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TPAW Planner - an interesting online drawdown simulator
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Joe 90
Posted: 29 December 2024 15:25:57(UTC)
#68

Joined: 14/01/2018(UTC)
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Neminem Laedit;329610 wrote:
Joe 90;329599 wrote:
I have found this tool very useful, particularly in the wake of the recent budget which changed the IHT rules bringing my SIPP into my estate. This led me to completely rethink my withdrawal strategy.

The IHT limit for a couple (with a property) is currently £1m. Our house is worth around £500k, so I have set the TPAW tool to "end" on my 80th birthday, leaving a £500k legacy. My logic here is that (assuming I'm still around) at that age, with half a million quid invested, plus two state pensions (and my house paid for) I'll be pretty much bullet-proof from that point on.

The amortisation of the fund down to that £500k target gives me a significantly higher withdrawal rate than SWR. It also gives much greater certainty that my pot will last. Furthermore, I won't end up being overly cautious, and then leaving a large sum to HMRC!

The model necessitates reductions in spending in line with market falls. I have a relatively large discretionary element to my spending and I can therefore cope with (say) a 25% drop following a poor year in the market. I accept that not everyone has that luxury.

Of course the Government in its wisdom will inevitably change the rules, or at the very least allow fiscal drag to render this approach less effective.

I've emailed Ben Matthew a couple of times and he has been very helpful. He pointed out that the £500k target will need revising manually in line with inflation every year, or to follow any increase in the IHT allowance (some hope). The tool won't do this on its own!


It's good that you are finding personalised ways to use the very powerful TPAW, and there will be more ways in future when Ben Mathew Ph.D implements new features.

However, two connected points arise from your plan, IIUC.

a) "The model necessitates reductions in spending in line with market falls." Yebbut, by using amortization and including all fixed incomes, and perhaps a spending tilt, your starting spending will be far higher than
that of SWR, and even after reductions due to market falls it will probably still be higher than SWR. A no-lose situation.

b) wouldn't it be simpler to drip-feed money to beneficiaries over time, from your generous TPAW spending allowance, rather than try and run your pot down to £500k by the arbitrary age of 80? You seem to imply that you could dispense with TPAW at 80, and "wing-it" from then on, assuming you're still around. I'm sure there must be a better way to minimise tax, and stay within the TPAW model until the end of life, although admittedly, without knowing your exact circumstances, I'm not sure what it is ! Or maybe you need a second plan, starting at age 80, with a £500k initial pot?

Thanks for the post. It's all food for thought, and TPAW seems to be the only tool which even allows you to explore such interesting, complex scenarios.

One of the greatest strengths of TPAW is you don't have to grapple with arbitrary AAs and attitudes to risk, and "what they really mean"...

As Ben Mathew advises, you just need to move the sliders around until a satisfactory spending graph appears.

That picture IS your AA and attitude to risk (instead of a thousand words)...


Inevitably it is necessary to make a few assumptions, even when it's virtually guaranteed that they will prove to be wrong! Without assumptions it's impossible to plan.

Accordingly, my thinking is as follows:

I'm close to 63 now, retired and spending generously on travel and money to the children. If I'm fortunate enough to survive to 80, I can't imagine I'll be travelling much at that point, so spending will be much lower.

The value of our house will cover care fees.

There's a fair chance that either my wife or I will be gone at that point.

There will be no IHT to pay on a £1m estate.

I've stress-tested living another 20 years (ie to 100) with one state pension and a £500k portfolio, and this gives an index linked income of £35k per year, which will be plenty.
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3 users thanked Joe 90 for this post.
Neminem Laedit on 29/12/2024(UTC), Dentmaster on 29/12/2024(UTC), Guest on 08/01/2025(UTC)
D Bergman
Posted: 29 December 2024 16:01:24(UTC)
#69

Joined: 22/03/2018(UTC)
Posts: 1,308

Thanks: 1686 times
Was thanked: 3536 time(s) in 1035 post(s)
Joe 90;329649 wrote:


Inevitably it is necessary to make a few assumptions, even when it's virtually guaranteed that they will prove to be wrong! Without assumptions it's impossible to plan.

