Is it all too good to be true?

Albermarle

Itsme01x said:

squirrelpie said:

Ciprico said:

I know this is a pensions forum, but I urge any men over 50 to get a PSA test....

But be aware of the downsides of a PSA test before you book one, and be sure you can cope in your own mind. (not the test itself, but subsequent investigations given the high false positive rate of the test)

My father was disagnosed with high prostrate PSA, ie cancer, they gave him choices but recommended don't do anything.  It is not the most reliable test.  We will do regular check ups - which they have of other factors/signposts. He is still going six years later without a change in his life.  We must also all remember that because we are living longer the rate of being diagnosed with cancer is nearing 1 in 2 people.  An isidious disease.

Following the publicity with Chris Hoy, I understand that Wes Streeting has asked NHS/NICE etc  to review the current policy on PSA testing.
It does need some clarification as there are conflicting views/ advice on the subject.

Pat38493

SouthCoastBoy said:

Yes, i've used that before, in the example above that red line would concern me

That's because it should not really be labelled as "broke".  You will know if you are in danger of hitting the red line at least 2-3 years, and probably more like 5-7 years, ahead of time.  So rather than saying "broke" it should say "area where you may have to make some modest spending adjustments during the earlier years".  

A couple of weeks ago I was playing round with the data downloads from historical simulations and looking at all the different years, for a scenario with a 15% chance of failure during a 40 year retirement timeframe.  In all of the failure scenarios, there were a lot of years before that where the year end balance was below the 30th percentile statistically.

In other words the red line would never actually happen because you would adjust accordingly before you hit it.  Especially for someone like yourself who seems to be very risk averse and would probably reduce your spending by more than needed at the first hint of any trouble.

The other things is, from posts on other threads, it kind of feels like you already have enough to buy an annuity that would see you set for life - for someone like you I suspect an IFA would try to steer them towards an annuity, on the assumption that whatever you have it will never be enough.

michaels

Pat38493 said:

SouthCoastBoy said:

Yes, i've used that before, in the example above that red line would concern me

That's because it should not really be labelled as "broke".  You will know if you are in danger of hitting the red line at least 2-3 years, and probably more like 5-7 years, ahead of time.  So rather than saying "broke" it should say "area where you may have to make some modest spending adjustments during the earlier years".  

A couple of weeks ago I was playing round with the data downloads from historical simulations and looking at all the different years, for a scenario with a 15% chance of failure during a 40 year retirement timeframe.  In all of the failure scenarios, there were a lot of years before that where the year end balance was below the 30th percentile statistically.

In other words the red line would never actually happen because you would adjust accordingly before you hit it.  Especially for someone like yourself who seems to be very risk averse and would probably reduce your spending by more than needed at the first hint of any trouble.

The other things is, from posts on other threads, it kind of feels like you already have enough to buy an annuity that would see you set for life - for someone like you I suspect an IFA would try to steer them towards an annuity, on the assumption that whatever you have it will never be enough.

This is actually a big problem with SWR - some of the 'success' scenarios see the pot shrink to only a dozen or less times annual drawings within the first 10 years before making a stunning recovery - problem is if you were living that scenario you would have been mad to simply 'trust the SWR' and not sharply reduce your expenditure (which would later to have turned out to be unnecessary poverty)

squirrelpie

michaels said:

This is actually a big problem with SWR - some of the 'success' scenarios see the pot shrink to only a dozen or less times annual drawings within the first 10 years before making a stunning recovery - problem is if you were living that scenario you would have been mad to simply 'trust the SWR' and not sharply reduce your expenditure (which would later to have turned out to be unnecessary poverty)

That's why guardrail-based schemes are often put forward as an alternative to a single SWR. The best known is perhaps Guyton-Klinger, but there are many other approaches.

Sarahspangles

michaels said:

Pat38493 said:

SouthCoastBoy said:

Yes, i've used that before, in the example above that red line would concern me

That's because it should not really be labelled as "broke".  You will know if you are in danger of hitting the red line at least 2-3 years, and probably more like 5-7 years, ahead of time.  So rather than saying "broke" it should say "area where you may have to make some modest spending adjustments during the earlier years".  

