If you are an SWR purist, when does your retirement start?

MK62

michaels said:

MK62 said:

michaels said:

MK62 said:

michaels said:

If my retirement had started when I handed in my notice 3 months ago then my SWR would be about 5k pa higher than it is now I am about to hit my retirement date.

To me this points up a pretty big flaw with a pure SWR approach.

It's not really a flaw as such......pretty much any portfolio with a sizable chunk invested in equities will show a similar pattern, even if the numbers don't match exactly. The global equity market is down about 10% over the last 3 months, and some equity funds a lot more than that (obv it depends on exactly what your equity investments are), so crunching the numbers now, compared to 3 months ago is going to show a lower starting withdrawal with pretty much any drawdown plan.

PS - personally I'm not really a big believer in the "pure" SWR drawdown plan......in my view it's basically gambling that the future will be no worse than the worst period in the past......it might well not be, but nobody knows!

But had I retired 3 months ago and was wedded to SWR then Alt-me would be happy pulling my 65k pa for ever after despite what has happened to the markets whereas me-me who retires next Friday will instead have to be happy drawing 60k.  I would say that realistically my risk of failure is lower than Alt-me's.  It is only SWR purists who would say otherwise.

True, but you are using hindsight.........had you withdrawn 65k three months ago, then the issue of withdrawal would not come up again until Jan 26, and who knows where we'll be then.......there would be no decision to make today.

For the SWR absolutist there is no decision to make ever, it is a day one launch and forget strategy...

.....but the decision is when day one is.......today or 3 months ago?.....

MK62

Bostonerimus1 said:

zagfles said:

michaels said:

MK62 said:

michaels said:

MK62 said:

michaels said:

If my retirement had started when I handed in my notice 3 months ago then my SWR would be about 5k pa higher than it is now I am about to hit my retirement date.

To me this points up a pretty big flaw with a pure SWR approach.

It's not really a flaw as such......pretty much any portfolio with a sizable chunk invested in equities will show a similar pattern, even if the numbers don't match exactly. The global equity market is down about 10% over the last 3 months, and some equity funds a lot more than that (obv it depends on exactly what your equity investments are), so crunching the numbers now, compared to 3 months ago is going to show a lower starting withdrawal with pretty much any drawdown plan.

PS - personally I'm not really a big believer in the "pure" SWR drawdown plan......in my view it's basically gambling that the future will be no worse than the worst period in the past......it might well not be, but nobody knows!

But had I retired 3 months ago and was wedded to SWR then Alt-me would be happy pulling my 65k pa for ever after despite what has happened to the markets whereas me-me who retires next Friday will instead have to be happy drawing 60k.  I would say that realistically my risk of failure is lower than Alt-me's.  It is only SWR purists who would say otherwise.

True, but you are using hindsight.........had you withdrawn 65k three months ago, then the issue of withdrawal would not come up again until Jan 26, and who knows where we'll be then.......there would be no decision to make today.

For the SWR absolutist there is no decision to make ever, it is a day one launch and forget strategy...

These days when indexed linked annuities generally give a better return than the SWR it would seem pointless to be a SWR absolutist. What's the point in using equities at all if you aren't going to take advantage of the (generally) higher returns. 

Be careful. Annuities don't have a "return", they have a payout rate that is made up of your capital and some extra money from the insurance company. SWR or annuitization are entirely different ways of generating income, which is why they can be complimentary in a plan.

Hmmm, not sure why you'd need to be careful if you financed retirement with an annuity, but the payout vs SWR does depend on your circumstances..........a single life IL annuity might give a higher payout than SWR, but a joint life 2/3s IL annuity might not......

zagfles

MK62 said:

Bostonerimus1 said:

zagfles said:

michaels said:

MK62 said:

michaels said:

MK62 said:

michaels said:

If my retirement had started when I handed in my notice 3 months ago then my SWR would be about 5k pa higher than it is now I am about to hit my retirement date.

To me this points up a pretty big flaw with a pure SWR approach.

