Retirement fund
Discussion
xeny said:
Groat said:
Wish there was a date on that article. This is less optimistic https://www.pensionbee.com/press/average-pension-p...And I think your 'less optimistic' one is talking about ALL pension pots, not just pot sizes at retirement, though further down the article makes predictions of pot size at 65.
Edited by Groat on Friday 4th June 18:06
Groat said:
It's in a 2021 Actuarial Post.
And I think your 'less optimistic' one is talking about ALL pension pots, not just pot sizes at retirement, though further down the article makes predictions of pot size at 65.
Thanks.And I think your 'less optimistic' one is talking about ALL pension pots, not just pot sizes at retirement, though further down the article makes predictions of pot size at 65.
Is your definitely about value at retirement? the article isn't explicit.
BarryGibb said:
"Bill: Yes, I don't think I ever used the term 4% rule, I don't believe so. That was kind of a creation of the media"
https://www.kitces.com/blog/bill-bengen-4-percent-...
He pretty much invited it though with the second graph on page 173.https://www.kitces.com/blog/bill-bengen-4-percent-...
xeny said:
Thanks.
Is your definitely about value at retirement? the article isn't explicit.
Think so. And pretty much what I'd have expected. A shedload of personal pensions from the 1980s and 90s - many of which were missold - were just nonsensical crap. I ran two for 13 years which had just about exactly what I'd contributed in them when I put a stop to them.Is your definitely about value at retirement? the article isn't explicit.
Oddly enough, this year I'll have had back from the annuities what they cost me. Next target is to get back what they've made from my money over the last 19 years!! Ok. Won't happen. But at least I've lived long enough to see my curse on annuities and annuity companies working.
Groat said:
Wonder how that would change if the notional value of public sector pension pots were included? In some areas, almost everyone seems to work for the public sector.The couples we know where one partner has spent their working life even in at a fairly 'ordinary' level as a teacher, nurse, police officer etc, seem to be sitting pretty. Those who held more senior positions appear positively loaded.
BarryGibb said:
red_slr said:
BarryGibb said:
LeoSayer said:
BGarside said:
Deduct say 2% for inflation and another 2% for management fees and to use the 4% rule you'd need a minimum market return of 8% every year just to preserve the value of the pension pot. This seems unrealistic to me and I'm thinking of drawing 2-2.5% to live on eventually which means a larger pot is required.
The 4% rule was designed to leave you with an empty pot after 30 years. https://en.wikipedia.org/wiki/Trinity_study
red_slr said:
BarryGibb said:
red_slr said:
BarryGibb said:
LeoSayer said:
BGarside said:
Deduct say 2% for inflation and another 2% for management fees and to use the 4% rule you'd need a minimum market return of 8% every year just to preserve the value of the pension pot. This seems unrealistic to me and I'm thinking of drawing 2-2.5% to live on eventually which means a larger pot is required.
The 4% rule was designed to leave you with an empty pot after 30 years. https://en.wikipedia.org/wiki/Trinity_study
BarryGibb said:
But it's not a rule. How can it possibly be given the impact of the various inputs on the success rate/sustainable withdrawal rate? To base your retirement planning on any rule such as this which is highly unlikely to apply to your circumstances is maybe not what you want to be doing.
In fact the guy who created the 4% rule has apparently revised it up to 5%. I think k it was because it was based on the worst thst the stock market has ever done (a period in the 60s iirc) and he has since said that you shouldn't plan on the worst (or for that matter the best).I'm 38 and have £100k in a SIPP invested in 7 FTSE 100 stocks - I followed the HYP method. I think my total contribution over the past 8 years is £45k and the growth has been down to dividend reinvestment and good (lucky!) timing with the stock buying.
Not without risk though as half my SIPP value is 100k shares in Lloyds which makes me a bit nervous. And I'm a bit pessimistic about some of the other companies in my portfolio (SSE-price cap; GSK-as stagnant as the Japanese economy; BP-will inevitably be a much smaller company in future; BT-I don't even know what their core purpose is anymore).
So I'm thinking of leaving it as it is and will just roll with my employer plans until retirement for the diversification (although I really resent the charges).
Not without risk though as half my SIPP value is 100k shares in Lloyds which makes me a bit nervous. And I'm a bit pessimistic about some of the other companies in my portfolio (SSE-price cap; GSK-as stagnant as the Japanese economy; BP-will inevitably be a much smaller company in future; BT-I don't even know what their core purpose is anymore).
So I'm thinking of leaving it as it is and will just roll with my employer plans until retirement for the diversification (although I really resent the charges).
RaymondVanDerDon said:
I'm 38 and have £100k in a SIPP invested in 7 FTSE 100 stocks - I followed the HYP method. I think my total contribution over the past 8 years is £45k and the growth has been down to dividend reinvestment and good (lucky!) timing with the stock buying.
So I'm thinking of leaving it as it is and will just roll with my employer plans until retirement for the diversification (although I really resent the charges).
Be aware that even the Lemon Fool (possibly the largest collection of HYP enthusiasts around) forum's consensus now is that HYP isn't a good fit for accumulation.So I'm thinking of leaving it as it is and will just roll with my employer plans until retirement for the diversification (although I really resent the charges).