Accordingly, my thinking is as follows:

I'm close to 63 now, retired and spending generously on travel and money to the children. If I'm fortunate enough to survive to 80, I can't imagine I'll be travelling much at that point, so spending will be much lower.

The value of our house will cover care fees.

There's a fair chance that either my wife or I will be gone at that point.

There will be no IHT to pay on a £1m estate.

I've stress-tested living another 20 years (ie to 100) with one state pension and a £500k portfolio, and this gives an index linked income of £35k per year, which will be plenty.


I think you should look at these variables when planning:

1. Average life expectancy in the UK for a 63 year old male is 85 years. There is a 33% chance of living till 90. Add 2 more years for femaIes aged 63. I wouldn't plan financially for survival till 80 if you are in decent health.

2. Nursing Home fees are now nudging £80K - £100K per year per person.

3. You could be in a position where one person is living at home and the other in a care home for some years, so planning on sale of house to fund care fees may not be an option (this has happened to friends of mine, where husband has dementia and had to be moved to a nursing home while the wife is still living in their house).

Not saying that your drawdown plan won't work, just that you might want to keep them flexible enough for possible revisions.
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4 users thanked D Bergman for this post.
Neminem Laedit on 29/12/2024(UTC), Dentmaster on 29/12/2024(UTC), Helen L on 30/12/2024(UTC), AlanT on 30/12/2024(UTC)
Joe 90
Posted: 29 December 2024 17:32:12(UTC)
#70

Joined: 14/01/2018(UTC)
Posts: 310

Thanks: 113 times
Was thanked: 438 time(s) in 182 post(s)
D Bergman;329651 wrote:
Joe 90;329649 wrote:


Inevitably it is necessary to make a few assumptions, even when it's virtually guaranteed that they will prove to be wrong! Without assumptions it's impossible to plan.

Accordingly, my thinking is as follows:

I'm close to 63 now, retired and spending generously on travel and money to the children. If I'm fortunate enough to survive to 80, I can't imagine I'll be travelling much at that point, so spending will be much lower.

The value of our house will cover care fees.

There's a fair chance that either my wife or I will be gone at that point.

There will be no IHT to pay on a £1m estate.

I've stress-tested living another 20 years (ie to 100) with one state pension and a £500k portfolio, and this gives an index linked income of £35k per year, which will be plenty.


I think you should look at these variables when planning:

1. Average life expectancy in the UK for a 63 year old male is 85 years. There is a 33% chance of living till 90. Add 2 more years for femaIes aged 63. I wouldn't plan financially for survival till 80 if you are in decent health.

2. Nursing Home fees are now nudging £80K - £100K per year per person.

3. You could be in a position where one person is living at home and the other in a care home for some years, so planning on sale of house to fund care fees may not be an option (this has happened to friends of mine, where husband has dementia and had to be moved to a nursing home while the wife is still living in their house).

Not saying that your drawdown plan won't work, just that you might want to keep them flexible enough for possible revisions.

Thanks for the input, although with respect, I think you may have misunderstood. I don't plan to shuffle off at 80, this is merely a milestone, and a point past which our spending is very likely to be significantly less than now.

I am aware of the costs of care, and my plan gives us at least £1m in assets (in real terms) to cover this, plus two full state pensions. To set aside anything more would in my opinion, be foolishly over-cautious.

The plan is as flexible as it can possibly be.
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4 users thanked Joe 90 for this post.
Dentmaster on 29/12/2024(UTC), Neminem Laedit on 29/12/2024(UTC), Guest on 29/12/2024(UTC), Guest on 03/02/2025(UTC)
Frank Spencer
Posted: 29 December 2024 18:05:27(UTC)
#71

Joined: 13/07/2019(UTC)
Posts: 220
Quote:
2. Nursing Home fees are now nudging £80K - £100K per year per person.