It's not really a flaw as such......pretty much any portfolio with a sizable chunk invested in equities will show a similar pattern, even if the numbers don't match exactly. The global equity market is down about 10% over the last 3 months, and some equity funds a lot more than that (obv it depends on exactly what your equity investments are), so crunching the numbers now, compared to 3 months ago is going to show a lower starting withdrawal with pretty much any drawdown plan.

PS - personally I'm not really a big believer in the "pure" SWR drawdown plan......in my view it's basically gambling that the future will be no worse than the worst period in the past......it might well not be, but nobody knows!

But had I retired 3 months ago and was wedded to SWR then Alt-me would be happy pulling my 65k pa for ever after despite what has happened to the markets whereas me-me who retires next Friday will instead have to be happy drawing 60k.  I would say that realistically my risk of failure is lower than Alt-me's.  It is only SWR purists who would say otherwise.

True, but you are using hindsight.........had you withdrawn 65k three months ago, then the issue of withdrawal would not come up again until Jan 26, and who knows where we'll be then.......there would be no decision to make today.

For the SWR absolutist there is no decision to make ever, it is a day one launch and forget strategy...

These days when indexed linked annuities generally give a better return than the SWR it would seem pointless to be a SWR absolutist. What's the point in using equities at all if you aren't going to take advantage of the (generally) higher returns. 

Be careful. Annuities don't have a "return", they have a payout rate that is made up of your capital and some extra money from the insurance company. SWR or annuitization are entirely different ways of generating income, which is why they can be complimentary in a plan.

Hmmm, not sure why you'd need to be careful if you financed retirement with an annuity, but the payout vs SWR does depend on your circumstances..........a single life IL annuity might give a higher payout than SWR, but a joint life 2/3s IL annuity might not......

You can easily get IL annuities joint life 100% spouse benefit paying over the 3.5% "SWR" quoted above at age 60. Over 4% at 65. I've got a quote of almost 4% and wife and I both under 60, a few minor health issues but nothing serious. 

zagfles

Bostonerimus1 said:

zagfles said:

michaels said:

MK62 said:

michaels said:

MK62 said:

michaels said:

If my retirement had started when I handed in my notice 3 months ago then my SWR would be about 5k pa higher than it is now I am about to hit my retirement date.

To me this points up a pretty big flaw with a pure SWR approach.

It's not really a flaw as such......pretty much any portfolio with a sizable chunk invested in equities will show a similar pattern, even if the numbers don't match exactly. The global equity market is down about 10% over the last 3 months, and some equity funds a lot more than that (obv it depends on exactly what your equity investments are), so crunching the numbers now, compared to 3 months ago is going to show a lower starting withdrawal with pretty much any drawdown plan.

PS - personally I'm not really a big believer in the "pure" SWR drawdown plan......in my view it's basically gambling that the future will be no worse than the worst period in the past......it might well not be, but nobody knows!

But had I retired 3 months ago and was wedded to SWR then Alt-me would be happy pulling my 65k pa for ever after despite what has happened to the markets whereas me-me who retires next Friday will instead have to be happy drawing 60k.  I would say that realistically my risk of failure is lower than Alt-me's.  It is only SWR purists who would say otherwise.

True, but you are using hindsight.........had you withdrawn 65k three months ago, then the issue of withdrawal would not come up again until Jan 26, and who knows where we'll be then.......there would be no decision to make today.

For the SWR absolutist there is no decision to make ever, it is a day one launch and forget strategy...

These days when indexed linked annuities generally give a better return than the SWR it would seem pointless to be a SWR absolutist. What's the point in using equities at all if you aren't going to take advantage of the (generally) higher returns. 

Be careful. Annuities don't have a "return", they have a payout rate that is made up of your capital and some extra money from the insurance company. SWR or annuitization are entirely different ways of generating income, which is why they can be complimentary in a plan.

Of course annuities give a return, a "payout rate" is a return! The point was if that return is better than the so called SWR then being a "SWR absolutist" is pointless, why would you want to take a lower return and more risk (even the SWR isn't risk free) if you're not going to take advantage of the upside if it happens. 

dunstonh

MK62 said:

Bostonerimus1 said:

zagfles said:

michaels said:

MK62 said:

michaels said:

MK62 said:

michaels said:

If my retirement had started when I handed in my notice 3 months ago then my SWR would be about 5k pa higher than it is now I am about to hit my retirement date.