How high are the employer scheme charges? Typically they're trumped by employer contribution matching, and ideally NI savings if they allow salary sacrifice.
BarryGibb said:
But it's not a rule. How can it possibly be given the impact of the various inputs on the success rate/sustainable withdrawal rate? To base your retirement planning on any rule such as this which is highly unlikely to apply to your circumstances is maybe not what you want to be doing.
I consider it a rule of thumb - my spreadsheet lists figures for 2.5->5% SWR (as well as corresponding likelihood of running out of money at various ages) so I can consider how frugal I want/need to be against how annoying the boss is.What better, simple, approach is there?
xeny said:
BarryGibb said:
But it's not a rule. How can it possibly be given the impact of the various inputs on the success rate/sustainable withdrawal rate? To base your retirement planning on any rule such as this which is highly unlikely to apply to your circumstances is maybe not what you want to be doing.
I consider it a rule of thumb - my spreadsheet lists figures for 2.5->5% SWR (as well as the corresponding likelihood of running out of money at various ages) so I can consider how frugal I want/need to be against how annoying the boss is.What better, simple, approach is there?
So if you were to take the UK SWR for a 50/50 portfolio with no fees, perfect investor behaviour and a 30 year time horizon of around 3.4%
https://finalytiq.co.uk/withdrawal-rates-in-retire...
A couple of examples illustrate how this SWR can vary.
Example 1: A couple in good health in their early 50s with great longevity prospects (both sets of parents in their 80s and still going strong). They work with a "wealth manager" that has put them in a "low-risk" portfolio (low equities %).
Given the headwinds of fees of >2%, prudent longevity assumptions and adjustment for asset allocation this could see the SWR south of 2%
Example 2: Another couple in the same situation but have decided to do this on a DIY basis. They are basing their retirement planning on the 4% rule, but have little understanding of:
Market history and what can (and has) gone wrong
How much of a drawdown they are willing to accept before they bail out
Diversification
Concentration, style and fund manager risk
The link between risk and return
They have based their investment decisions on recent history and have a portfolio that has no resemblance to the (U.S. based) work that has been undertaken and contains all the potential issues mentioned above.
"What better, simple, approach is there?"
So to answer your question, it might be worth understanding how those factors might impact your situation and understand more nuanced items such as what success rate you might be happy with (what are your chances of needing to adjust your plan, some are happy with 80-90%, not 100%), what you are willing to adjust, and when you might need to, if we have unfavourable market returns.
xeny said:
RaymondVanDerDon said:
I'm 38 and have £100k in a SIPP invested in 7 FTSE 100 stocks - I followed the HYP method. I think my total contribution over the past 8 years is £45k and the growth has been down to dividend reinvestment and good (lucky!) timing with the stock buying.
So I'm thinking of leaving it as it is and will just roll with my employer plans until retirement for the diversification (although I really resent the charges).
Be aware that even the Lemon Fool (possibly the largest collection of HYP enthusiasts around) forum's consensus now is that HYP isn't a good fit for accumulation.So I'm thinking of leaving it as it is and will just roll with my employer plans until retirement for the diversification (although I really resent the charges).
How high are the employer scheme charges? Typically they're trumped by employer contribution matching, and ideally NI savings if they allow salary sacrifice.
Nor decumulation I assume?
As someone who is managing his own investments, with a view to retirement, I am embarassed to say I dont understand a decent chunk of what has been written above!
Where is the best place to go for advice? I'm always wary of IFA, wealth managers and the likes. Surely they will eat a huge chunk of capital in fees?
Where is the best place to go for advice? I'm always wary of IFA, wealth managers and the likes. Surely they will eat a huge chunk of capital in fees?
NorthDave said:
As someone who is managing his own investments, with a view to retirement, I am embarassed to say I dont understand a decent chunk of what has been written above!
Where is the best place to go for advice? I'm always wary of IFA, wealth managers and the likes. Surely they will eat a huge chunk of capital in fees?
Which bits?Where is the best place to go for advice? I'm always wary of IFA, wealth managers and the likes. Surely they will eat a huge chunk of capital in fees?
I know when I started investing a few years ago it literally seemed like a different language but you soon get familiar with enough to get by
xeny said:
Be aware that even the Lemon Fool (possibly the largest collection of HYP enthusiasts around) forum's consensus now is that HYP isn't a good fit for accumulation.
How high are the employer scheme charges? Typically they're trumped by employer contribution matching, and ideally NI savings if they allow salary sacrifice.
Yeah I do look on there. I think I'll wait to see how the 'progressive dividend' approach of these companies will play out in the post covid recovery world. How high are the employer scheme charges? Typically they're trumped by employer contribution matching, and ideally NI savings if they allow salary sacrifice.
I don't know the specific % of charges of my employer scheme but I know it's very competitive. Flat fees for admin charges make complete sense to me and seem very fair. It's just the principle of charging a % of my holdings for 'expert advice' that grates - as my reasoning is if these people are actual experts in stock markets then why do they need to work for a living?
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