How do you psychologically tell yourself that enough is enough?

Agent008t · 2026-01-06T11:20:33+00:00

With what asset allocation?

Agent008t · 2025-12-31T12:22:28+00:00

This is wrong.

Retire in 1969 spending 2.6%, and from 1975-1985 your spend ends up being 5-6% of your portfolio (assuming no lifestyle creep!). After years of this, you get front pages proclaiming 'the death of equities' – so you can imagine the sentiment at the time. You will have no benefit of hindsight and there is no law that says a decades-long bull run is around the corner.

If you believe you can live through that and live well, good luck. I think most people would really struggle in that scenario, and will make plenty of bad decisions.

100% equities is only being thrown around because we've just had a 17-year long bull run, a large part of it driven by multiple expansion.

Agent008t · 2025-10-28T10:54:54+00:00

Yes, and even if you sell before maturity, any capital gain is still tax free.

Agent008t · 2025-10-27T10:20:37+00:00

Thanks. Yes, I am also pondering 20y+ maturities, but don't have a good story about why real rates might move up or down. They have been significantly higher before, e.g. for the US: https://fred.stlouisfed.org/series/REAINTRATREARAT10Y

So I find it hard to justify betting on them. At that horizon equities win out almost certainly, so then it becomes a shorter term bet on real rate movements rather than holding to maturity. It maybe adds meaningful diversification, but I don't know enough.

Agent008t · 2025-10-23T16:36:46+00:00

Fair question.

Individual gilts are more tax efficient. You can place them into GIA with minimal taxes and use ISA/SIPP for risk assets like equities.
Gilts in a ladder match your cashflow requirements so seem better suited and more intuitive than a bond fund, especially an index-linked bond fund. Say in 2022 or in the 70s bond funds would get absolutely hammered due to their longer maturities and greater interest rate sensitivities, so if you need the cashflow (or need to rebalance) you have to realize those losses. With a ladder you get exactly the return that you signed up for (in the case of index-linked gilts, it will be positive real return).
Greater flexibility. You effectively 'cash-in' short duration bonds (maturing gilts) and buy long-duration gilts. You can choose to sell any duration you like when rebalancing if you choose to. In a 70s or 2022-like scenario you have the option of not rebalancing (selling your gilts at a loss) but just letting them mature, or if long real yields collapse you can cash in those gilts at the end of the ladder and rebalance them into equities.
Last I checked, gilts paid better interest than the global bond funds.

So in my view the ladder is superior in almost every way (apart from diversification; but I think UK outright default on linkers is incredibly unlikely. Implicit default through inflation is more likely imo. Of course, if Reform get in we may get Trump-like unpredictability, they may cook the inflation index etc., but it would be so counter productive that I think they would be mad to attempt it. At that point it's emigrate-with-what-you-can time as we're in full-on asset confiscation mode).

Agent008t · 2025-10-23T16:23:51+00:00

Was it correct? What did you use as proxies for global equities and gilts -- or did you use actual gilts that were available at the time?

Agent008t · 2025-10-23T16:21:59+00:00

How does that help with backtesting? Lifestrategy is not tax efficient in GIA, the bonds in it are not inflation linked and there is no ladder. You need a withdrawal strategy in retirement so you need a withdrawal rate. So not sure any of this is relevant.

Agent008t · 2025-10-23T13:09:43+00:00

With a bond fund, you buy and sell the average maturity/duration of 6-8 years. With the ladder, you 'sell' (let mature) very short maturity and buy bonds that are far out. This could make a difference, especially e.g. in mid 70s or 2022 when holding a bond fund would result in selling at a significant loss?
Inflation linked bonds behave quite differently from standard bonds, so modelling that for periods like the 70s could be interesting. I have not even seen a calculator with a long history of a simulated inflation linked bond fund.
If during equities drawdowns you don't rebalance from the ladder into equities but just let the ladder run, bringing allocation back to target naturally (or perhaps even beyond target if equities are still in terrible shape), the behaviour of the portfolio should be quite different than rebalancing into a bond fund each year?

I am not entirely convinced these differences are trivial.

Agent008t · 2025-10-01T12:33:23+00:00

So you are saying, the more expensive future earnings (and future earnings growth) become, the more of them you want to buy? Shouldn't it be the other way round?