To me this points up a pretty big flaw with a pure SWR approach.

It's not really a flaw as such......pretty much any portfolio with a sizable chunk invested in equities will show a similar pattern, even if the numbers don't match exactly. The global equity market is down about 10% over the last 3 months, and some equity funds a lot more than that (obv it depends on exactly what your equity investments are), so crunching the numbers now, compared to 3 months ago is going to show a lower starting withdrawal with pretty much any drawdown plan.

PS - personally I'm not really a big believer in the "pure" SWR drawdown plan......in my view it's basically gambling that the future will be no worse than the worst period in the past......it might well not be, but nobody knows!

But had I retired 3 months ago and was wedded to SWR then Alt-me would be happy pulling my 65k pa for ever after despite what has happened to the markets whereas me-me who retires next Friday will instead have to be happy drawing 60k.  I would say that realistically my risk of failure is lower than Alt-me's.  It is only SWR purists who would say otherwise.

True, but you are using hindsight.........had you withdrawn 65k three months ago, then the issue of withdrawal would not come up again until Jan 26, and who knows where we'll be then.......there would be no decision to make today.

For the SWR absolutist there is no decision to make ever, it is a day one launch and forget strategy...

These days when indexed linked annuities generally give a better return than the SWR it would seem pointless to be a SWR absolutist. What's the point in using equities at all if you aren't going to take advantage of the (generally) higher returns. 

Be careful. Annuities don't have a "return", they have a payout rate that is made up of your capital and some extra money from the insurance company. SWR or annuitization are entirely different ways of generating income, which is why they can be complimentary in a plan.

Hmmm, not sure why you'd need to be careful if you financed retirement with an annuity, but the payout vs SWR does depend on your circumstances..........a single life IL annuity might give a higher payout than SWR, but a joint life 2/3s IL annuity might not......

Where the annuity could really come into play is for the defensive side of the portfolio.   e.g. fund of £500k.  instead of going 50/50 with equities and bonds, you could go 50% on the annuity and invest the remainder in equities (plus cash float as needed).   

You can either buy the annuity within the pension wrapper so the income is not taxed and draw accordingly (that option wont be available to DIY investors I believe) or you buy it outside of the pension wrapper and with current rates exceeding SWR, you can draw less from the remaining pot.

MK62

zagfles said:

MK62 said:

Bostonerimus1 said:

zagfles said:

michaels said:

MK62 said:

michaels said:

MK62 said:

michaels said:

If my retirement had started when I handed in my notice 3 months ago then my SWR would be about 5k pa higher than it is now I am about to hit my retirement date.

To me this points up a pretty big flaw with a pure SWR approach.

It's not really a flaw as such......pretty much any portfolio with a sizable chunk invested in equities will show a similar pattern, even if the numbers don't match exactly. The global equity market is down about 10% over the last 3 months, and some equity funds a lot more than that (obv it depends on exactly what your equity investments are), so crunching the numbers now, compared to 3 months ago is going to show a lower starting withdrawal with pretty much any drawdown plan.

PS - personally I'm not really a big believer in the "pure" SWR drawdown plan......in my view it's basically gambling that the future will be no worse than the worst period in the past......it might well not be, but nobody knows!

But had I retired 3 months ago and was wedded to SWR then Alt-me would be happy pulling my 65k pa for ever after despite what has happened to the markets whereas me-me who retires next Friday will instead have to be happy drawing 60k.  I would say that realistically my risk of failure is lower than Alt-me's.  It is only SWR purists who would say otherwise.

True, but you are using hindsight.........had you withdrawn 65k three months ago, then the issue of withdrawal would not come up again until Jan 26, and who knows where we'll be then.......there would be no decision to make today.

For the SWR absolutist there is no decision to make ever, it is a day one launch and forget strategy...

These days when indexed linked annuities generally give a better return than the SWR it would seem pointless to be a SWR absolutist. What's the point in using equities at all if you aren't going to take advantage of the (generally) higher returns. 

