Future Proofing Your Retirement Income

[@stevegeek]

I recently added a BTL property to my investments...unfortunately it has been nothing but trouble, with tenants complaints and maintenance issues. Now looking to sell the property and going back to stocks and shares / bonds for my retirement income. Expensive learning curve.

[@Pensioncraft]

Hi @stevegeek the return on arse (not a widely used metric, I'll admit) is low for buy-to-let 8-) Thanks, Ramin.

[@stevegeek]

@@Pensioncraft 😆 Like it!

[@floydchusset3143]

I retired at age 53, so I am in my early 60s. Many of them resisted me because they couldn't understand the idea of not working if it wasn't necessary. I considered the phases of my life. I worked very hard to achieve what I have now, but in my last years, I owe it to myself to "stop and smell the roses." In my instance, I departed the nation after retiring and currently reside in Latin America. It made it possible for me to appreciate my new surroundings while escaping all the bad things that were going on in America. Nobody that I know of regrets retiring has yet to come to me.

[@mechthildhaeussler5736]

In my opinion, anybody who is managing buy-to-let property, is not a retiree, but actually running a business. As I experienced, it can easily wrack your nerves, become difficult once you get older (and when you outsource it, profitability decreases often to 0).

[@369dabbler]

It’s about contacts and the way you treat tenants. I’m out the uk 6 months per year and not owed a penny

[@davidwebber6956]

Simply not worth buy to let any more

[@369dabbler]

@@davidwebber6956 gratefully it’s awarded me a wonderful freedom 🙏

[@andrewrobinson2565]

My wife and I have 4 income streams - my French pension, her nurse's salary, our furnished tourist rental around the corner from our home (which we manage ourselves), and a handful of unfurnished flats in the next town, which I ran for 15 years then gave to an agency 3 years ago. When my wife retires in January 2027 (zero mortgage debt at that time) we'll sell our home (creating a stocks and bonds portfolio) and move into our tourism rental as our primary residence, leaving it to travel six months of the year, and using a concierge service to receive guests and do cleaning and maintenance. That will give us: - 2 pensions - unfurnished rental income - furnished tourist rental income - bond coupons and share dividends. 5 streams. Fingers crossed 🇨🇵🇪🇺. 😮

[@369dabbler]

Fabulous

[@hougrel9514]

Ramin - I worked because i enjoyed what I was doing, but I also delayed taking my state pension for several years (the little grey cells don't recall how many years), I think that was suprisingly advantageous.

[@illegalgiant_]

damn the wisdom tree sponsor. man’s getting big

[@Pensioncraft]

Hi @illegalgiant_ that's right I'm writing this on my private island in the Caribbean. Thanks, Ramin

[@TomSlatter-t8r]

With interest rates coming down now, I do like ETFs that have a dividend element to them. The quality element of the ETFs here is nice too, so that there is some meaningful upside in the actual value of the ETF.

[@jam99]

