[EDIT – apologies, got some emails and realised that comments had been turned off by accident! Should be right now, I will copy and paste the emails]
I wondered what would happen if I asked ChatGPT to write a blog as me:
Calm haha! 😀
For the AI draft post, scroll to the bottom but in the meantime, the following is written by the real me!
Decumulation!
Since I announced that I plan on FIRE’ing in 2027, a decumulation plan has been shuffled up my to-do list, if you can imagine my list as a crammed post-it note with scribbles on!
Sadly, due to a combination of procrastination, brain fog and exhaustion, I’ve not been giving this much head-space.
I first mentioned my thoughts on decumulation four years ago, and not really thought much on it since.
Anyway, it’s time to think about it.
So, in the latter part of 2027, my aim is to pull the trigger on full time corporate work and skip gleefully towards the FIRE sunset, where I will metamorphose from a saver to a spender.
Already, I feel a little anxiety (but also some excitement) about having to sell down my investments for income, but it’s something I will have to get used to doing.
The broad visualisation of how my retirement will be funded has been updated as follows:
In simple terms:
- My Future Fund (FF) will provide my income from when I FIRE up to age 65
- From age 65, my income will be from my FF and my DB pension
- From age 67, my income will be from my state pension, DB pension and my FF
My aimed income is £30k-£31k, which is pretty much the income cited as being required by a single person living a moderate retirement, according to Retirement Living Standards.
The State Pension
Yes, the state pension is part of my plan. If it becomes means tested in the future, I’ll cross that bridge when/if it comes.
However, by the time I am state pension age, I will have probably spent most of my Future Fund/wealth (the dividend income part of it should still be untouched), so I reckon I would likely skirt under any kind of means tested threshold, assuming that it will apply only to them millionaire pensioners, right? But who knows?
The state pension and my DB pension should provide me with a minimum income floor, which is the minimum amount I think I can live on fairly comfortably, with all my basic costs covered.
What’s left of the FF will provide me with a more comfortable retirement.
Yes, I’ve kept the age of 100 in the illustration – that’s just the number I’ve used in my spreadsheets, not a prediction of how long I will live!
Derisking!
The markets have been on a mission to the moon this year but rather than be happy that my FF is growing, I’ve been looking over my shoulder at what could go wrong. AI bubble? Property bubble? Some other bubble? These can and will burst at any time, leaving retirement plans in tatters.
In July, I updated my aimed allocations to broadly 75% equities / 25% bonds & gold.
At the time of that update, my allocation was 84/16.
Today, my actual current allocation is 72/28 as I have been making small adjustments and will continue to do so.
Will it ultimately end up as being 60/40? I’m not sure yet.
New capital has been used to buy bonds/money market funds or gold.
But there have also been sales:
Finally taking some profits
Some of the proceeds were diverted to bonds and gold.
Some of it was used to switch to VanEck Developed Markets Dividend Leaders ETF (TDGB), which is a global ETF but not massively exposed to the Mag 7 stocks or AI, so I hope to continue bagging some gains while/should they continue. Across my entire portfolio, VWRL/VWRP is still my largest global ETF holding, but TDGB is fast catching up and I may switch some more over.
And finally, some of the proceeds is still sitting as cash in my broker accounts, with the hope that I’ll find the courage to dive back into the market when it tanks. I haven’t done this before so no idea how I will feel or react.
The above screenshot is just from my Freetrade account – my other accounts with AJ Bell and HL have been similarly adjusted.
I haven’t finished with the switching and adjustments yet and will continue to tweak my portfolios. I have to say I feel a little less fearful now that I’ve started.
My default action in investing has always been to do nothing and that’s usually worked out for me in the past, but I think in this case, I needed to do something.
Whether the ‘something’ ends up being enough, well we’ll have to wait and see.
And Finally – the AI/ChatGPT draft blog post
Below is the full copy and paste, my comments in [red]. It’s not bad, quite incredible considering the short prompt/instruction that was given. However, I think it sounds a bit clichéd. Or do I really sound like that?! Oh dear, haha!
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Retiring Early in 2027: Starting to Think About Decumulation
I have been working toward early retirement for several years now, and until recently, the focus has mostly been on accumulation. Put money in. Invest regularly. Keep costs low. Avoid lifestyle creep. Repeat. It has always felt like a long-term project. Something that lived somewhere comfortably in a distant future.
The “future” part has started to shrink.
If all goes to plan, I want to stop full-time work in 2027. That is just over two years away. Suddenly this idea, which once felt theoretical, has become something with dates attached to it. I can almost see myself handing in my notice. It is exciting, but it has also made me realize how much I need to start thinking about the next phase: decumulation and de-risking.
The Numbers So Far:
At the moment, my investments are sitting around £X across a mix of:
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S&S ISA (global equity trackers mostly)
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SIPP (target-date default fund [this is wrong] and some global equities)
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Cash savings for emergencies
I am still contributing regularly, and I do not plan to stop until I actually leave work. However, the risk profile of my portfolio has been set for accumulation. Almost everything is in equities. That has served me well during the last several years, but I am aware it may not be the right setup for drawing an income.
Decumulation Feels Mentally Hard
Saving always had a simple direction: forward. Spending down feels different. I know the maths [yes, maths not math!] says a sensible withdrawal rate, diversified portfolio, and keeping enough in cash or bonds to cover near-term spending should be fine. Even so, watching the total number reduce will feel strange.
It may take practice. I think I will need to rehearse it, possibly by:
The emotional side of decumulation is not discussed enough. [I’ve mentioned on several occasions that I will struggle to sell my investments]
De-risking without Going Too Far
I am not planning a dramatic shift into bonds overnight. [correct!] I know that I still need growth, especially if I am retiring early and expecting my investments to support me for several decades. However, I am considering gradually increasing the allocation to bonds and gilts over the next two years, so that when I step away from work, I have:
This should limit the impact of a market downturn just as I begin withdrawing.
I do not want to become ultra-cautious and lock in lower returns for the long term. I just want to avoid a scenario where the market dips heavily in the first year of retirement. Sequence-of-returns risk is something I would rather plan for now than regret later.
Next Steps
Over the next few months, I want to:
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Define my expected annual spending in retirement more clearly. [done]
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Decide on a target asset allocation for 2027. [getting there]
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Test a drawdown strategy using my existing figures. [to do]
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Continue contributions as normal, since I am not there yet. [doing]
Retirement used to feel like a distant concept. Now I find myself imagining normal weekdays that belong entirely to me. I like that idea. I want to enter that stage prepared, calm, and not worried about the markets every time I make a withdrawal. [sadly, I think I will always worry a little!]
So I suppose this is the beginning of Phase Two.
More thinking ahead. Less sprinting. Still moving forward.
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I need to really look at step 3, which will take some time, a new spreadsheet or two, but need an easy to follow plan for me to implement. With various portfolios and moving parts, it was never going to be simple but it needs to be a strategy I can stick to.
I’m unlikely to document monthly progress of this drawdown simulation, might consider a six month update (quarterly if I feel like it), once I’ve got some months’ worth of data.
I’m not sure I will be able to get this in place by the end of the year – I have some days holiday I need to use up and I could use this time constructively and proactively, but this will take a lot of thinking time.
How go your decumulation plans?