Be careful. Annuities don't have a "return", they have a payout rate that is made up of your capital and some extra money from the insurance company. SWR or annuitization are entirely different ways of generating income, which is why they can be complimentary in a plan.

Hmmm, not sure why you'd need to be careful if you financed retirement with an annuity, but the payout vs SWR does depend on your circumstances..........a single life IL annuity might give a higher payout than SWR, but a joint life 2/3s IL annuity might not......

You can easily get IL annuities joint life 100% spouse benefit paying over the 3.5% "SWR" quoted above at age 60. Over 4% at 65. 

I didn't say you couldn't.......I said it depends on your circumstances, and "might" or "might not".......the rates on IL annuities vary quite a bit depending on those circumstances (age, spousal provision (and age gap), health etc)......and SWR varies quite a bit depending on your investments and age (obviously the younger you start, the lower it will be........the SWR on a 35 year IL gilt ladder is currently running at about 3.75%.......and at 30yrs, 4.2%.......probably as good an example as you'd get for a "pure" SWR strategy, even if it is, admittedly, something of a corner case).

Pat38493

dunstonh said:

MK62 said:

Bostonerimus1 said:

zagfles said:

michaels said:

MK62 said:

michaels said:

MK62 said:

michaels said:

If my retirement had started when I handed in my notice 3 months ago then my SWR would be about 5k pa higher than it is now I am about to hit my retirement date.

To me this points up a pretty big flaw with a pure SWR approach.

It's not really a flaw as such......pretty much any portfolio with a sizable chunk invested in equities will show a similar pattern, even if the numbers don't match exactly. The global equity market is down about 10% over the last 3 months, and some equity funds a lot more than that (obv it depends on exactly what your equity investments are), so crunching the numbers now, compared to 3 months ago is going to show a lower starting withdrawal with pretty much any drawdown plan.

PS - personally I'm not really a big believer in the "pure" SWR drawdown plan......in my view it's basically gambling that the future will be no worse than the worst period in the past......it might well not be, but nobody knows!

But had I retired 3 months ago and was wedded to SWR then Alt-me would be happy pulling my 65k pa for ever after despite what has happened to the markets whereas me-me who retires next Friday will instead have to be happy drawing 60k.  I would say that realistically my risk of failure is lower than Alt-me's.  It is only SWR purists who would say otherwise.

True, but you are using hindsight.........had you withdrawn 65k three months ago, then the issue of withdrawal would not come up again until Jan 26, and who knows where we'll be then.......there would be no decision to make today.

For the SWR absolutist there is no decision to make ever, it is a day one launch and forget strategy...

These days when indexed linked annuities generally give a better return than the SWR it would seem pointless to be a SWR absolutist. What's the point in using equities at all if you aren't going to take advantage of the (generally) higher returns. 

Be careful. Annuities don't have a "return", they have a payout rate that is made up of your capital and some extra money from the insurance company. SWR or annuitization are entirely different ways of generating income, which is why they can be complimentary in a plan.

Hmmm, not sure why you'd need to be careful if you financed retirement with an annuity, but the payout vs SWR does depend on your circumstances..........a single life IL annuity might give a higher payout than SWR, but a joint life 2/3s IL annuity might not......

Where the annuity could really come into play is for the defensive side of the portfolio.   e.g. fund of £500k.  instead of going 50/50 with equities and bonds, you could go 50% on the annuity and invest the remainder in equities (plus cash float as needed).   

You can either buy the annuity within the pension wrapper so the income is not taxed and draw accordingly (that option wont be available to DIY investors I believe) or you buy it outside of the pension wrapper and with current rates exceeding SWR, you can draw less from the remaining pot.

So it’s possible through an IFA to purchase an annuity that pays the regular payments back into the pension wrapper?  I did not even know that was possible.

westv

Pat38493 said:

dunstonh said:

MK62 said:

Bostonerimus1 said:

zagfles said:

michaels said:

MK62 said:

michaels said:

MK62 said:

michaels said:

If my retirement had started when I handed in my notice 3 months ago then my SWR would be about 5k pa higher than it is now I am about to hit my retirement date.

To me this points up a pretty big flaw with a pure SWR approach.