A couple of weeks ago I was playing round with the data downloads from historical simulations and looking at all the different years, for a scenario with a 15% chance of failure during a 40 year retirement timeframe.  In all of the failure scenarios, there were a lot of years before that where the year end balance was below the 30th percentile statistically.

In other words the red line would never actually happen because you would adjust accordingly before you hit it.  Especially for someone like yourself who seems to be very risk averse and would probably reduce your spending by more than needed at the first hint of any trouble.

The other things is, from posts on other threads, it kind of feels like you already have enough to buy an annuity that would see you set for life - for someone like you I suspect an IFA would try to steer them towards an annuity, on the assumption that whatever you have it will never be enough.

This is actually a big problem with SWR - some of the 'success' scenarios see the pot shrink to only a dozen or less times annual drawings within the first 10 years before making a stunning recovery - problem is if you were living that scenario you would have been mad to simply 'trust the SWR' and not sharply reduce your expenditure (which would later to have turned out to be unnecessary poverty)

Though in reality most people who have based their projection on a relatively generous income will not be living off beans on toast, they’ll run their car a bit longer, defer the new suite and switch from long haul holidays to the med.

Pat38493

michaels said:

Pat38493 said:

SouthCoastBoy said:

Yes, i've used that before, in the example above that red line would concern me

That's because it should not really be labelled as "broke".  You will know if you are in danger of hitting the red line at least 2-3 years, and probably more like 5-7 years, ahead of time.  So rather than saying "broke" it should say "area where you may have to make some modest spending adjustments during the earlier years".  

A couple of weeks ago I was playing round with the data downloads from historical simulations and looking at all the different years, for a scenario with a 15% chance of failure during a 40 year retirement timeframe.  In all of the failure scenarios, there were a lot of years before that where the year end balance was below the 30th percentile statistically.

In other words the red line would never actually happen because you would adjust accordingly before you hit it.  Especially for someone like yourself who seems to be very risk averse and would probably reduce your spending by more than needed at the first hint of any trouble.

The other things is, from posts on other threads, it kind of feels like you already have enough to buy an annuity that would see you set for life - for someone like you I suspect an IFA would try to steer them towards an annuity, on the assumption that whatever you have it will never be enough.

This is actually a big problem with SWR - some of the 'success' scenarios see the pot shrink to only a dozen or less times annual drawings within the first 10 years before making a stunning recovery - problem is if you were living that scenario you would have been mad to simply 'trust the SWR' and not sharply reduce your expenditure (which would later to have turned out to be unnecessary poverty)

True but the point is that a lot of the time, you could just make some small adjustments when you see the first early warning signal - in many cases all it will take is the deferral of a couple of items to a later year, or one less holiday or whatever in a year, and you will find yourself back on track.  Yes you are correct that you might have been on track anyway and there are quite a few false flag alarms.  Obviously if your spending plan only just covers your mandatory basic spend, it's a different matter.

cfw1994

SouthCoastBoy said:

Yes, i've used that before, in the example above that red line would concern me

Come back, SCB, we're all willing you onwards!

Does the grey zone not scare you more?

Watched another Shack video today where he pointed out you would have warnings of that kind of problem & you can then take action if needed.   I kind of had that when I stepped away in 2021 - markets were falling at the end of the year, & after only 1 or 2 withdrawals, I paused drawdown and we lived off cash assets for about a year, before easing back in.      

saucer

This thread reminds me of the Monty Python sketch about the accountant who wants to be a lion tamer who instead settles on a step towards it via banking. 

OldScientist

michaels said:

Pat38493 said:

SouthCoastBoy said:

Yes, i've used that before, in the example above that red line would concern me

That's because it should not really be labelled as "broke".  You will know if you are in danger of hitting the red line at least 2-3 years, and probably more like 5-7 years, ahead of time.  So rather than saying "broke" it should say "area where you may have to make some modest spending adjustments during the earlier years".  

A couple of weeks ago I was playing round with the data downloads from historical simulations and looking at all the different years, for a scenario with a 15% chance of failure during a 40 year retirement timeframe.  In all of the failure scenarios, there were a lot of years before that where the year end balance was below the 30th percentile statistically.