I would not think that your choice of div stock (inc) or no-div stock (acc) should be determined by interest rates unless your decision is for tax reasons. All else being equal (which it won't be, but which way depends on personal circumstances) you can just regularly sell some stock instead. Dividends (inc) mean that some profit is paid out whereas an identical investment without dividend (acc) is where that same amount as the dividend would be reinvested instead. So without dividend you instead get more capital growth. Whether you go divs or no divs is not better or worse by itself, it's just a tax concern for balancing income vs capital gain, and a convenience if you need an income stream and find divs are all you need coming in because they need no interaction if set to pay into your bank account. The taxes are income/dividend tax and/or capital gains tax calculations and depend on your personal situation. Other than tax concerns, requiring money to live on from capital just means you need to sell some of it now and again. To assess the cost of that, you need to include selling fees on whichever platform you use but if you sell a chunk every 6months, say, it's not going to be very much. (Many platforms charge a dividend reinvestment fee if you have div paying stock but don't want the divs into your bank - this should usually be avoided if, instead, you can move the same investment in an equivalent acc fund/ETF - for ETF beware the buy/sell spread where you lose a little.) Regardless, your starting point should be how much money you need each year, and your attitude to risk and diversity, then tax. Given that income tax allowances are now generally larger than capital gains tax on what might be long term investments, then maybe divs are the best bet for many retirees. But whether it comes from GIA (general investment account i.e. no tax wrapper), ISAs or SIPPs is going to hugely affect the tax considerations. The budget is likely to shake all this up a bit so we shall see what happens. Unless this is considered, a regular person will always want to have dividend stocks because it's "nice" having money regularly coming into their bank account automatically (it is familiar because it's what happened during most of a person's working life). They don't really mind what the capital value of their stocks are (so long as it has not fallen significantly) since their appreciation of inflation is usually way behind the curve anyway ("a cup of tea is HOW much now?"). There is nothing wrong with that - life is about feeling at ease, especially when you are older. Many people unfamiliar with investing also don't even remember that they must look at the total of capital growth and dividends together (total return) when assessing an investment. This is not surprising, though, given that most investment platforms happily tell you how much the capital value of your original investment has gone up or down but completely omit showing you what dividends you have received. This fact makes the % change value shown by platforms for those with dividend producing stocks largely meaningless. Usually the sensible thing to do is to invest in non-div stocks when working and saving, and then assessing close to retirement to see if you want to transfer anything to div paying investments. Just beware those transfer/trading fees mentioned.

[@TomSlatter-t8r]

@@jam99 Im not talking about whether I choose the Accumulating or Distributing classes of the same ETF. Im talking about whether I would opt for a fund that chooses on less volatile but high dividend paying companies or more volatile but high growth companies.

[@elephantandcastle838]

Much depends on how much you are relying on the dividends to fund your basic needs. Funding your basic needs by selling equity or equity funds is all easy until there is a market crash, then you will need nerves of steel. Don't rule out instruments with long track records of increasing dividends YOY, eg certain investment trusts

[@jam99]

@@TomSlatter-t8r Oh, it didn't seem that you said that at all to me.

[@neilfordham4312]

Great holistic overview, Thanks, Ramin

[@Pensioncraft]

Hi @neilfordham4312 thank you! Ramin

[@MrDuncl]

4:00 I am glad you qualified that. My only Wisdom Tree ETF is Gold Bullion Securities, which I have had for eighteen years. Despite not producing any income, during that time they have increased five fold giving a return of 9%. Better than my other stocks and investments. Of course, what they will do over the next 18 years will depend on how much FIAT currency Governments "print".

[@declanmcardle]

@12:00 "wouldn't be fair to tax it twice". Irish Revenue Commissioners: "Hold my Guinness....right 41% tax on unrealized gains every 8 years..."

[@2tadhg]

The biggest Con Job of all time, investing in a ETF in Eire

[@frederickwoof5785]

Don't forget if one of a married couple has only the state pension as income. The other partner can claim some of the others tax allowance.

[@Pensioncraft]

True @frederickwoof5785 but the amount is limited to £1,260 of your partner's allowance rather than the full £12,570. Better than nothing though! Thanks, Ramin.

[@akosiamarillo]

If all else worked out as planned, me and my wife will have small DB pensions each, state pensions and small S&S ISA each. I hope these would be enough.

[@MrDuncl]

I wish he would cover DB pensions a bit more. I have a large one lined up but once in payment the maximum it will increase is 2.5% a year. There is no Triple Lock on private sector DB pensions.

[@akosiamarillo]

@@MrDuncl Ramin’s the only one with the word ‘pension’ on his channel name but never talks about pensions. I am joking 😃

[@MrDuncl]

@@akosiamarillo SIPPCraft

[@MrDuncl]

A desirable Lamborghini might have been a good purchase. No Capital Gains tax on Motor Vehicles in the U.K.

[@rexblackstream]

What about ring-fencing the 25% tax free amount and going into drawdown and first drawing the 25% over a number of years until it is exhausted and then drawing the remaining taxable amount over remainder of your life? Basically delaying paying tax. Everything remains invested within the pension plan.