It's not really a flaw as such......pretty much any portfolio with a sizable chunk invested in equities will show a similar pattern, even if the numbers don't match exactly. The global equity market is down about 10% over the last 3 months, and some equity funds a lot more than that (obv it depends on exactly what your equity investments are), so crunching the numbers now, compared to 3 months ago is going to show a lower starting withdrawal with pretty much any drawdown plan.

PS - personally I'm not really a big believer in the "pure" SWR drawdown plan......in my view it's basically gambling that the future will be no worse than the worst period in the past......it might well not be, but nobody knows!

But had I retired 3 months ago and was wedded to SWR then Alt-me would be happy pulling my 65k pa for ever after despite what has happened to the markets whereas me-me who retires next Friday will instead have to be happy drawing 60k.  I would say that realistically my risk of failure is lower than Alt-me's.  It is only SWR purists who would say otherwise.

True, but you are using hindsight.........had you withdrawn 65k three months ago, then the issue of withdrawal would not come up again until Jan 26, and who knows where we'll be then.......there would be no decision to make today.

For the SWR absolutist there is no decision to make ever, it is a day one launch and forget strategy...

These days when indexed linked annuities generally give a better return than the SWR it would seem pointless to be a SWR absolutist. What's the point in using equities at all if you aren't going to take advantage of the (generally) higher returns. 

Be careful. Annuities don't have a "return", they have a payout rate that is made up of your capital and some extra money from the insurance company. SWR or annuitization are entirely different ways of generating income, which is why they can be complimentary in a plan.

Hmmm, not sure why you'd need to be careful if you financed retirement with an annuity, but the payout vs SWR does depend on your circumstances..........a single life IL annuity might give a higher payout than SWR, but a joint life 2/3s IL annuity might not......

Where the annuity could really come into play is for the defensive side of the portfolio.   e.g. fund of £500k.  instead of going 50/50 with equities and bonds, you could go 50% on the annuity and invest the remainder in equities (plus cash float as needed).   

You can either buy the annuity within the pension wrapper so the income is not taxed and draw accordingly (that option wont be available to DIY investors I believe) or you buy it outside of the pension wrapper and with current rates exceeding SWR, you can draw less from the remaining pot.

So it’s possible through an IFA to purchase an annuity that pays the regular payments back into the pension wrapper?  I did not even know that was possible.

Nor did I. I am trying to think what the benefit would be.

Albermarle

westv said:

Pat38493 said:

dunstonh said:

MK62 said:

Bostonerimus1 said:

zagfles said:

michaels said:

MK62 said:

michaels said:

MK62 said:

michaels said:

If my retirement had started when I handed in my notice 3 months ago then my SWR would be about 5k pa higher than it is now I am about to hit my retirement date.

To me this points up a pretty big flaw with a pure SWR approach.

It's not really a flaw as such......pretty much any portfolio with a sizable chunk invested in equities will show a similar pattern, even if the numbers don't match exactly. The global equity market is down about 10% over the last 3 months, and some equity funds a lot more than that (obv it depends on exactly what your equity investments are), so crunching the numbers now, compared to 3 months ago is going to show a lower starting withdrawal with pretty much any drawdown plan.

PS - personally I'm not really a big believer in the "pure" SWR drawdown plan......in my view it's basically gambling that the future will be no worse than the worst period in the past......it might well not be, but nobody knows!

But had I retired 3 months ago and was wedded to SWR then Alt-me would be happy pulling my 65k pa for ever after despite what has happened to the markets whereas me-me who retires next Friday will instead have to be happy drawing 60k.  I would say that realistically my risk of failure is lower than Alt-me's.  It is only SWR purists who would say otherwise.

True, but you are using hindsight.........had you withdrawn 65k three months ago, then the issue of withdrawal would not come up again until Jan 26, and who knows where we'll be then.......there would be no decision to make today.

For the SWR absolutist there is no decision to make ever, it is a day one launch and forget strategy...

These days when indexed linked annuities generally give a better return than the SWR it would seem pointless to be a SWR absolutist. What's the point in using equities at all if you aren't going to take advantage of the (generally) higher returns. 

