Stick or twist

Albermarle

https://forums.moneysavingexpert.com/discussion/comment/81899881#Comment_81899881

30-50% market dip would be a concern, as it would surely be for many. I could ride it out if short-lived.

In the dotcom crash of 2000, the S&P500 lost 50% at the bottom, and took 13 years to get back to its previous peak valuation ( the Nasdaq lost 80% and took 17 years)

In the GFC of 2008, the S&P 500 lost again about 50% but 'only' took 6 years to recover.

Also in those down years, inflation still marched on.

Veloflyer

https://forums.moneysavingexpert.com/discussion/comment/81900624#Comment_81900624

Yes - aware of that, and it does keep me awake sometimes. I am being more persuaded to gradually decrease equity exposure as per previous post else decrease it all now via ILG or similar in the SIPP

DT2001

Is your cash buffer 3 years of your total spend?

If you create a bond/gilt ladder to cover the gap to SPA you only need circa £13k p.a. on top of that. If the market drops 50% and takes 6 years to recover you could take 50%+ of your original drawdown and the cash buffer would cover the rest up to 50% (if cash buffer just equals excess above SP). Cash buffer will last longer as 50% is bottom of the market. You can mix and match your options for annuity/gilt ladder etc

kempiejon

https://forums.moneysavingexpert.com/discussion/comment/81900941#Comment_81900941

I held a finger in the air and picked 3 years cash and a 50% crash, it's good to see it spelt out like that and I concur the cash could easily ride out a a bit more time for markets to recover as they will hopefully begin to climb up during those 6 years. But it is still just a guess.

A bit of my portfolio is gilts/corp bonds with a known, hopefully fixed, secure income, and some cash at known dates; having a bit of spare cash to built a few years of maturing gilts is another plan I look at. Or annuitize.

For now I've some gold ETF and Sovs which might not behave the same way as equities when they correct. But it is still just a guess, equities have a lot to do over the next 1-40 years or how long that guess turns out to be.

Veloflyer

https://forums.moneysavingexpert.com/discussion/comment/81900941#Comment_81900941

Cash buffer is around 3 x average annual present spend over the past 5 years or so.

Not entirely sure what you are getting at, but I am leaning towards a short term ILG ladder of 100K per ann maturing each year until SP kicks in 5 years down the line.

Assume ann spend is @37K/ann and pot of 500K

On maturity of the first gilt, I request TFLS of 25K and 12K/ann income from the (crystallized remainder), thus no tax to pay.

Repeat the TFLS request for the next 4 years

Remaining is 315K in drawdown pot

SP kicks in 2031 so I need @ extra 25K/ann for life. Should be possible to obtain purchasing IL annuity with the 315?

Cash buffer may be used as bunce as soon as the ladder is set up.

DT2001

https://forums.moneysavingexpert.com/discussion/comment/81901320#Comment_81901320

Sorry, misunderstood. I had 2 x SP to leave only £13k needed. Have you checked annuity rates that are pertinent to you?

Your new plan looks solid

Veloflyer

https://forums.moneysavingexpert.com/discussion/comment/81902401#Comment_81902401

The missus will have full SP but I didn't include it. Thanks for the vote of confidence ref plan. I am aware that it seems the sensible thing to do in my situation. I guess if I carry it out, the cash buffer is not as vital as the large equity cover required is vastly reduced. I guess it then may be part invested perhaps? One for later.

Annuity based on rough estimate of 7K/ann per 100K capital. For sure I have not looked into rates in great detail. I am assuming I can purchase an annuity from the already crystallized funds - the 315K?

OldScientist

Note that an annuity payout rate of 7% is likely to be for a single life, level annuity at 65yo (e.g., see either https://www.hl.co.uk/retirement/annuities/best-buy-rates or https://www.moneyhelper.org.uk/en/pensions-and-retirement/taking-your-pension/compare-annuities for a more bespoke estimate).

The rates for single life RPI annuities at 65yo are closer to 5.4%, and for joint life (100% beneficiary) under 4%.

DT2001

Including or excluding OH’s SP makes a big difference as it is almost a third of your £37k. Does your budget include expenses that will decrease with age (ours includes overseas travel) as you could end up with surplus income post 75/80? Another consideration is when one dies can the other continue to keep the same standard of living.

Oldscientist has shown that your assumption re the annuity maybe optimistic which was why I suggested getting some quotes that are pertinent to you. I still think you have a good base for your plan but further research will enable you to tweak it to your own circumstances.

Good luck

Veloflyer

Thank-you both again. I appreciate the annuity conundrum. For sure I am being optimistic somewhat in RPI annuity but perhaps pessimistic in not including wife's SP. I also have the cash buffer - or at least part of it - to perhaps offset any potential shortfall.

Short term I'd be looking to protect what I have, so the annuity decision could wait. We'd just live off the TFLS and 12K drawdown income until my SP kicks in. There is also still a chance I'd gain a 12 month work contract during that period.