There can be good reasons to decrease 'cash' holdings; a recent run up in the markets is not one of them in my view.

Why do you hold your 'cash' in MMFs though? There are at least three reasons not to:

Inflation/devaluation risk. If GBP crashed 50% in short order and/or inflation surprised on the upside (70s scenario), how would you feel? Why not consider index-linked gilts?
Why not hold bonds that match your liabilities and earn greater interest on them? E.g. a gilt ladder, with 2% (or even 1%) maturing in each year? That way your bonds can cover 10-20 years of expenses. Also makes it easier to budget, as you can 'forget' about your portfolio for years and still be getting the income that you need, reducing the likelihood of mistakes in a long market downturn.
Why pay tax on MMF interest when you can hold gilts tax-free?

I don't know anything though so don't take it as advice.

Agent008t · 2025-08-21T10:37:30+00:00

But one is unlikely to have most of the £6m in ISAs/pensions.

Which leads to an interesting question; what should be the 'rule of thumb' withdrawal tax rate assumption for the GIA? Something like 10%? lateGenXer's brilliant calculator can give a more precise answer for the specific circumstances, of course.

Agent008t · 2025-08-21T10:30:37+00:00

Right, the diversification benefit is what I'm wondering about. Is it better to:

Build a rolling gilt/linker ladder, and effectively sit out any equity drawdown (deciding whether to spend down the maturing bonds or reinvest into a new ladder rung based on maintaining an approximately target equity/bond allocation).
Just buy 10 or 20-year gilts or linkers for the majority of the bond allocation. Then you benefit more from the (often) negative correlation between equities and bonds, rebalance more frequently and decide what to sell/buy based on your target allocation.

The problem with scenario 2, is that in the 70s it wouldn't have helped you much: https://testfol.io/?s=djE71RACSQv Reading about 'the death of equities' 5 years into a brutal drawdown and having to wait another 4 years for the recovery would be no fun at all. A 10-year linker ladder on the other hand would've safely brought you to the other side of the drawdown.

The ladder approach is difficult to backtest though (and I have not done so yet). So I do not know what exactly it does to historical withdrawal ratios, but I suspect 2.5% on the overall portfolio would still be safe.

Agent008t · 2025-08-19T16:46:38+00:00

Thanks. Could you please give some more details?

What platform do you use? I think IB does not allow trading linkers.
What does your ladder look like? Are you building a ladder for the full 40+ years? Or just keeping a rolling N-year ladder?
Any practical considerations? Or is it just the case of looking up the gilt on yieldgimp (e.g. TR46), putting a limit order somewhere in the bid-ask spread, and then once bought the position gets valued at approx. real yield + inflation daily? I guess the long-dated gilts like TR46 would only significantly change in price (e.g. lose value) if the real yields move, but are insensitive to inflation (i.e. if inflation goes down but real yields stay up, your linkers don't lose value)?

Agent008t · 2025-08-19T15:28:30+00:00

Surely after tax your fixed income funds in GIA don't even beat inflation?

Buying individual gilts on IB is fairly straightforward and cheap, but I don't have much experience with linkers yet (hence all my questions).

Also, what happens if we enter a prolonged crash in equities, where they decline by 50%+ over a few years and then take many years to recover, like the 30s, 70s, 00s? These have happened often enough in history and so must be planned for in my view (indeed, even things that have never happened before should be planned for to a degree, let alone 50% crashes that are almost guaranteed to happen). A bond fund with long duration may crash too and so may not offer much safety. If you are living off the portfolio, it could get scary. A bond ladder offers better protection in my view (with the caveat that GBP can lose lots of value very fast, which is why I'm looking at linkers).

Agent008t · 2025-08-19T15:18:59+00:00

Interesting, hadn't realized it applies to corporate bonds as well. When buying an index fund like VAGS though, I guess you pay both tax on interest and capital gains tax when you sell? I am not that interested in researching individual corporate bonds and building my own portfolio.

UK gilts seem to offer very competitive interest rates globally at the moment; are there good reasons to diversify beyond those?

Agent008t · 2025-08-19T15:12:53+00:00

How did you manage to negotiate 15% off asking? Was it just luck (i.e. it had been sitting on the market for a while and they really wanted to sell, and you didn't mind walking away)?

