The doomsday question, when do you sell up investments?
Discussion
Here's the scenario:
Single
No kids
Retire in 6 months at 55
Various investments floating, but if I completely sold up, holding onto my current property, I would have a million spare plus a modest £16k a year pension.
The dreaded question is calculating the year of my demise and when to sell the investments instead of living off their returns?
Single
No kids
Retire in 6 months at 55
Various investments floating, but if I completely sold up, holding onto my current property, I would have a million spare plus a modest £16k a year pension.
The dreaded question is calculating the year of my demise and when to sell the investments instead of living off their returns?
Edited by Mark300zx on Friday 8th May 16:46
Edited by Mark300zx on Friday 8th May 16:49
It’s debated a bit but a lot of people talk about a 4% safe withdrawal rate which has worked historically.
You might be dipping into capital occasionally, but it should bounce back.
If the value of your investments fall then you also trim your expenses.
I’m going to plan on something like that whilst keeping investments low risk and anticipating spending less over time as I get older and travel less.
You might be dipping into capital occasionally, but it should bounce back.
If the value of your investments fall then you also trim your expenses.
I’m going to plan on something like that whilst keeping investments low risk and anticipating spending less over time as I get older and travel less.
I guess you have to pick an age to aim for and plan having the bare minimum to support your lifestyle at that age. At worse towards the end the house could always be sold to fund a care home and then council take over if you live unexpectedly long. Id probably top myself if things got that bad though. I really dont fancy my last years in a posh hospital.
I plan to front load the spending and retire 55-60 (In 5 years or so) and spend the fittest years doing all the things you dream off. Draw out that 25% tax free and have a good 10-15 years (hopefully) then "retire" after that to a more sedate lifestyle on a fixed pension income.
I plan to front load the spending and retire 55-60 (In 5 years or so) and spend the fittest years doing all the things you dream off. Draw out that 25% tax free and have a good 10-15 years (hopefully) then "retire" after that to a more sedate lifestyle on a fixed pension income.
I found this quite helpful:
https://www.amazon.co.uk/Beyond-4-Rule-retirement-...
There's some frightening stats in there. Like for a 65 year old couple there's a 24% chance one of them will live to be 100.
Basically dont trust the 4% rule - its more complicated than that (surprise!). There's a particularly interesting bit about declining mental capacity which is something that has always worried me. At the moment i am young (ish), fit and healthy. I largely manage my own affairs because I had a dislike of paying fees based on a percentage of my assets - I am happy to pay for advice when I need it. But I guess at some point I may need to hand over the reigns
https://www.amazon.co.uk/Beyond-4-Rule-retirement-...
There's some frightening stats in there. Like for a 65 year old couple there's a 24% chance one of them will live to be 100.
Basically dont trust the 4% rule - its more complicated than that (surprise!). There's a particularly interesting bit about declining mental capacity which is something that has always worried me. At the moment i am young (ish), fit and healthy. I largely manage my own affairs because I had a dislike of paying fees based on a percentage of my assets - I am happy to pay for advice when I need it. But I guess at some point I may need to hand over the reigns
Mark300zx said:
...when to sell the investments instead of living off their returns?
Two months ago might have been a good opportunity...Anyway, if you're retiring at 55 and face average life expectancy of 30 years (possibly 40 or more) you have little choice other than to remain heavily invested for at least the next 15 years with a significant equity exposure.
Beyond that, 4% is the rough rule of thumb so spending c.£40,000 p.a. at the outset. Forget about "capital" and "income". All that matters is to secure a decent overall return on your investments and not spend too much each year.
You won't see State Pension for a long time so you may need to finesse the cash flow with that in mind. At the same time you'll almost certainly want to keep in the 20% income tax band insofar as possible. If you take a sudden lump of income drawdown you'll be straight into 40% tax. But you'll have the 25% tax free slice to juggle as well. I wouldn't pull out 25% tax free at the start unless you have something very compelling to do with it - you'll be shooting yourself in the foot.
Edited by anonymous-user on Saturday 9th May 13:27
We retired 15-years ago with no kids. My wife’s pension is worth £40k so with mine and investments we have managed to invest about £10k per year and do whatever we want.
However, we are now 68 and I think that we have decided that it is probably better to die rich, rather than run out of cash. There has to be sufficient for one of us to enjoy a better nursing home - the basic ones are simply awful. Employing a full-time live-in carer, is probably preferable.
This year, while on holiday in Spain, I suddenly developed an arrhythmia for which I had to pay €3365 up front for treatment. This was a very clear yellow card warning that 5H1T happens and it is probably unforeseen things that can suddenly make you think that you are, perhaps, not as well off, as you believe.
