Illustrating Sustainable Withdrawal For Different Phases of Retirement

We’re delighted to announce a new feature on Timeline which enables planners to illustrate the benefits of scaling up/down withdrawals at different phases of retirement

The traditional assumption for sustainable withdrawal rate is that a client will spend the same amount of inflation adjusted income throughout their retirement. This assumption is not supported by cold hard data on spending pattern of retirees.

Research in the UK shows spending in retirement declines progressively in real terms. From age 65, spending typically declines progressively and is about 35% lower at age 80.=

In the US, researchers found a similar trend among retirees. As financial planner Michael Kitces noted, real spending tends to decline a little at the beginning of retirement, accelerates its decline in the middle retirement years, and then slows its decline again in the final decade. Researchers identified three unique phases of retirement dubbed:

  • The Go-Go years, the active first decade of retirement,
  • The Slow-Go years, the less active second decade of retirement, and
  • The No-Go years, the final decade of retirement when most discretionary spending stops

Strangely, it’s has been difficult, even impossible for financial planners to take this into account when illustrating sustainable withdrawal from a client’s portfolio.

That’s until now.

With this new feature on Timeline, financial planners can illustrate the benefits of scaling up/down spending at different phases of retirement.

For instance, you can illustrate a scenario where the client wants a withdrawal of £40,000/yr from age 65 to 75, then £30,000/yr from age 76 to 85, and £20,000/yr thereafter from a £1M portfolio. Here’s what real (inflation adjusted withdrawal looks for all rolling 30 year periods between 1900 and 2016.

The following shows the same withdrawal pattern as above, but in nominal terms…

With this new feature, planners can customise the spending pattern and retirement phases to each client’s preferences. The spending pattern is also automatically pulled through into the withdrawal policy statement!

The feature is available in the US and UK versions of the app.

We’re keen to know what you think of the new feature. So please sign up for a free trial of Timeline and tell us what you think!

Abraham is the Founder and CEO of Timelineapp. He has authored the Beyond the 4% rule book, written several industry papers and delivered many talks. He holds a master’s degree from Coventry University and an alphabet soup of designations, including the Investment Management Certificate, Chartered Financial Planner and Chartered Wealth Manager.


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