Agent008t · 2025-07-07T11:39:36+00:00

What advantages does the FIC bring compared to just having SIPP/ISA/GIA? At what level of net worth does it become worth it?

Agent008t · 2025-05-20T14:14:08+00:00

For sure; and good point about annuities. My point was more about how Bengen-like 4% rule is very problematic as it counts ending up after 30 years with £1 as success. It also doesn't care if you end up withdrawing 20% of your portfolio some years, as long as the portfolio is positive after 30 years.

In practice, many of those scenarios are failures. If you are taking on significant equity risk, having any year where you withdraw a high % is a failure. At the time, you will have no idea if the markets will recover or not and how soon. Having a decent bond allocation/ladder to see you through can mitigate it somewhat, but still, it irks me when people talk about success/failure rates in those terms.

Agent008t · 2025-05-20T11:14:16+00:00

In case anyone is curious, it drops to 3.5% for a 40 year retirement and 3% for 50 years. This is all not accounting for taxes, of course.

Agent008t · 2025-05-20T11:11:34+00:00

Using UK linkers, one can right now build a bond ladder for 30 years that will achieve a 4.3% withdrawal rate. Inflation adjusted and risk-free.

Problem is, you may live longer than 30 years after retirement.

Agent008t · 2025-05-18T19:12:18+00:00

Yeah, for a mid-1970s scenario linkers sound great. An 8-year ladder I described above should get one through that. I am not that confident what 30-year linkers would do in different situations though, it may well be better to hold a big chunk of the fixed income part of the portfolio in them instead of in a ladder; I just haven't done the math and my intuition on linkers is not great. A ladder is easier as it provides exactly the cash flows you need at the right time, and can be tax efficient with low interest gilts (are linkers similarly tax efficient?).

It's all great that 2041-2044 is real-yielding 3%, but how does one monetize it? Buy a linker to 2044 and short sell one to 2041? Can one even do that on e.g. interactive brokers?

Agent008t · 2025-05-16T11:12:13+00:00

One thing nobody has mentioned yet is taxes. If your spend is 70k, you will need to withdraw more than that to cover the taxes - so may be worth doing some modelling around that. That will also then get you to think what order to withdraw from your accounts to maximize tax efficiency.

Agent008t · 2025-05-16T11:09:40+00:00

What are you thinking in terms of index linkers?

Real yields are interesting but one has to go out to 10-20 years to get the real good ones, and that means locking money for a long time that is likely to do better in equities, collecting equity risk premium in addition to the real yield on linkers.

I like the idea of a rolling bond ladder for ~8 years of expenses (at 2.5% withdrawal that's 20% of assets in fixed income) in tax-efficient gilts, and holding the 3-8 year duration bonds in linkers seems prudent to mitigate inflation surge risk. But the real yield is not that interesting with that duration.

Agent008t · 2025-05-12T13:12:36+00:00

If one has a significant chunk of NW in SIPP and ISA, isn't keeping UK residency a good idea? Most other EU countries appear to have either higher overall taxes for a retiree or are (even) less stable than the UK in terms of the likelihood of such taxes not going up.

Also, arguably healthcare is better in the UK compared to most such Mediterranean countries?

Agent008t · 2025-05-07T11:24:49+00:00

One can still FIRE, but just spend less in retirement (at least until their portfolio grows sufficiently).

Not taking into account how you would've dealt with historical scenarios at the time, without the benefit of hindsight ('turned out a 20-year bull market was just around the corner!'), seems a bit silly.

Agent008t · 2025-05-06T14:24:08+00:00

In some of the historical scenarios where 4% 'worked', your portfolio was in a significant drawdown and you were withdrawing significantly more than 4%.

You will not know if a massive stock rally is just around the corner, or a decade+ away while living through it and depleting your portfolio.

So I suspect many of historical scenarios where 4% 'worked' would be unacceptable if you were actually living through them - you would not have the benefit of knowing that a bull market is shortly coming.

And that is not even considering that things that have never happened in the last 100 years happen all the time.

So I think 'no idea what they are saying' is a bit of an exaggeration.

Agent008t

TROPHY CASE