The Money Mustache Community
Around the World => UK Discussion => Topic started by: SpreadsheetMan on September 03, 2017, 02:51:26 AM
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This one: http://www.retirementinvestingtoday.com/2017/09/improving-safe-withdrawal-rate-for-uk.html
(and the Morningstar research paper referenced: http://media.morningstar.com/uk%5CMEDIA%5CResearch_paper%5CUK_Safe_Withdrawal_Rates_ForRetirees.pdf)
2.1% !!!
(yes, you can squeak it up a bit by reducing fees, but it is still a long, long way below the 4% rule-of-thumb)
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Yeah, I was a bit put out by the article, but when I saw he quoted a 1% fee, which had me laughing, and was basing it on something like 50 or 60% bonds in your portfolio, I lost interest.
And the 4% is not meant to be absolute, but a rough guide with a high level of success; I'm happy to stick with it and fully understand the risks.
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1% fees are indeed ridiculous. Let me also add my standard disclaimer about any article about how the 4% rule doesn't apply to countries outside the USA.
Check if they include retirement intervals spanning 1939-1945. The UK came through world war two better than a lot of countries in europe, but the loss of a generation of young men, and years of german bombers destroying infrastructure still produced economic outcomes outside the range of what you'd see short of a major war fought outside your front door.
Now if you want to save enough money to be able to make it through something comparable to what world war II did to europe and east asia without having to alter your lifestyle or spending plans, then yes, the 4% rule probably isn't for you. But that's a question of overall risk tolerance that isn't specific to potential retirees in one country.
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The Morningstar paper is essentially assuming future returns will be lower than inflation, which seems a fairly extreme position to me. (With zero inflation and a 100% cash portfolio earning no interest, a 2.1% withdrawal rate gives you 47 years before you run out of money.) Also it's instructive to compare this figure with what can be obtained simply by buying an annuity at age 55 (which are generally considered not great value for money?)
I don't understand why one's home country should have a significant effect on future returns. Putting aside the house I live in, I could be 100% invested outside the UK if I chose. That wasn't the case until recently.
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The Morningstar paper is essentially assuming future returns will be lower than inflation, which seems a fairly extreme position to me. (With zero inflation and a 100% cash portfolio earning no interest, a 2.1% withdrawal rate gives you 47 years before you run out of money.) Also it's instructive to compare this figure with what can be obtained simply by buying an annuity at age 55 (which are generally considered not great value for money?)
I don't understand why one's home country should have a significant effect on future returns. Putting aside the house I live in, I could be 100% invested outside the UK if I chose. That wasn't the case until recently.
Agreed, your home country has an impact on inflation, and currency, but future returns? You can buy funds hedged to an alternative currency if it suits you better.
Read, think, ignore, carry on with day.
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I much preferred this article:
https://www.retirement-planner.co.uk/232025/stop-talking-3-4-drawdown-rules-finalytiqs-okusanya
Empirically, around 80% of the time the client would end up with more money than they started with by drawing down 3% rates.
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Should we really be basing client plans on the idea we are going to get market conditions that are worse than World War I and World War II type scenarios?
I don't agree with everything he has to say, but it's nice to hear everyone here is being "cautious" when it comes to FIRE.
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4% is already a worse case scenario based on some extreme events that have happened in the past, I don't quite see any logic behind being more conservative than this in fact I find it rather annoying to be honest.
I am sure it's just to spark a reaction