How to get income from funds from year 6 and not before?

20122013

I have 5 years spending money and I am looking to move the rest of my savings into S&S.

If I do not need access to the funds until year 6, would choosing an accumulative fund and switching it to an income fund work?  or should they be income funds from the start and keep reinvesting the income until I need the money in Year 6? or buy them as accumulative and sell when I need the money? 

As each year I will sell the S&S and repurchase them as S&S ISA. 

dunstonh

would choosing an accumulative fund and switching it to an income fund work?

I use income wherever possible.   reinvest whilst in the accumulation stage (a natural form of rebalancing) and then run a cash float in the decumulation stage to allow a fixed regular draw with natural income replenishing it.

Linton

It is not clear whether you have a SIPP or other pension from which you will need to drawdown or will be using money that is already in ISAs and/or a taxable environment, nor whether you have other income, eg a DB pension.  The precise circumstances can make a diifference as to how you manage your money.

Either way I suggest you build up your (and your spouse's if you have one) S&S ISA(s)  as quickly as possible over the next 6 years and beyond with the intention of withdrawing ongoing income from it. This will minimise tax and avoid or substantially reduce any risk you may have of becoming a higher rate tax payer when you take your State Pension.  It is also highly flexible in that any excess income can be reinvested back into the S&S ISA and it can provide a repository for emergency and one-off large expenses.

As you suggest there are 2 main ways of generating the income - either from specialist income funds or from selling assets.  This is a major topic in its own right and often discussed on these pages.  There are advocates on both sides. I use a strategy based on income funds. If you wish to discuss this I suggest you start another thread giving more details on your circumstances (eg liquid assets, desired income, other sources of income).

DRS1

I think this is a follow on from another thread here
Cash Ladder which bank - Page 2 — MoneySavingExpert Forum

I seem to have lost it but I thought the OP said he had a pension of c£100k and more outside so would probably be doing less drawing from his pension than others on here.

He also has S&S outside an ISA which he will be selling to contribute to an S&S ISA which probably means he can't draw out of the pension to contribute to an ISA.

My own thought would be to consider a gilt ladder for years 6 - 10 and the S&S ISA for years 10 and on.  If the gilts are held outside the ISA they should be low coupon ones.  

20122013

Thanks  @DRS1

I did add my OP to Cash Ladder which bank - Page 2 — MoneySavingExpert Forum but had no response so I thought I would create a new thread..

20122013

Linton said:

It is not clear whether you have a SIPP or other pension from which you will need to drawdown or will be using money that is already in ISAs and/or a taxable environment, nor whether you have other income, eg a DB pension.  The precise circumstances can make a diifference as to how you manage your money.

I do not have a SIPP but I have an old work Pension (SW) about £100K. Hence, I keep thinking whether I need to plan in great draw down details compare to those who have a higher value pension pot than mine.

Either way I suggest you build up your (and your spouse's if you have one) S&S ISA(s)  as quickly as possible over the next 6 years and beyond with the intention of withdrawing ongoing income from it. This will minimise tax and avoid or substantially reduce any risk you may have of becoming a higher rate tax payer when you take your State Pension. 

I do not have a spouse or any dependants and have used all my ISA allowance for this year 

 It is also highly flexible in that any excess income can be reinvested back into the S&S ISA and it can provide a repository for emergency and one-off large expenses.

Would you mind explaining a bit more to the above? 

As you suggest there are 2 main ways of generating the income - either from specialist income funds or from selling assets.  This is a major topic in its own right and often discussed on these pages.  There are advocates on both sides. I use a strategy based on income funds. If you wish to discuss this I suggest you start another thread giving more details on your circumstances (eg liquid assets, desired income, other sources of income).

I will look into more into income funds, at the moment I am tempted to put all my spare cash into my current fund instead of waiting till I have a bit more understanding of all the different investment options and I have a better understanding of my current fund, more than other funds. MMF, gilts and bonds) 

aroominyork

dunstonh said:

would choosing an accumulative fund and switching it to an income fund work?

I use income wherever possible.   reinvest whilst in the accumulation stage (a natural form of rebalancing) and then run a cash float in the decumulation stage to allow a fixed regular draw with natural income replenishing it.

That's interesting. I expect most DIYers use accumulation funds during the accumlation stage - seems logical! - and hadn't thought of using income to rebalance. I guess it partly depends on whether your platform charges for trades, and maybe also whether you have disciplined yourself only to log on once or twice a year. 

LHW99

aroominyork said:

dunstonh said:

would choosing an accumulative fund and switching it to an income fund work?

I use income wherever possible.   reinvest whilst in the accumulation stage (a natural form of rebalancing) and then run a cash float in the decumulation stage to allow a fixed regular draw with natural income replenishing it.

That's interesting. I expect most DIYers use accumulation funds during the accumlation stage - seems logical! - and hadn't thought of using income to rebalance. I guess it partly depends on whether your platform charges for trades, and maybe also whether you have disciplined yourself only to log on once or twice a year. 

I have worked this way with our SIPPs for the past 12 years or so. Using II there is a free trade every month, and I confess to logging in at least weekly!

20122013

Do you mean you have income fund(s)  and you withdrawl / sell enough each month to give you the amount you need? As originally I was thinking of selling my ACC fund once a year (as less paper work), however, an income funds may be more likely to be provide an income than my ACC fund.

LHW99

Haven't actually withdrawn from the Sipps till last year, but have been building the portfolio of income funds over the years, so that the ividend income coming in has graadually reached the sort of amount we look for to cover any discretionary spends above SP and work pensions.

For the last 12 years, the gradually rising income has just been re-invested in whichever fund helps keep the balance (geographic, equity v bonds etc) as wanted.