[@SteveMoore1969]

If your SIPP pension pot is big enough to retire a few years before claiming your state pension. Then I remember seeing an example of withdrawing approx £16k income (£4k was the 25% tax free and £12k is under the yearly 0% personal tax allowance). when you become 67 and claim state pension. Your SIPP will still have a 25% tax free buffer and delays paying the 20% income tax in your later years.

[@ChrisShawUK]

​@@SteveMoore1969this is what I do. I'm 56 and withdraw 16k a year from mine and my wife's sipp. 32k a year tax free is way more than we need to live on, so the excess is put into an isa

[@davem.4003]

Which platforms allow this approach and what are the benefits? It sounds rather like a variation on the UFPLS approach, where you take an occasional lump sum, of which 25% is tax free, so you are spreading the taxable income over many years but with an effective tax rate of 15% (for basic rate taxpayers). In my experience with ii, 25% of the crystallised sum is paid immediately, whilst the remainder of the crystallised pot stays invested until you sell some to fund the next taxable drawdown amount (when using flexi-access drawdown).

[@ChrisShawUK]

@@davem.4003 that's exactly what I do with ii too! I draw the 12k taxable in one go so it's taxed immediately. But then I fill out the p55 form, send it to Newcastle, and the tax paid pops into my current account eight weeks later

[@thelouderyouscream]

you are assuming that politicians will continue to allow that tax free pot. thats brave.

[@Greylocks129]

For full disclosure it may be worthwhile to mention similar ETFs. For example Fidelity Quality Global Dividend offers higher dividend for the same performance per annum over 5 years compared to Wisdom Tree.

[@Pensioncraft]

Thanks for sharing that @Greylocks129 Ramin.

[@TomsPersonalFinance]

FGQD has underperformed GGRP on a total return basis

[@Greylocks129]

@@TomsPersonalFinanceover 5 years it’s about level pegging. The video is sponsored by Wisdom Tree which has been fully declared so I have no issues whatsoever. Caveat emptor. That said Ramon is a great contributor and I value his contributions.

[@w00dyalien]

Another great educational video to build mindset

[@Pensioncraft]

Much appreciated @w00dyalien

[@pauls3075]

Love the videos. A little confused at 9:46 where you say "If you die early you might actually be worse off". 🤔Regrets after death I can live with.

[@chrismclean2989]

35 years NIC ain’t enough for a full state pension if you were opted out for a period. I worked 44 years and paid a lot of Nat Ins (much over the minimum amount) but I don’t get the full basic state pension because my employers scheme opted us out for a while….

[@davidpearson243]

Your employer might have opted you out of SERPS A SERPS pension is a scheme that you could have paid into to qualify for the additional state pension which is paid out on top of the basic state pension. You will still receive the full state pension after 35 years of contributions

[@ChrisShawUK]

Coupon and rent can be classed as income because the asset price does not change when you receive them. But dividends are giving you money that you already own. They should be called return of capital, not income. Buying back shares has the same effect as paying a dividend (provided the share count goes down) but you never hear anyone call that increase "income"

[@BuyVWRD]

Great video! Would be interesting to understand how big your pension pot would need to be to generate various income levels

[@MrDuncl]

Ever heard of "Deferred Annuities" ? They only seem to be a thing in the USA. Why don't we have them in the U.K. ?

[@tancreddehauteville764]

What about 'with profits' annuities? What are the pros and cons of these?

[@Exposure2life]

Ramin covered dividends in a previous video. He said whatever you do, don't sell the units invested in the dividend paying portfolio. Ramin likened this to killing the goose that lays the golden eggs. Coincidentally, it's also what the giant advised when he said, "Fe fi fo fum!"

[@fredatlas4396]

Surely the best way to take retirement income is from total returns ie dividends and capital gain. Just take a lump sum once a year this seems to be the recomended route. Check out Ben Felix videos on this subject, he explains why a dividend portfolio isn't a good idea

[@chrisf1600]

​@@fredatlas4396 100% agree. By all means, take an income to use up your tax-free allowance but there's no rational reason to favour income over capital gains. Then again, if we all take capital gains in our retirement then nobody will need to buy WisdomTree's award winning quality dividend ETF (tm). Hmm.