Just as an aside, up in the frozen north current nursing home fees are approx £60K per year.....in a very nice facility.Lindsey Hall
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Neminem Laedit
Posted: 31 December 2024 09:02:36(UTC)
#66

Joined: 17/09/2018(UTC)
Posts: 1,473

Thanks: 1011 times
Was thanked: 2019 time(s) in 822 post(s)
Neminem Laedit;329610 wrote:
Joe 90;329599 wrote:
I have found this tool very useful, particularly in the wake of the recent budget which changed the IHT rules bringing my SIPP into my estate. This led me to completely rethink my withdrawal strategy.

The IHT limit for a couple (with a property) is currently £1m. Our house is worth around £500k, so I have set the TPAW tool to "end" on my 80th birthday, leaving a £500k legacy. My logic here is that (assuming I'm still around) at that age, with half a million quid invested, plus two state pensions (and my house paid for) I'll be pretty much bullet-proof from that point on.

The amortisation of the fund down to that £500k target gives me a significantly higher withdrawal rate than SWR. It also gives much greater certainty that my pot will last. Furthermore, I won't end up being overly cautious, and then leaving a large sum to HMRC!

The model necessitates reductions in spending in line with market falls. I have a relatively large discretionary element to my spending and I can therefore cope with (say) a 25% drop following a poor year in the market. I accept that not everyone has that luxury.

Of course the Government in its wisdom will inevitably change the rules, or at the very least allow fiscal drag to render this approach less effective.

I've emailed Ben Matthew a couple of times and he has been very helpful. He pointed out that the £500k target will need revising manually in line with inflation every year, or to follow any increase in the IHT allowance (some hope). The tool won't do this on its own!


You seem to imply that you could dispense with TPAW at 80, and "wing-it" from then on, assuming you're still around. I'm sure there must be a better way to minimise tax, and stay within the TPAW model until the end of life, although admittedly, without knowing your exact circumstances, I'm not sure what it is ! Or maybe you need a second plan, starting at age 80, with a £500k initial pot?


Another possibility to test in the planner is to run your pot down to say £500k + x, at age 80, where x is the cost of an annuity from age 80.

You will obviously have to estimate from current rates what x might be, but at least you stay inside the planner, rather than winging it beyond 80, and have plenty of time to tweak the plan before age 80.
https://www.sharingpensi...ity_rates_purchased.htm

Ben Mathew gives an example here.
https://www.bogleheads.o...;hilit=Annuity#p7996328

I understand that modelling annuities will eventually be integral to the planner.
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Joe 90 on 08/01/2025(UTC)
Neminem Laedit
Posted: 06 January 2025 11:58:52(UTC)
#78

Joined: 17/09/2018(UTC)
Posts: 1,473

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The Economist article is now available here:

https://elmwealth.com/ho...appiness-does-money-buy/
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3 users thanked Neminem Laedit for this post.
Frank Spencer on 06/01/2025(UTC), Guest on 06/01/2025(UTC), Joe 90 on 08/01/2025(UTC)
Neminem Laedit
Posted: 06 January 2025 16:12:56(UTC)
#79

Joined: 17/09/2018(UTC)
Posts: 1,473

Thanks: 1011 times
Was thanked: 2019 time(s) in 822 post(s)
Victor Haghani and James White (of Elm wealth)

backtested the Merton strategy, with favourable results, outperforming simple 1/CAPE, fixed 65/35 and even 100/0...

https://elmwealth.com/ea...eld-dynamic-allocation/

They elaborate in depth on these ideas in their excellent book - "The Missing Billionaires".

https://youtu.be/sUgmlHOIKTc?si=Ld7ptcn9uUviYzdU
https://www.morningstar....ons-missing-billionaires
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4 users thanked Neminem Laedit for this post.
MrBatch on 06/01/2025(UTC), Guest on 06/01/2025(UTC), Jay P on 06/01/2025(UTC), Joe 90 on 08/01/2025(UTC)
Joe 90
Posted: 08 January 2025 07:47:14(UTC)
#67

Joined: 14/01/2018(UTC)
Posts: 310

Thanks: 113 times
Was thanked: 438 time(s) in 182 post(s)
Neminem Laedit;329714 wrote:
Neminem Laedit;329610 wrote:
Joe 90;329599 wrote:
I have found this tool very useful, particularly in the wake of the recent budget which changed the IHT rules bringing my SIPP into my estate. This led me to completely rethink my withdrawal strategy.

