Is the 4% rule still applicable today?

Pat38493

Bostonerimus1 said:

MallyGirl said:

Hence the shift in my mindset to drawdown all I can up to the 20% threshold, putting excess into an ISA. At least then our daughter will only have to pay the 40% IHT and not also get hit paying income tax on any that is left.

This is also my strategy. I face a couple of issues being in the USA and thinking about a return to the UK. The UK has a higher top rate of tax and the US mandates a certain level of withdrawals from DC accounts at age 75. So I'm paying US tax on DC withdrawals at a marginal rate of 22% now so I can get it into a "ROTH" DC retirement account which is tax free in the USA and the UK. However, right now the US IHT on my estate would be 0% and if I move back to the UK it would be 40% on most of it. To avoid some of that 40% tax hit I'm giving to family members before I move to the UK to make use of the generous gift rules in the US.

That was pretty much already my strategy even before the upcoming IHT changes, for a few other reasons, but it’s now reinforced.  We had already decided that we prefer to have the option to spend or give away our money whilst still alive and see the family enjoy it, without additional constraints from income tax thresholds.  Also modelling this approach in cash flow tools didn’t really make much difference compared to leaving it in the pension as long as possible.

Scarum

There's also the 25x guide where you need 25 times total savings (all DC pensions and other savings) of annual expenses as a rough guide.

I've decided to use this '25x' guide along with the SIPP safe withdrawal rate, as you would expect they are well correlated.  I am well above 25x (28x) and a bit under 3.5% SWR.

Bostonerimus1

Scarum said:

There's also the 25x guide where you need 25 times total savings (all DC pensions and other savings) of annual expenses as a rough guide.

I've decided to use this '25x' guide along with the SIPP safe withdrawal rate, as you would expect they are well correlated.  I am well above 25x (28x) and a bit under 3.5% SWR.

Hmmm....25x spending in investable assets vs 4% drawdown? I say potato etc.

Smudgeismydog

MallyGirl said:

Hence the shift in my mindset to drawdown all I can up to the 20% threshold, putting excess into an ISA. At least then our daughter will only have to pay the 40% IHT and not also get hit paying income tax on any that is left.

That’s what I’ve decided to do as well, although I intend to spend/gift more than I’d originally thought. I honestly don’t see why I’d try to preserve my SIPP value. 

kempiejon

I think I can see a link between 4 and 25 and 100 too.
I set my first year of spending at £20k so needed a pot of £500k.
The following year my £20k was increased by 2% for cost of living = £20,400 but whoa my pot is worth £535,000 and the sum don't work anymore. Drat I'll just take what I need and keep an eye on the pot.