One “rule” widely used by pension’s savers in America is the 4pc rule. It is not a magic formula but it could be considered well respected and popular with many financial advisers here in Britain. The idea is that 4pc is the maximum amount that can be safely withdrawn from a pension each year over any 30-year retirement. Although in this period your portfolio’s capital value might fall as well as rise, your income payments – starting at 4pc of your initial capital and increasing yearly in line with inflation thereafter – will always be met, at least for those three decades.
This number was based on work undertaken two decades ago by an American former financial planner, William Bengen, and designed purely to help pensioners maximise their retirement savings while minimising the risk of running out of cash. The theory was given the thumbs up by another academic paper a couple of years later, which put the chances of success at 95pc. This assumed that savers would split their pension portfolios into two, with half in shares and half in bonds. Both studies arrived at their conclusions following analysis of US stock market and bond returns over almost 100 years. If you want to talk about where this American model might work for you Enable’s IFA's would be happy to talk things through.
Issued by: Enable Independent Financial Life Planners 25c North Street, Bishops Stortford, Herts CM23 2LD Telephone: 01279 755950 - Fax: 01279 657339 Enable Independent Financial Life Planners is a trading style of Enable Independent Limited is authorised and regulated by the Financial Conduct Authority. It is important always to seek independent financial advice before making any decision regarding your finances. If you would like any assistance, please contact us. NOTHING CONTAINED IN THE ARTICLES SHOULD BE CONSIDERED AS GIVING INDIVIDUAL FINANCIAL ADVICE
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