y0rkiebar wrote:Yes, that's my understanding too. The state forecast could be clearer in this area IMO.
Agreed, it confused a lot of people, myself included initially.
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y0rkiebar wrote:Yes, that's my understanding too. The state forecast could be clearer in this area IMO.
Darka wrote:Hariseldon58 wrote:The object of the exercise is not to run out of income rather than maximise gains.
(I’m 15 years into retirement having stopped at 49)
Spending is somewhat sporadic but averages around 2 ½ % which roughly equates to the portfolio income at present.
Clearly a different portfolio could give a much higher income and I could have a significant income surplus or a different portfolio might produce an income below the spending level and an income deficit. ( it has in the past )
I ignore the income produced from the portfolio, virtually all is reinvested, I take spending from cash reserves , occasional sales etc.
If I invested in a series of Investment Trusts that produced 5% or 1% would that really change what I should spend ?
Might be interesting to know what Darka’s portfolio yields to know whether the income surplus is availed to be spent or would be prudent to reserve.
I imagine my spending is less than I could spend but spending more just for the sake doesn’t seem sensible.
However we have just spend the equivalent of a years income on a new car…. (As I said spending is sporadic !!! )
Thanks Hariseldon58,
Current yield is 4.85% (if I ignore any cash in the portfolio), otherwise if I include all cash (including reserves) then the yield is 4.53%.
That included my SIPP which I can't access yet.
I have a mixture of IT's (growth/income/growth+income) and some remaining individual shares which I'm gradually moving into IT's for a more stable (hopefully) income.
1nvest wrote:Darka wrote:Current yield is 4.85% (if I ignore any cash in the portfolio), otherwise if I include all cash (including reserves) then the yield is 4.53%.
That included my SIPP which I can't access yet.
I have a mixture of IT's (growth/income/growth+income) and some remaining individual shares which I'm gradually moving into IT's for a more stable (hopefully) income.
Yield is just part of total return. Yields can collapse. A simple SWR choice is more consistent. Set aside surplus capital today to spend at a later date and if you reach 33 times anticipated spending across a 30 year horizon then drawing 3.33% of the initial portfolio value, increasing that amount by inflation as the amount drawn at the start of subsequent years, and not only is that income stream consistent in real (after inflation) terms, but history indicates that a reasonably diversified portfolio has a high probability of success of sustaining such withdrawals for 30 years. More often at the end of the 30 year there is substantial amounts of the inflation adjusted start date portfolio value still intact, 3.33% x 30 years, 100% broad inflation pacing was a historic low/bad case outcome, more usually actual outcomes are much better.
Over time you may find that your original 3.33% SWR value amount has declined to being the equivalent of perhaps 2% of the ongoing portfolio value, flagging that you have surplus capacity and might draw out a modest/large amount perhaps for a new car/whatever.
More commonly use 4% SWR as their guideline, save up 25x yearly spending and then start drawing 4% SWR from that. As such 3.33% might be considered a conservative figure, but its nice to have that additional element of safety. 3.33% is more for those with longer than 30 year horizons and where state/other pensions kick-in in later decades. All very personal/subjective. For some, state + occupational pensions alone might be enough, such that they're only drawing from investments/savings in years following retiring and prior to state/occupational pensions starting.
1nvest wrote:Yield is just part of total return.
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