Chartered Financial Planner with over 15 years experience in financial services.
Home is Berkshire with my wife and daughter having lived and worked in London for a number of years.
DISCLAIMER: All of my views are my own, and not representative of any company. Any personal opinions, ideas, and tips represented on this channel should not be seen as financial advice or a recommendation to take any specific course of action.
Thanks for this great video. I have a doubt about annuities that I would like to be clarified. Do I need to have cash sitting in my SIPP in order to buy an annuity, or invested value is taken into consideration as well?
In order to buy an annuity you would need to do so using cash. How that would work in reality is that on agreeing to proceed with an annuity the assets are sold down to cash and the monies are then transferred to the annuity provider.
I often find myself trying to explain to people how misleading average wealth, pension, wage etc etc actually is. Great to see some content looking at the median. Percentiles for the win.
I am thinking state pension only after aged 80 is fine surely. How many folk in 80s do a lot. I don’t want to miss out on travel etc in early retirement when fitter.
Thanks for the comment. That is the consensus view but I’ve not seen much proof of this when using the open market. And with all consensus views it demands to be challenged.
This is an excellent presentation, which I came across quite by chance. It is explained extremely well. I really like the charts, how the presenter used and explained the various scenarios. I certainly learned a lot and, clearly, the presenter knows this area very well. Thank you.
because British Govts. dont give a damn about their old & best citizens who have given theirn all for Britain. They make lame excuses about "arrangements" & "its always been like this" instead of caring ethically & morally about its own.
I'm 60 still working as a higher rate tax payer, and would expect to not retire until at least 65. I'm looking to max out the annual allowance of upto £60k salary sacrifice. As I understand I can continue to take 25% of the growing pension (different pots) upto a max of £268k through periodic tax free draw downs. In that time I would subsist on the draw down money, i know there are recycling rules if you put the draw down straight back in the pension, but thats not my intention and I would keep these sums separate ie the salary sacrifice is direct form earnings. is this viable?
We have factored in to our calcs a reducing need of expenditure - going down to one car , less ambitious holiday destination’s , less pressure on income from dependent children etc . Is this reasonable or offset by inflation calculation . Have I assumed “ a glass half full “ ?
Would be nice for more AT RETIREMENT videos. Fees play a big part in overall "take home" from funds. Would be great to see some good examples of implementation - e.g. x years easy access cash, longer term investments. How to use drawdown effectively. Too many vids out there explaining the options but none really go into how you would implement and manage going forward in retirement. I think it's great to get all this financial education out there to ensure folks understand what they need to do to build up their wealth pre-retirement. Please let's do more at-retirement vids.
Thanks Edmund for a very useful tool. I've produced something similar in the past, but yours is better and I like the use of charts for ease of understanding the possible outcomes. Like others, I have added a column for gross expenditure to allow for tax and then used this for the projections. Plus the use of the F4 button!
Edmund, thank you so very much shortfall has been paid and I have been informed of the amount I will receive. I am so grateful for all your assistance. Greetings from Cyprus. 😅😅😎😎
Good video, highlighting the issues on a single level income post retirement. In an ideal world you would have a emergency buffer on which you could rely upon rather than withdrawing from your primary high risk/high reward layer
It will be interesting to see if the market drops and stays down, how many will still feel the same about equities, i doubt it. Putting all your eggs in one basket has never been good advice
My real life situation (I was never happy holding anything other than equities in my portfolio but appreciate I had back up of DB pension large cash isa+max prem Bonds and rental property). I moved all of my Sipp, employee Dc pension and ss isa into equities (global index acc trackers) in 2016 aged 49. It was more luck than judgement as I had planned to retire age 60 as thought I would have to rebuild a subsiding property but insurance (after 5 year claim) admitted liability. So took a welcome unexpected generous redundancy in March 2024 and retired at 56. I have chosen not to move any % of my investments into bonds, as have redundancy money,, a 4+ year cash ladder and rental income. I raise this makes my decision to stick with equities not that brave at age 56.....but it's right for me.
I too watched in horror as the 'safe' gilts portion of my retirement portfolio crashed 30%, though I got out before the bottom. The equities have recovered strongly but the gilts are still down. My thinking is now all equity except for 2-3 years short term money market to draw on in down years.
I did that and obsessed about it I retired at 57 and should have gone earlier. I was way too conservative. It’s amazing how little you can spend if you want to on normal things and also how much of your spending you did because you were at work. We spend most of our money on holidays and fun. Do it is my advice.
@alanbrooks4718 My wife and I are very fortunate (although we work hard in stressful jobs) in that we earn very good money. I keep watching this type of stuff worring if £3k net income pm will be enough? That's a huge loss of income.....We are looking to downsize as we won't need the 5 bed house were in and do lots more travelling. We will be mortgage free. All our boys are adults and sorted. We have grand kids but plan on spending as much time travelling and relaxing whilst we can. We have very healthy savings and investments as backup. I had a TIA recently it was a big wake-up call.......
Another good video Edmund and I think I agree in principle that over the long term equities will always outperform. Although I would add a caution that the long term can sometimes be very long indeed if you are unlucky enough to retire at the wrong time. There have been at least three occasions over the last 100 years when the markets have gone down hard and not recovered for a good 15yrs and that is in nominal terms - There are a few comments about 2 or 3 years of cash, which unfortunately just won't cut it under those circumstances. (2000-2013, 1966-83, and the big one 1929-55!) We have been in a golden period for equity investment recently (at least in the US which most global funds are heavily invested in) since 2009 which cannot last forever. Averages can hide some real horror stories :)
Thanks Peter. Agreed that a not impossible worse case scenario would be a long period of low returns or returns under inflation would be very damaging to long term sustainability. We’d always look to stress test using a full investment period of below inflation returns to model outcomes and consider whether securing income makes sense to limit risk.
