Aren't there any services to help you manage SWR?

[Chrysalis]

Joking aside, I think this does go back to who bears the risk, the point I was trying to make in my initial post.
Drawdown is inherently risky. I imagine many companies are steering clear of providing the sort of service you are thinking of, precisely because they can see the next mis-selling scandal looming. No one will want to promise money can’t run out under drawdown. They want the risk squarely and clearly on the customers shoulders. That is exactly why drawdown should not be viewed as an alternative to an annuity, and why annuities are expensive (it was guaranteeing annuity rates which turned out to be far too cheap which led to the collapse of Equitable Life).

You are right to draw attention to the issue though. It is the central problem of pensions - how to guarantee income over an uncertain, long and probably lengthening time frame - if it were easy then so would pension policy be.

[TUK020]

Ok so that’s one member signed up for £300 in year one. At £10 per hour that buys 30 hours to knock it together. Oh, minus the domain name registration fee, company registration, fees to setup a business bank account, transaction fees for taking the payment, website hosting fees, advertising fees to get the concept out to member number two etc etc. Not enough money on this really to ensure that I put top notch security in place and comply fully with GDPR. Never mind, I look trustworthy enough for a random bloke on the Internet. I’m sure there’ll be loads of other people who want to sign up and pay me £1000 up front for this. Oh sorry, didn’t I explain. As a beta tester you get 5 years for £1000 but you have to pay up front... before I’ve actually built and tested the service. Still in?
Degsy

On serious note, the investment you are talking about here is what it takes to market launch and scale up.
It would make sense to market test the concept before you committed to that.
Why don't you charge Gilgongo for just one year, on the provio that he gives you a comprehensive feedback report on the process.
Publish aims, advice and feedback here, and get a bunch more feedback.
Then decide whether you could make a go of it

[Gan020]

This is what I do. I'm 53 retired. My wife is 54 and earns less than £3k a year so I just ignore that. I own my own home so I see CPI rather than RPI as a sensible measure of inflation. I have no defined benefit pension just our SIPPs, ISAs and savings

If CPI is around 2%, then if I make 4.5% a year I can afford to withdraw 2.5% and leave enough to ensure my pot isn't eroded by inflation.

Of course we don't want to die with all out pot intact at today's prices so as every year goes by it's safer for us to spend some of our pot as well. I'm fairly uncomfortable about spending my pot in today's money until I hit 60 as we could live another 50 years and that's a long time.

At 67 we will both get nearly full government pensions and our pot won't need to be so large, so between 60 and 67 I will be happy to take out more than the 2.5%.

I suggest you don't need to make your SWR calculation over complicated. As long as you remember that £100 in today's money will be worth a fraction of this in 50 years time and include it in your calcuations, you should be able to get reasonably close.


Note - I think a rainy day fund is always helpful. Interest rates could go lower yet or indeed go to 10% if we look at a 50 year timeframe.

[JuanDB]

If you are well off enough to be able to leave a substantial estate, just hold highish income investments and only spend the dividend income. It's only if the dividend income isn't enough to live on that there's a potential problem. You can get 4.5% on a FTSE 100 Tracker, higher than that if you skew the investments towards higher dividend yields.

Fair enough, but let's just say I'm not that rich: https://finalytiq.co.uk/natural-yield-totally-bonkers-retirement-income-strategy.

I’m not sure that article should be given too much credence. The description of ongoing dividend payments “fluctuating” relative to current share price is a pretty fundamental misunderstanding of dividends and yield calculations.

[TedSwippet]

Fair enough, but let's just say I'm not that rich: https://finalytiq.co.uk/natural-yield-totally-bonkers-retirement-income-strategy.

I’m not sure that article should be given too much credence. The description of ongoing dividend payments “fluctuating” relative to current share price is a pretty fundamental misunderstanding of dividends and yield calculations.

I viewed that part of the article as just making the point that 'natural yield' and 'dividend payments' are not the same thing. Dividends vary according to the performance of the underlying asset, but also according to the whim of company directors, accountants, and so on.

A stock that pays no dividends but instead funnels all company profit into growth (new assets, improved factories, whatever) doesn't necessarily have a zero 'natural yield'. But that seems to be the implication of treating dividends as a proxy for natural yield.

[JohnB]

I wrote my own php webpage calculator to predict my drawdown. When I mentioned it to others I got little interest, and comments ranging from it had too many questions to it didn't cover their personal circumstances. I was reluctant to leave it available because of the support burden it would cause. I don't think it would be a commercial proposition.