In other words the red line would never actually happen because you would adjust accordingly before you hit it.  Especially for someone like yourself who seems to be very risk averse and would probably reduce your spending by more than needed at the first hint of any trouble.

The other things is, from posts on other threads, it kind of feels like you already have enough to buy an annuity that would see you set for life - for someone like you I suspect an IFA would try to steer them towards an annuity, on the assumption that whatever you have it will never be enough.

This is actually a big problem with SWR - some of the 'success' scenarios see the pot shrink to only a dozen or less times annual drawings within the first 10 years before making a stunning recovery - problem is if you were living that scenario you would have been mad to simply 'trust the SWR' and not sharply reduce your expenditure (which would later to have turned out to be unnecessary poverty)

There's some evidence that suggests the performance of SWR over the first 10 to 15 years of retirement provides a fairly good forecast of the final SWR (e.g., see https://portfoliocharts.com/2024/03/15/how-to-harness-the-flowing-nature-of-withdrawal-rate-math/ which I think is probably one of the best articles on SWR projections - although note that it is limited to the US for 1970 onwards only, although I think to tool discussed allows other countries and portfolios).

MK62

OldScientist said:

michaels said:

Pat38493 said:

SouthCoastBoy said:

Yes, i've used that before, in the example above that red line would concern me

That's because it should not really be labelled as "broke".  You will know if you are in danger of hitting the red line at least 2-3 years, and probably more like 5-7 years, ahead of time.  So rather than saying "broke" it should say "area where you may have to make some modest spending adjustments during the earlier years".  

A couple of weeks ago I was playing round with the data downloads from historical simulations and looking at all the different years, for a scenario with a 15% chance of failure during a 40 year retirement timeframe.  In all of the failure scenarios, there were a lot of years before that where the year end balance was below the 30th percentile statistically.

In other words the red line would never actually happen because you would adjust accordingly before you hit it.  Especially for someone like yourself who seems to be very risk averse and would probably reduce your spending by more than needed at the first hint of any trouble.

The other things is, from posts on other threads, it kind of feels like you already have enough to buy an annuity that would see you set for life - for someone like you I suspect an IFA would try to steer them towards an annuity, on the assumption that whatever you have it will never be enough.

This is actually a big problem with SWR - some of the 'success' scenarios see the pot shrink to only a dozen or less times annual drawings within the first 10 years before making a stunning recovery - problem is if you were living that scenario you would have been mad to simply 'trust the SWR' and not sharply reduce your expenditure (which would later to have turned out to be unnecessary poverty)

There's some evidence that suggests the performance of SWR over the first 10 to 15 years of retirement provides a fairly good forecast of the final SWR (e.g., see https://portfoliocharts.com/2024/03/15/how-to-harness-the-flowing-nature-of-withdrawal-rate-math/ which I think is probably one of the best articles on SWR projections - although note that it is limited to the US for 1970 onwards only, although I think to tool discussed allows other countries and portfolios).

Unfortunately though, you can't know the performance of your portfolio over the first 10-15 years of your retirement, as you set your SWR at the start.
The basic premise of the SWR strategy is that you set it at the start and then continue at that level, index linked, for the duration, basically trusting that the future will be no worse than the worst period in the past....if you deviate from that, then you aren't following the SWR strategy, but some variant of the variable withdrawal strategy (and there are many).
I think michaels makes a good observation above about SWR.......how many people would have lost their nerve after a few years if early returns were significantly negative at the start of their retirements?... even if history ultimately shows that they needn't have (not that they could have known this at the time though).

The other main issue for me with SWR, is that at the start you set the level to cope with the worst period in the past (and maybe knock a few tenths off that, just in case), but knowing that all other periods gave a better outcome, some significantly.......so there is a high probability that you are setting your income a bit too low at the start of your retirement, very likely right when you want your income to be at it's peak.......and in life, there is no rewind button.
Personally I suspect few people actually follow the SWR strategy in practice, but rather use it as a guide, and then use a variable withdrawal strategy of some sort.