Alternatively, you could buy yourself a Ferrari and Philipino girlfriend and go on the alltime bender of your life.
Life is always about difficult choices.
However, we are now 68 and I think that we have decided that it is probably better to die rich, rather than run out of cash. There has to be sufficient for one of us to enjoy a better nursing home - the basic ones are simply awful. Employing a full-time live-in carer, is probably preferable.
This year, while on holiday in Spain, I suddenly developed an arrhythmia for which I had to pay €3365 up front for treatment. This was a very clear yellow card warning that 5H1T happens and it is probably unforeseen things that can suddenly make you think that you are, perhaps, not as well off, as you believe.
Alternatively, you could buy yourself a Ferrari and Philipino girlfriend and go on the alltime bender of your life.
Life is always about difficult choices.
rockin said:
Stuff about tax
This is an absolutely vital part of whatever you do.From what I can see careful tax planning can save you from giving away substantial chunks of whatever you choose to withdraw to live on. It can be complex and needs doing correctly.
There’s been some chat about this on the IM thread recently, it would be worth a look on there.
The point that has already been made about progressively moving your investments into lower-risk assets is a good one.
I’m not sure what form your holdings take at the moment and clearly this will influence your decision - if lots of property / BTLS then risk is quite dependent on how much debt you have against them, plus it’s harder to partly release the capital, high transaction costs and illiquidity.
I’m not sure what form your holdings take at the moment and clearly this will influence your decision - if lots of property / BTLS then risk is quite dependent on how much debt you have against them, plus it’s harder to partly release the capital, high transaction costs and illiquidity.
Mark300zx said:
Here's the scenario:
Single
No kids
Retire in 6 months at 55
Various investments floating, but if I completely sold up, holding onto my current property, I would have a million spare plus a modest £16k a year pension.
The dreaded question is calculating the year of my demise and when to sell the investments instead of living off their returns?
]
https://www.death-clock.org (hint......keep the BMI number down, get fitter!!)Single
No kids
Retire in 6 months at 55
Various investments floating, but if I completely sold up, holding onto my current property, I would have a million spare plus a modest £16k a year pension.
The dreaded question is calculating the year of my demise and when to sell the investments instead of living off their returns?
]
Does that pension kick in at 55 or later? If 55, I’m guessing a forces or police/fire style role, which might mean you are already fit and healthy, unlike us desk monkeys....
Perhaps the £16k covers all basic needs (I suspect it would for us).
That means the rest is the fun money!
Biggest question is perhaps how you plan to spend your time after retiring. Clearly coke & hookers cost more than gardening and hiking....
Have a chat on the IM thread: you can have a bit of decent free guidance from people who understand finances well.
If you’re investing for the long term, you may of course want some low risk but I would say also some high risk to grow over that period, and as you appreciate, how and when to draw on your funds are a key question for you.
Yes, the 4% rule is often mentioned, and might work for many. For the UK, 3-3.5% is generally held as a fair sum to be withdrawing each year from a pot and not have it run out.
That said, and major healthcare costs excepted, I bet most people spend way more from 55-65 than 65-75.....so front loading money use may be valid, to some degree.
I seem to be saying this on a lot of threads but it's surprised me about how many people speak about investments as if they are binary i.e. you're either entirely invested or you have everything in cash 
A quick look at the Intelligent Money or Vanguard websites will give you a really quick and basic overview that there are a whole range of options available depending on your appetite for volatility.
Do people really hit a certain age and think "Right that's it everything is going into cash now?".
A quick look at the Intelligent Money or Vanguard websites will give you a really quick and basic overview that there are a whole range of options available depending on your appetite for volatility.
Do people really hit a certain age and think "Right that's it everything is going into cash now?".
If you look to have a reasonable cash buffer, then this can negate the need to sell up shares / units when the markets are depressed.
This can help to give you more of the upsides of equities etc (ie growth above inflation), whilst buffering you (a little) from the downsides (ie market has fallen sharply, just when you are about to drawn out your annual / quarterly income).
This can help to give you more of the upsides of equities etc (ie growth above inflation), whilst buffering you (a little) from the downsides (ie market has fallen sharply, just when you are about to drawn out your annual / quarterly income).
The 25% tax free element of pension fund may not be there forever - in fact once the virus is over it may be taken away.
Fact is it’s the tax statute currently but any statute can change.
Likewise the income tax rates thresholds may change markedly or not.
All you can do is plan based upon current rules but s
t happens and things can change.
If you’ve a £16k pa pension from 55 years old you’ve done very well for yourself most have trivial amounts. So first question is if you can live on this superb - secondly if you have funds which you can burn through that equate to your state pension @67years old then you could take that pot over 12 years so that you have pre and post state pension commencement being exactly the same
Fact is it’s the tax statute currently but any statute can change.