Be careful. Annuities don't have a "return", they have a payout rate that is made up of your capital and some extra money from the insurance company. SWR or annuitization are entirely different ways of generating income, which is why they can be complimentary in a plan.

Hmmm, not sure why you'd need to be careful if you financed retirement with an annuity, but the payout vs SWR does depend on your circumstances..........a single life IL annuity might give a higher payout than SWR, but a joint life 2/3s IL annuity might not......

Where the annuity could really come into play is for the defensive side of the portfolio.   e.g. fund of £500k.  instead of going 50/50 with equities and bonds, you could go 50% on the annuity and invest the remainder in equities (plus cash float as needed).   

You can either buy the annuity within the pension wrapper so the income is not taxed and draw accordingly (that option wont be available to DIY investors I believe) or you buy it outside of the pension wrapper and with current rates exceeding SWR, you can draw less from the remaining pot.

So it’s possible through an IFA to purchase an annuity that pays the regular payments back into the pension wrapper?  I did not even know that was possible.

Nor did I. I am trying to think what the benefit would be.

I presume it is because you are using the annuity as a defensive part of a pension portfolio, in place of cash or bonds. As opposed to buying an annuity to pay a regular income from the day you buy it. 

Just guessing as I have never heard of it before either.

Pat38493

westv said:

Pat38493 said:

dunstonh said:

MK62 said:

Bostonerimus1 said:

zagfles said:

michaels said:

MK62 said:

michaels said:

MK62 said:

michaels said:

If my retirement had started when I handed in my notice 3 months ago then my SWR would be about 5k pa higher than it is now I am about to hit my retirement date.

To me this points up a pretty big flaw with a pure SWR approach.

It's not really a flaw as such......pretty much any portfolio with a sizable chunk invested in equities will show a similar pattern, even if the numbers don't match exactly. The global equity market is down about 10% over the last 3 months, and some equity funds a lot more than that (obv it depends on exactly what your equity investments are), so crunching the numbers now, compared to 3 months ago is going to show a lower starting withdrawal with pretty much any drawdown plan.

PS - personally I'm not really a big believer in the "pure" SWR drawdown plan......in my view it's basically gambling that the future will be no worse than the worst period in the past......it might well not be, but nobody knows!

But had I retired 3 months ago and was wedded to SWR then Alt-me would be happy pulling my 65k pa for ever after despite what has happened to the markets whereas me-me who retires next Friday will instead have to be happy drawing 60k.  I would say that realistically my risk of failure is lower than Alt-me's.  It is only SWR purists who would say otherwise.

True, but you are using hindsight.........had you withdrawn 65k three months ago, then the issue of withdrawal would not come up again until Jan 26, and who knows where we'll be then.......there would be no decision to make today.

For the SWR absolutist there is no decision to make ever, it is a day one launch and forget strategy...

These days when indexed linked annuities generally give a better return than the SWR it would seem pointless to be a SWR absolutist. What's the point in using equities at all if you aren't going to take advantage of the (generally) higher returns. 

Be careful. Annuities don't have a "return", they have a payout rate that is made up of your capital and some extra money from the insurance company. SWR or annuitization are entirely different ways of generating income, which is why they can be complimentary in a plan.

Hmmm, not sure why you'd need to be careful if you financed retirement with an annuity, but the payout vs SWR does depend on your circumstances..........a single life IL annuity might give a higher payout than SWR, but a joint life 2/3s IL annuity might not......

Where the annuity could really come into play is for the defensive side of the portfolio.   e.g. fund of £500k.  instead of going 50/50 with equities and bonds, you could go 50% on the annuity and invest the remainder in equities (plus cash float as needed).   

You can either buy the annuity within the pension wrapper so the income is not taxed and draw accordingly (that option wont be available to DIY investors I believe) or you buy it outside of the pension wrapper and with current rates exceeding SWR, you can draw less from the remaining pot.

So it’s possible through an IFA to purchase an annuity that pays the regular payments back into the pension wrapper?  I did not even know that was possible.

Nor did I. I am trying to think what the benefit would be.

I assume it's useful if you want the certainty of an annuity, but you have uneven spending and want to countrol your tax situation year by year.