As you have control over expenditure as well as drawdown, my best advice would be cautious and keep an eye on things. Expect to only withdraw the excess of real return over inflation in the early years, dipping into capital during deep recessions, and then ramp up capital withdrawal later as your health position becomes clearer.

[Gilgongo]

If CPI is around 2%, then if I make 4.5% a year I can afford to withdraw 2.5% and leave enough to ensure my pot isn't eroded by inflation. ... Of course we don't want to die with all out pot intact at today's prices so as every year goes by it's safer for us to spend some of our pot as well. I'm fairly uncomfortable about spending my pot in today's money until I hit 60 as we could live another 50 years and that's a long time.

Pinning the withdrawal on asset performance (so presumably selling capital when it goes negative?) seems like it may be rather too conservative and you might be leaving money on the table. The various researched formulas (like Bergen's SWR, Guyton guardrail and others) are designed to address this problem though. So as with others here who apply their own formulas - can I ask on what basis you chose this method? For example, have you tested it against historical data?

[AsleepInYorkshire]

OK - I'm a bit confused by the responses so far on this so I'll try again. Apologies for not making myself clear.

Given that Pension Freedom rules are a recent development, and annuity rates are ridiculously bad value, there is (or at last should be!) a lot of interest in retirement income strategies to guard against sequence risk, market volatility, your own longevity, and various other things that might leave you with not much (or any) money to live on. In fact the book I've just read ("Beyond the 4% Rule") goes so far to say that retirement income planning needs to be seen as a separate discipline in its own right now.

Entirely possible that the book was incorrect? If I looked at this subject and I am as I am planning to retire in the next 15 years I'd make sure I built in a margin for "failsafe". And that would be very simple to do. My own plan is to "failsafe" by "over-saving" and making sure the "pot" is larger than it needs to be.

Therefore, and for the first time in modern British history, millions of poor sods like me are facing the real chance of literally starving to death in 40 years time if they even slightly mis-manage their portfolio during the withdrawal phase (unless you think the state pension is going to be anything).

Yes you poor sods really do have it hard. I don't recall Parliament passing any acts to starve pensioners if they live to long. I'm impressed with you literal ability to over-state.

That's scary, obviously. But there are a number of well-researched approaches out there (and I'm reading up on them). So I'm surprised there aren't services that automate the otherwise pretty labour-intensive (and somewhat mathematically involved) process of implementing those approaches while you are alive.

I worked through a spreadsheet of my own. Took me six months to develop. It works for me. You're more than welcome to review it as long as you don't charge me for your time. Albeit if you have developed software that will help me I think I'd be happy to pay £50 for it.

Right now, it seems that if (for example) I decide to use the Guyton-Klinger strategy, I'll need to construct some way of recording the performance of my portfolio and run simulations perhaps monthly, checking the CPI, and then using a formula to determine which assets to sell down by how much (assets which might number, say, 8-10 or more if I have a HYP as part of my portfolio). Oh and then actually do the selling (log in, fill out form, transfer proceeds, record that in a log in case I get confused, etc.)

Alternatively you could simplify it a little. Let's get a reality check in here shall we? So you've lived all your life working without £200K to £1m in the bank? And because you no longer work as retirement beckons you have something put to one side for that occasion. Perhaps you should "cut your cloth to suit". There are plenty of examples out there. And what are you planning to do in retirement?

All that seems rather a lot of faff. But is that really what others are doing? How do you find enough time for jet-skiing?

I don't think so. But then I'm content in my own skin. I'll stick to my spreadsheet. As for the jet-skiing ... well let's just say I've already done it. What I haven't done yet is retire.

AiYn'U

[dealtn]

If CPI is around 2%, then if I make 4.5% a year I can afford to withdraw 2.5% and leave enough to ensure my pot isn't eroded by inflation. ... Of course we don't want to die with all out pot intact at today's prices so as every year goes by it's safer for us to spend some of our pot as well. I'm fairly uncomfortable about spending my pot in today's money until I hit 60 as we could live another 50 years and that's a long time.

... So as with others here who apply their own formulas - can I ask on what basis you chose this method? For example, have you tested it against historical data?

None, no method, no testing.

Just enjoying and not worrying about how complicated things are (or aren't). Living off the total return of the investment portfolio, confident it'll be ok. If not adjust spending, or return to work. Doubt that'll happen but I have no intention to micro-predict or manage the next potential 50 years.