[@ianseward9928]

I’m running two funds in parallel in a sipp . The vanguard lifestrategy 60 and the hsbc global strategy balanced funds to add diversification. I have two say within two months the hsbc is already 1% up compared to the vanguard. Strange

[@elephantandcastle838]

@@ianseward9928 The only real diversification here is a different fund manager. The HSBC fund doesn't state what its objectives are beyond risk level so surely no real surprise that you get a difference in performance? Be aware that Vanguard Life Strategy Funds target 25% exposure to UK, even though UK is much less % of global all cap index

[@robertsims260]

Not strange, the vanguard is heavily UK overweight which usually drags down average return. Plus percentage of bonds vs stocks may be different in each fund.

[@ianseward9928]

@@robertsims260 thx yes the HSBC is volatile managed . It only tilts the allocation slightly, plus as you say the US got a boost with it's cut . Great fund the HSBC might switch the vanguard into it .

[@ianseward9928]

The HSBC also seems to equal the bny Mellon multi asset balanced which although active is quite a well reviewed fund .

[@venil82]

Any REITs we have here in the UK?

[@Pensioncraft]

Hi @venil82 the London Stock Exchange has a list: www.londonstockexchange.com/raise-finance/investment-funds/reits Thanks, Ramin

[@kn58]

Hi Ramin, could you please do a video on REITs in theUK?

[@venil82]

@@kn58 I support this ask

[@donjohnson4368]

Hi. Ramin. Can you recommend an etf for the rising China market please.

[@Pensioncraft]

Hi @donjohnson4368 this video from 2019 talked about China ETFs kzbin.info/www/bejne/fWWrlpmfaM53Y80 and you can also find them on JustETF. Thanks, Ramin.

[@jayplays568]

Is it possible to get an annuity if you are below retirement age? e.g. how much would an annuity for a 40 year old cost? If it is possible then in theory you could retire if you could find an annuity that is linked to inflation and covers all your spending needs. I guess if they are available they would be very very expensive?

[@Pensioncraft]

Hi @jayplays568 you can do that but I expect it would be very expensive i.e. for the same income you would pay more in your 40s than in your 60s. Thanks, Ramin

[@cruz3076]

I’m 62 , nearing retirement, but my plans are in disarray. I have a 30k annuity and a depleted 401(k) with only 150k left, leaving me uncertain about my financial future. Would consulting a financial advisor be wise to get my retirement plans back on track?

[@vincentchan5773]

Given your concerns, consulting a financial advisor is a great step. They can help optimize your funds, making your money work for you. Considering your 401(k) depletion, delaying retirement slightly might also be wise. This could provide additional time to replenish your retirement savings.

[@cruz3076]

I have heard how they can help you make the best decisions. Honestly, I'm worried about losing more money. The thought of working in retirement to make ends meet is unsettling. I want to ensure I make informed decisions to secure my financial future.

[@TheBoringInvestorMan]

@@cruz3076 looks like the bots have broken XD

[@TheBoringInvestorMan]

@@vincentchan5773 looks like the bots have broken XD

[@TheBoringInvestorMan]

looks like the bots have broken XD

[@pmbuk80]

Just hope this government don't mess about with isas in October and put a lifetime cap on them.

[@Pensioncraft]

Hi @pmbuk80 we'll just have to wait and see. I think it's unlikely because it would put people off saving. Thanks, Ramin

[@oneworldcafe]

When you are in your 90s you probably spend most of your time watching tv so probably wont need much money.

[@Pensioncraft]

8-)

[@erickillian313]

Not sure about the UK but in the United States in-home care or retirement facilities can cost upwards of $13,000 a month per person.

[@MrDuncl]

@@erickillian313 It is a lot here if you have money or property. However, if you spend it all before you end up there the Council (Local government) pays and gets a quantity discount on the fees.

