the UK. More like 3-3.5%ish.

May as well buy an index linked annuity then.