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I agree, jal.....
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This is the bit don't get. The fund I am in yeilds on average 16% a year over the last 20 years, with some years nearer 50% countered by the worst loss in a year of 33% (2008)
£40K is only 4% of £1M, that seems a really low return.
Final salary is an absolute dream - I would love one of those but never gonna happen.
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I've looked at this for my DB pension and there isn't a huge penalty for taking it earlier and it doesn't grow much by deferring it. Yes I will be taxed at 40% until I retire but I have factored that in. I want the tax free lump sum at 55 as we plan to do some work on the house. If I take that I have to start taking the pension, I can't take the lump sum and defer the pension unfortunately.
So, for me, the one to defer is the DC pension which I will only take when I can satisfactorarily answer the inponderable question of how much is enough! Hopefull the fund I'm in has a good few years and I can get enough to put it beyond doubt.
As an Annuity that is - not via self-managed funds. The annuity yeilds are miserly at the moment.
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Defo working in a higher paying job full-time then going into something less stressful and for less hours later in life sounds a damn good plan.
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I'm not planning to take an annuity, as Paul Weller sang "...seems like madness to me"
I have plenty planned. Road trips around the UK staying in AirBnB to see places and towns I want to see, bird watching, model train exhibitions, a huge list of books to read, a million recipes to cook, become a magistrate, volunteering, The North Coast 500, join the gym, the list goes on...
Supportact said: [my style is] probably more an accumulation of limitations and bad habits than a 'style'.
OK thanks, I'm not going down the annuity route, it's too cautions and returns not good enough.
Supportact said: [my style is] probably more an accumulation of limitations and bad habits than a 'style'.
No but once you commit to annuity you lose it all in exchange for the measly return and there is nothing left for wife & kids inheritance and you lose the potential extra gains from the stock market in the good years. They buy your pot for a healthy profit based on your life expectancy.
It's also worth noting that the first chart you posted has an annual draw proportional to the fund's performance in that year (or possibly some combination of recent years - it's hard to tell) - would you be comfortable significantly decreasing your income in a bad year? If not, work it out again with a constant draw.
You also don't appear to have factored in inflation - even at a conservative 2.5%, you'll need £57K/pa in 2040 to be equivalent to your current £35K/pa.
I've also seen the 4% figure used as a benchmark for a safe drawdown rate (including some suggesting it's too aggressive, and 3.5% is safer). I'm not an IFA (or anything like that), but I'd assume there's a reason that figure is the consensus - you're proposing just under 10%.
I'm naturally very cautious financially, and don't want to put a dampener on your plans, but personally, there's no way I would bet my security in old-age on averaging 16% returns (and low/no inflation) for the rest of my life.
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Supportact said: [my style is] probably more an accumulation of limitations and bad habits than a 'style'.