As I write this post the S&P500 cyclically adjusted price earnings ratio sits at 32.0 against a long run average of 16.9, Donald Trump is starting trade wars, the US market has been in a bull cycle for well over 9 years and closer to home we have a Brexit shambles playing out in slow motion that might just ruin the economy for a long time. Then on a personal front I’m just about to ride off into the FIRE sunset.
Against this backdrop it feels right to reinvigorate and update the UK retirement income drawdown series, which I last posted about 2 years ago, to see how things are playing out. I hope it’s not relevant to my situation but you just never know.
Unless you’re one of the lucky ones sitting on a defined benefit pension (although it’s likely you’ll also need some other income source in the early years if you’re going to FIRE) or you intend to buy an annuity (again, not likely for the early years of FIRE) or you’re just planning on living off the State Pension then income drawdown in FIRE (or even just plain old retirement) is relevant.
This update of the drawdown demonstrations now has our retiree some 11.5 years in to retirement. We are now just over one third of the way through the period that the 4% rule is based upon and this simulation assumes retirement was taken on the 31 December 2006. If this date sounds convenient then you’re right. The date was deliberately chosen as it is the year prior to the commencement of the global financial crisis and so hopefully represents a modern worst case. Someday it may even go down in history as one of the time periods which saw a poor sequence of returns however of course that will only become clear when we are firmly looking in the rear view mirror many years hence.
S&P500 cyclically adjusted price earnings ratio, click to enlarge
Against this backdrop it feels right to reinvigorate and update the UK retirement income drawdown series, which I last posted about 2 years ago, to see how things are playing out. I hope it’s not relevant to my situation but you just never know.
Unless you’re one of the lucky ones sitting on a defined benefit pension (although it’s likely you’ll also need some other income source in the early years if you’re going to FIRE) or you intend to buy an annuity (again, not likely for the early years of FIRE) or you’re just planning on living off the State Pension then income drawdown in FIRE (or even just plain old retirement) is relevant.
This update of the drawdown demonstrations now has our retiree some 11.5 years in to retirement. We are now just over one third of the way through the period that the 4% rule is based upon and this simulation assumes retirement was taken on the 31 December 2006. If this date sounds convenient then you’re right. The date was deliberately chosen as it is the year prior to the commencement of the global financial crisis and so hopefully represents a modern worst case. Someday it may even go down in history as one of the time periods which saw a poor sequence of returns however of course that will only become clear when we are firmly looking in the rear view mirror many years hence.
