Looking for some ARF investment thoughts. Is it reasonable to assume I can withdraw 4% from an ARF (age 56 so need to last 30+ years, with approx €1m fund)?
Would this require 5% fund growth to cover charges?
What equities/bonds ratio would be needed to get this return?
v good point Conan.). This assumes you are trying to keep the €1m fund intact.
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With respect Colm, that period happens to coincide with the longest uninterrupted bull market in global stock market history. Your personal good fortune hardly represents a sound basis for any prudent retirement plan.For what it's worth, my ARF is now worth considerably more than when I started it in December 2010
Finally, I would personally ignore any State contributory pension or other benefits (including the Fair Deal scheme) for planning purposes. Hopefully those benefits will still exist 30 years from now but really who knows?
Speculating about future taxes or levies is futile - we can only make reasonable decisions based on we know today.
v good point Conan.
I think a lot of advisors drive the idea of keeping as much of the fund as possible intact in order to ensure their maximum take from the fund in charges. If the retiree reduces the fund substantially then somewhere among the cloak and daggers of charges the "advisor" loses out. It is a very subtle idea planted and easily sold.
People need to be realistic about how much money they actually need and can spend once they reach 70/75 +, regardless of supposed increases in longevity which generally comes with limiting health factors. This assumes they own a house and don't need to pay rent or mortgage in retirement which is a point Brendan has correctly emphasised for many years that should be a priority over a pension.
Over what timeframe? 25, 30, 40 years? I assume you mean 4% adjusted for inflation.4% drawdown rates seem generally sustainable
I'm actually surprised it's as high as 16%. An increasing number of seniors obviously choose to pay for long-term care to be provided within their own homes.only 16% of people aged 85+ in the UK live in care homes
Is that not a contradiction in terms?Of course many people will need care in later life, but this is not typical.
Drawdowns above 6% become touch and go. 4% drawdown rates seem generally sustainable but not for conservative portfolios.
Over what timeframe? 25, 30, 40 years? I assume you mean 4% adjusted for inflation.
And how would you define what is "generally sustainable"? Would you consider a 10% chance of failure, based on your model, to be acceptable? 5%?
With respect Colm, that period happens to coincide with the longest uninterrupted bull market in global stock market history. Your personal good fortune hardly represents a sound basis for any prudent retirement plan.
Over what timeframe? 25, 30, 40 years? I assume you mean 4% adjusted for inflation.
What guidance notes/best practice have the professional bodies issued around this question and how has the guidance changed over the years? Are the various representative bodies broadly in agreement? Are links available?
The "sequence of return risk" has often been cited as an argument against high equity levels in a retirement portfolio. The risk is overblown. Any theoretical studies I've seen on this topic start from the false assumptions that (i) the pensioner withdraws a constant amount each year, and (ii) they cash investments equal to the amount withdrawn. Both assumptions are wrong.
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