Likewise the income tax rates thresholds may change markedly or not.
All you can do is plan based upon current rules but s
t happens and things can change. If you’ve a £16k pa pension from 55 years old you’ve done very well for yourself most have trivial amounts. So first question is if you can live on this superb - secondly if you have funds which you can burn through that equate to your state pension @67years old then you could take that pot over 12 years so that you have pre and post state pension commencement being exactly the same
Welshbeef said:
The 25% tax free element of pension fund may not be there forever - in fact once the virus is over it may be taken away.
Fact is it’s the tax statute currently but any statute can change.
Likewise the income tax rates thresholds may change markedly or not.
All you can do is plan based upon current rules but st happens and things can change.
If you’ve a £16k pa pension from 55 years old you’ve done very well for yourself most have trivial amounts. So first question is if you can live on this superb - secondly if you have funds which you can burn through that equate to your state pension @67years old then you could take that pot over 12 years so that you have pre and post state pension commencement being exactly the same
I think having his house paid and the spare £1m above his £16k pension is more impressive. Fact is it’s the tax statute currently but any statute can change.
Likewise the income tax rates thresholds may change markedly or not.
All you can do is plan based upon current rules but s
t happens and things can change. If you’ve a £16k pa pension from 55 years old you’ve done very well for yourself most have trivial amounts. So first question is if you can live on this superb - secondly if you have funds which you can burn through that equate to your state pension @67years old then you could take that pot over 12 years so that you have pre and post state pension commencement being exactly the same
tighnamara said:
I think having his house paid and the spare £1m above his £16k pension is more impressive.
True but the pension payment @55yo clearly indicate the level of income he must be on in his 40’s. Then again no kids is a big one.
My wife who was on over £40k in 2011 has not worked since due to kids so we’ve “lost” £320k in salary plus the pension contributions and salary increases in that time and of course we’ve also had significant cost of kids too and being a step younger than OP so I can see if no kids it’s much easier to accomplish
bhstewie said:
hstewie said: Do people really hit a certain age and think "Right that's it everything is going into cash now?".
This is the crux. I am fairly certain that if you have had a good standard of living, and intend to continue doing so, the the answer has to be an emphatic No!The other thing to bear in mind is that once you are retired, you have a lot more time, during which to spend cash. The cost of “going to work” is high, but probably a lot less than meeting up with friends for drinks / lunch / dinner several times each week.
rdjohn said:
This is the crux. I am fairly certain that if you have had a good standard of living, and intend to continue doing so, the the answer has to be an emphatic No!
The other thing to bear in mind is that once you are retired, you have a lot more time, during which to spend cash. The cost of “going to work” is high, but probably a lot less than meeting up with friends for drinks / lunch / dinner several times each week.
The other thing is if you do change it all to cash. The other thing to bear in mind is that once you are retired, you have a lot more time, during which to spend cash. The cost of “going to work” is high, but probably a lot less than meeting up with friends for drinks / lunch / dinner several times each week.
1. It’s only guaranteed to £75/80k if a bank failed. You can mitigate this by spreading it over many institutions but when your talking £1m+ I’m not sure there are enough UK regulated banks that OP could put it in so it’s not risk free as cash.
2. Inflation given 0.1% BOE base rate is harming your capital.
Is there a reason to retire at 55? Working later makes a massive difference. You could be looking at 30 years or more and if there is an inflationary period you’re pension will be worthless. Further , unless you die young you have a very good chance of needing a home or assistance beyond 80 and that gets expensive .
I worked full time till 63 and still work about 30 hours a week because I enjoy it. Do not need the money.
The extra time for leisure can get expensive unless you plan to garden,walk the dog and watch TV. My life now is more expensive than when I worked.
I would not go to cash and gradually run it down. People often think “ might as well live now in case I get sick or die”. While that might happen the statistical likelihood is more that you live a long tome and outlast your money.
There is a superb book called The 100 Year Life that is very revealing about this.
Anyway I am 71 now and of course locked down like all of us but I would have been bored to death being unproductive. I still have plenty of time to play with cars. Etc.
I worked full time till 63 and still work about 30 hours a week because I enjoy it. Do not need the money.
The extra time for leisure can get expensive unless you plan to garden,walk the dog and watch TV. My life now is more expensive than when I worked.
I would not go to cash and gradually run it down. People often think “ might as well live now in case I get sick or die”. While that might happen the statistical likelihood is more that you live a long tome and outlast your money.
There is a superb book called The 100 Year Life that is very revealing about this.
Anyway I am 71 now and of course locked down like all of us but I would have been bored to death being unproductive. I still have plenty of time to play with cars. Etc.
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