I guess we are both outliers, with the norm somewhere between our perspectives.

[Gan020]

If CPI is around 2%, then if I make 4.5% a year I can afford to withdraw 2.5% and leave enough to ensure my pot isn't eroded by inflation. ... Of course we don't want to die with all out pot intact at today's prices so as every year goes by it's safer for us to spend some of our pot as well. I'm fairly uncomfortable about spending my pot in today's money until I hit 60 as we could live another 50 years and that's a long time.

Pinning the withdrawal on asset performance (so presumably selling capital when it goes negative?) seems like it may be rather too conservative and you might be leaving money on the table. The various researched formulas (like Bergen's SWR, Guyton guardrail and others) are designed to address this problem though. So as with others here who apply their own formulas - can I ask on what basis you chose this method? For example, have you tested it against historical data?

Indeed my method is conservative and could well result (if I do nothing) in reaching the age of say 75 with too much capital in my pot. However, I'm a risk adverse sort of person. I'd rather end up with too much money at 75, than have to deal with the outcome if the stock market falls 20%, which would mean at best curtailing our lifestyle. People tend to be over-optimistic imho when planing for this sort of thing. Sometime over the next 20 years there will be a 10% correction for sure. Maybe there will be more than 1. Maybe there will be a 20% correction. If it happens next year that's a problem if you are cutting you capital pot a bit fine on retirement due to compounding. I don't know when it will happen but I'm sure it will happen.

At my age of 53 inflation matters and will eat up my pot in real terms. By the age of 75 it will matter less as I'll only have say 25 years to live instead of say 47 and in addition by the time you reach the age of 85, it becomes difficult to continue to spend at the same rate due to ill health (ignoring nursing home costs)

I have not researched and evidenced my figures but I do know the BOE inflation target is 2% and interest rates should adjust to keep it there. Look at it this way. If the economy starts overheating and inflation is in danger of reaching 3%, BOE will raise interest rates, so whilst inflation will be eating into my pot by 1% more, the rates I will able to attain on corporate bonds will also rise 1%, so I end up in the same place (acknowledging their may be a lag). Further, if the economy is doing well companies will be turning higher profits so that means more dividends and share price increases. This may be more or less than 1%

Likewise if the economy starts going backwards, interest rates will fall, as will my returns but I will be able to accept lower returns then 4.5% as inflation is lower. Of course company profits may also be falling which is a danger and the reason for a buffer and me potentially ending up at 75 with more money than I need.

Care is required in allocation of assets between bonds and shares.


I have another suggestion which is quick and easy which may help you. Take the value of your pot and use one of the on-line calculators to work out how much you get a year as an annuity. Because realistically that's about as much as you can afford to withdraw as if you live longer than the average life expectancy you are going to need the extra money you make by doing drawdown yourself to fund the extra years you live. I know this is a bit crude but one of the benefits of an annity is you get the money if you live until 120. Unless you are sure you are doing to die before average life expectancy doing it all yourself introduces additional risks.


If interest rates rise to 10% you'll see the popularity of annunities coming back. I would happily hand over my whole pot to someone else if that happens.

[Urbandreamer]

Has anyone tried this calculator.

https://www.firecalc.com/

No, it doesn't produce a SWR. What it does is allow you to pick a withdrawl rate and regeme then predict (based upon the US stock market) your likelyhood of achieving your objective.

Don't forget to fill in the boxes with the state pension on the Other Income tab.

Of course it's a prediction and not a guarentee. If you want a guarentee, then you want an annuety.

[taken2often]

I have been out of the loop for a while just building up my funds. You have not indicated how much your fund is for good reason. So as a starting point if it is less than 100k an annuity has to be considered, but keep in mind unless it is indexed it will be worth buttons in 25 years plus if not earlier depending on inflation. Other wise I would go for Dividend Growth companies 30%, Preference Shares 40%, Dividend Growth Investment Trusts 30%.
Buy and forget, only make changes when forced. Each year take 80% of the natural income if needed and reinvest 20% for indexing to buy more income.
If you have used UFLPS you get 25% tax free every year up to the limit.

If you buy unit trusts these are much higher risk due to member panic. Selling shares or units for pension needs can be very volatile and once their gone their gone.

There becomes a point in time when the capital is not important. If it drops this tends to be a buying opportunity. But the thing is you still have capital available for emergencies.

Last resort if running out of money and assets consider Self Deliverence