Canasta Strategy - Jonathan Guthrie

Fermion

https://www.ft.com/content/69c88628-087c-4924-88f0-e5bd9cf5e5b4

(Free download but need to Register with the FT)

Interesting article by Jonathan Guthrie of the FT about the Canasta Strategy - worth a read

" Forget the 4 Per Cent Rule, according to the Canasta Strategy, you should let the market decide your pension spending"

Bostonerimus1

https://forums.moneysavingexpert.com/discussion/6676022/canasta-strategy-jonathan-guthrie

It's amazing how often the same thing can be rediscovered, renamed and recycled to the public by the financial industry and media. It's either an indication of the shallowness of their knowledge or their desire to make a few quid off an old idea that they put a new name on. Ponzo is a significant figure, but mention of a few other researchers would have been nice. It is good for people to realize that "4%" is just one strategy and might not be the most appropriate for their circumstances, but the article is very old news. There are many withdrawal strategies ( 4%, VPW, 1/N, Guyton Klinger, dividends and interest) and here's a guide to a few.

https://www.bogleheads.org/wiki/Withdrawal_methods

mrklaw

while posting an entire article probably isn’t reasonable, at least summarising the topic in a way that doesn’t leave us guessing would be helpful?

edit: so its a guardrails flavour?

MK62

As Bostonerimus says, it's really just another take on the many ways to implement a variable withdrawal strategy…..catchy name though!

DT2001

I have not seen a strategy before that suggests (from the graphs) potentially increasing your withdrawals from 20k to 90k on a £500k starting point and then back down to below (?) 20k. I know there is a caveat that you could take advice to understand the tax consequences but surely it would be logical to utilise your luck (complete opposite of an early poor sequence of returns) to put in place a tweak that would lessen the volatility. It is suggested that this strategy might be of interest to those who had a variable income through their accumulation years. My OH and I have been self employed for the majority of life so a variable income is something we are used to - at the moment it is our intention to draw a fixed % quarterly from our growth equities pot however we will have guaranteed income from SP, small DBs and income focused ITs to cover all ‘necessary’ spend and some discretionary.

Dead_keen

A non-paywalled link: https://archive.is/veQpy

Bostonerimus1

https://forums.moneysavingexpert.com/discussion/comment/82067448#Comment_82067448

With the anticipated inclusion of DC pensions in estates for IHT purposes, a withdrawal strategy will include tax planning for many. In addition to covering spending from a variable pot of money you also have to factor in how much tax you and your estate will pay on your DC accumulation and of course its generally expected that your spending drops as you age. I suppose extra withdrawals to spend down the DC pension to zero is an attractive plan to minimize IHT, so such strategies might lean into gifts from excess income. All these moving parts mean that the tactics of annual spending will diverge from your strategic plan.