I sold all my equities for bitcoin. I self custody and I buy more bitcoin every fortnight. At a 50% CAGR I’ll be reaching retirement a lot quicker then with shares
imagine paying into a pension that u get taxed on and already taxed when u put money into the pension lol open up a stocks and shares isa and do it yourself tax free, the money the government put in when u retire gets taken back when u retire
I think a good strategy is to have 100% invested in a low cost global tracker except for a separate cash buffer to cover 2-3 years of essential expenditure which can be drawn on during a market downturn. Currently it should be possible to obtain around 5% interest on the cash buffer by splitting it across fix interest savings, money markets and individual government bonds with maturity dates at six month intervals. Doesn't require too much effort to maintain, just a bit of rebalancing every 6 months depending on stock market returns. Individual UK government bonds can also be tax advantageous if returns are primarily from capital gains rather than income as capital gains are tax free. Admittedly may not get a great return on the cash if interest rates go down in the future, but working quite well at the moment. Better to go for individual bonds as they are far less risky than bond funds if held to maturity.
Appears to me that your 'perfect example' is a little unrealistic. Return v risk would lead us to expect that the annualised return for equities would be higher than the more stable investment option delivering a 3.5% annualised return, which would struggle even to keep pace with long term inflation. Long term equity returns would confirm this. Also the example used of unsually large losses in the early years, balanced to 3.5% average only by equally abnormal gains in the last three years only serves to discredit the illustration. Sequences of return of this nature in the real world would have resulted in something approaching a 1.5%. rule rather than the highly flawed 4% mantra.
Thanks for the comment although apologies as I'm not entirely sure I follow what it is you are saying. The illustrations are simply to represent the flawed logic of using a linear model especially when drawing an income from it. The percentage returns of 3.5% is not relevant other than that both models annualise at 3.5% net p.a. but the end result is severely impacted by the combination of seq of returns and volatility drag. In summary the risks of being invested in a highly volatile portfolio whilst drawing down from it. Perhaps that wasn't entirely clear in my video.
It appears that according to morning star data a 50:50 portfolio offers superior returns when considering worst and best SWR. The worst SWR is much higher than 100 stocks but only differing 0.2% on best case. Am I understanding this correctly?
I'm all for 100% equities if investors have a cash buffer to rely on when markets tumble, *and* if they have the stomach for equity risk. I think people forget that stocks pay an excess return because there's the potential for losing a LOT of money very quickly. Stock returns are compensation for the risk that you might not get your investment back, ever. Unfortunately, I think that many investors see the recent 10+ % returns from stocks and have come to see index funds as a sure-fire money maker. Sadly, as countless investors have learned in the past, they're not !
10:30 My takeaway from this table of safe withdrawal rates is that the traditional approach is probably the right one. Higher equities allocation when you are accumulating and lower in retirement. A safe withdrawal rate as low as 1.7% will be insufficient for most retirees. To me this table shows that in retirement 50:50 is the way to go, much better 'Worst' withdrawal rate (3.4 instead of 1.7) with a 'Best' withdrawal rate only slightly lower than 100% equities (6.7 instead of 6.9). In retirement the main priority is usually not running out of money, growth is a nice-to-have.
I think this does reinforce the need for nerves of steel and 2-3 years in cash and a willingness to use it, certainly my current direction of thinking on retirement which I hope to start a glide path into shortly. Thanks for this and also your previous content, especially the recent episode on building the spreadsheet, incredibly useful to me at this stage of life.
I'm never quite sure why there is a tendency to purposely put one's funds into what will be a poor return vehicle, say a 40/60 fund, and on the basis you need to protect your wealth. Given in the same breathe you are told to fund for 20 or even 30 years retirement, then surely leave it where it will continue to grow rather than languish somewhere "safe" making a few percent return if you are lucky. Great video and quality content.
Very interesting. I came to this conclusion myself maybe 20 years ago, when i realised thati might eb retired for say 30 years, and so the theory that when in employment you needed to be highly invested for growth, then the same applied to that 30 years of retirement which is a nearly as long period as employment. So i stayed 100% equities all the way to retirement and still now (been retired 5 years) About ten years ago my employer also began to reverse the policy of moving people from high % equities to bonds and cash as they approached retirement, this happened automatically in the pension plan and every person had a session with a FA where they were guided to staying into equities unless they intended to buy an annuity. Of course most people in the company were still with the awful default funds which was another issue, i was one of a handful that did my own thing, nothing outrageous but just 100% international index funds rather than a mix if ftse 100 , international and bonds , which i think was chosen as a safe option so that nervous employees who say large fluctuations didnt complain.
All that being said imagine if instead of -15.83% and -13.11% in years 1 and 2 you had +15.83 and +13.11. How thing would be different. Not sure how you can factor for just bad timing but in my case I like the idea of 6-10 % in money markets or cash that I will use when the markets are down and won’t touch the stocks.
As ever, an interesting and thought provoking video. The approach I have taken over the past decade, has been to simplify my SIPP investment to a single ‘All-World Index Tracker. I aim to retire within the next three years, and continue to invest, having excluded an Annuity as a ‘sensible option’