[@peterharris3096]

@@erickillian313 £1400 -1600 per week in the UK outside of London.

[@DrRock2009]

Not paying tax is key. 🤷‍♂️

[@Pensioncraft]

Hi @DrRock2009 ISAs and SIPPs are definitely worth using as much as possible. Thanks, Ramin

[@dabe1971]

Any plans to do a video on the ticking time bomb thats coming in April 2028 for anyone born after 6 April 1971 but before 6 April 1973? On April 6th 2028 when the new rules on pension access age come in anyone born between those dates will find the access to the pension they will already have had since they turned 55 *removed* because they won't have actually turned 57. I will be affected since I won't turn 57 until December 2028 but nobody seems to be talking about it. Unless the Government changes the legislation - and they don't appear to have plans to do so because I don't think they have realised it - that's what we're facing and if people aren't prepared to bridge that gap with a cash buffer it's going to be a shock when they are told - no money for you !

[@MrDuncl]

The Government (and the previous one) have both made comments about trying to encourage people to stay working. Despite being in my 60s, the change that will affect me is that I won't get my state pension until I am 67.

[@myfyrmadocjones]

I would suspect that any crystallised funds can still be drawn on between 55 and 57 (like an annuity in payment taken at 55 or 56 would still continue) but any uncrystallised funds would be unaccessible until age 57.

[@maxfastest]

What retirement income ? Heck we barely earned enough at our jobs to keep up with inflation! We had to eat and put a roof over our heads

[@richardyates7280]

I looked at quality dividend ETFs but they didn’t seem to keep up with inflation over 10 years. I would be happy to find one that both matched inflation in capital growth and paid a rising income. Perhaps that is attempting to square the circle.

[@kieron8051]

JEPG - Global Equity Premium Income looks okay.

[@blumousey]

GGRG has outperformed VWRP over the past 5 years.

[@kieron8051]

@@blumousey doesn’t provide dividend income though? And i think that’s what he’s after

[@aduckquackquack5783]

Rubbish. All ETFs can be confiscated.

[@Pensioncraft]

Hi @aduckquackquack5783 I think that's rather unlikely. Thanks, Ramin.

[@posterestantejames]

Let's see... will Ramin mention Bitcoin yet? An uncorrelated asset class that has gained mainstream acceptance among so SO many savvy people and the world's wealthiest families and banking institutions? Nope. Still plugging his ears, looking the other way and shouting, "La-la-la-la-la...". When will he ever have the courage to evaluate (or re-evaluate) his own conclusions?? At what point does his omission of Bitcoin consideration constitute harmful advice?

[@peterharris3096]

There is no advice or recommendations, just descriptions of products and financial strategy.

[@SirPhytone]

It's just another risk asset, you may as well buy the nasdaq, less risk then as well.

[@chrismclean2989]

35 years NIC ain’t enough for a full state pension if you were opted out for a period. I worked 44 years and paid a lot of Nat Ins (much over the minimum amount) but I don’t get the full basic state pension because my employers scheme opted us out for a while….

[@MrDuncl]

That happened to us. To make things worse, once in payment they pension increases by a maximum of 2.5% a year, even if inflation is 8% like recently.

[@davidwhyman1189]

Same for me. I have 31 years, and can't increase that because for a few years I "contracted out". However, DEFERRING the claim of your UK STATE PENSION will result in your current weekly pension forecasted figure being UPLIFTED by 5.8% per year (which is about 1% for each 9 week deferred period).

[@MrDuncl]

@@davidwhyman1189 I don't suppose you can buy the missing years either. I haven't looked into it as 46 years after starting work I reach the 35 years NI payments required this year. In hindsight, contracting out was a terrible idea, despite being encouraged by employers, as there is no Triple lock on company pensions. In fact the lock on mine is a maximum increase of 2.5% a year. As for the uplift for delaying, a colleague who retired age 67 ten years ago got a much better uplift. 2% a month to give him a 24% uplift. The uplift was halved in 2016 around the time inflation was deemed under control and the BoE reduced the base rate to 0.25%.