The IHT limit for a couple (with a property) is currently £1m. Our house is worth around £500k, so I have set the TPAW tool to "end" on my 80th birthday, leaving a £500k legacy. My logic here is that (assuming I'm still around) at that age, with half a million quid invested, plus two state pensions (and my house paid for) I'll be pretty much bullet-proof from that point on.

The amortisation of the fund down to that £500k target gives me a significantly higher withdrawal rate than SWR. It also gives much greater certainty that my pot will last. Furthermore, I won't end up being overly cautious, and then leaving a large sum to HMRC!

The model necessitates reductions in spending in line with market falls. I have a relatively large discretionary element to my spending and I can therefore cope with (say) a 25% drop following a poor year in the market. I accept that not everyone has that luxury.

Of course the Government in its wisdom will inevitably change the rules, or at the very least allow fiscal drag to render this approach less effective.

I've emailed Ben Matthew a couple of times and he has been very helpful. He pointed out that the £500k target will need revising manually in line with inflation every year, or to follow any increase in the IHT allowance (some hope). The tool won't do this on its own!


You seem to imply that you could dispense with TPAW at 80, and "wing-it" from then on, assuming you're still around. I'm sure there must be a better way to minimise tax, and stay within the TPAW model until the end of life, although admittedly, without knowing your exact circumstances, I'm not sure what it is ! Or maybe you need a second plan, starting at age 80, with a £500k initial pot?


Another possibility to test in the planner is to run your pot down to say £500k + x, at age 80, where x is the cost of an annuity from age 80.

You will obviously have to estimate from current rates what x might be, but at least you stay inside the planner, rather than winging it beyond 80, and have plenty of time to tweak the plan before age 80.
https://www.sharingpensi...ity_rates_purchased.htm

Ben Mathew gives an example here.
https://www.bogleheads.o...;hilit=Annuity#p7996328

I understand that modelling annuities will eventually be integral to the planner.

Yes, this is of course an excellent approach. An 80 year old with £500k to spend on an annuity will do very well. As an example, at present HL are suggesting a joint life 50%, 3% escalation, no guarantee annuity would yield about 6.5%.
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1 user thanked Joe 90 for this post.
Neminem Laedit on 08/01/2025(UTC)
New Simon T
Posted: 08 January 2025 08:20:53(UTC)
#72

Joined: 19/07/2018(UTC)
Posts: 1,239

Thanks: 1214 times
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Frank Spencer;329655 wrote:
Quote:
2. Nursing Home fees are now nudging £80K - £100K per year per person.


Just as an aside, up in the frozen north current nursing home fees are approx £60K per year.....in a very nice facility.Lindsey Hall


The average life expectancy in UK care homes is 24 months for care homes without nursing and 12 months for care homes with nursing

When I first found this I was shocked, but subsequent friends experiences are in line with the statement
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2 users thanked New Simon T for this post.
Neminem Laedit on 08/01/2025(UTC), Joe 90 on 08/01/2025(UTC)
Joe 90
Posted: 08 January 2025 09:04:21(UTC)
#80

Joined: 14/01/2018(UTC)
Posts: 310

Thanks: 113 times
Was thanked: 438 time(s) in 182 post(s)
Neminem Laedit;330243 wrote:
Victor Haghani and James White (of Elm wealth)

backtested the Merton strategy, with favourable results, outperforming simple 1/CAPE, fixed 65/35 and even 100/0...

https://elmwealth.com/ea...eld-dynamic-allocation/

They elaborate in depth on these ideas in their excellent book - "The Missing Billionaires".

https://youtu.be/sUgmlHOIKTc?si=Ld7ptcn9uUviYzdU
https://www.morningstar....ons-missing-billionaires

I shall try to listen to the audio version of this book when I'm in the gym. Whether I'll be able to give it the full attention required remains to be seen!
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1 user thanked Joe 90 for this post.
Neminem Laedit on 08/01/2025(UTC)
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