I am retiring next yr at 57 with 3 houses paid off worth 4.5 million. One is my place of residence the other 2 properties will give me $150,000per/yr rent. I have steady income stream from my dividend portfolio total $250,000 a yr to live comfortably, thanks to my Fiduciary. I also have no debts ... Stay Motivated!!🌹✅
I am looking for how to venture into Dividend investing on a long term basis, I really seek to create an alternate source of income. how did you find a good Fiduciary?
I did quick research on her, She has pretty decent credentials, left a well organised mail after going through her webpages & reviews. I found this very helpful, Thank you!
Essmildaa Morgan has been the key factor in the buildup of my dividend growth portfolio. I am learning more and pushing more to buy assets, with one goal of steady dividend income.
Keep going mate I started at 41... was in 7K debt and living in my overdraft. I'm now debt free have a 15K emergency fund. 20K saving pot and just surpassed ~£100K. My portfolio is roughly ETFs, REITs, and small-cap stocks... I am almost 43 now!
I am retiring soon and using a 2-bucket approach. I will keep in Bucket #1 some 3-5 years in liquid assets like cash, money market, and Berkshire Hathaway covered call options. Will review my Bucket #2 yearly and answer the question, “is my account at a new high?” If yes, refill Bucket #1. If no, don’t refill. Neil, your approach is similar to mine, only I keep much less in liquid (water) accounts. Why am I confident to keep more money in play in the stock market? When digging into the returns each year on the stocks or index funds I invest in going back 40 years, I see that after a drop (and we’ve had some huge drops within this period of 40 years), the fund ALWAYS reaches a new all-time high within 5 years and usually within 1-3 years. This way, I will never need to sell at a loss when I refill Bucket #1 only when my account is at a new all-time high. And if the past 40 years with all its ups and downs is a predictor of the next 40 years, I’ll be good! Well, I’ll be dead by then, but you know what I mean 😂 Thanks for another excellent video. The drink analogy: 👍🏻
Thanks Denise, that too looks a really good way to approach this. Also agree wholeheartedly about the movement post a drop. Sounds like you have a good plan too :-) All the best.
Hi @metro1361, no idea! My financial advisor models the business around Warren Buffet’s investment strategy 100%. One of the cash-like conservative options they offer for Bucket #1 is a BRK B covered calls option whereby they do the trades. Has never lost money, including in down years and has averaged 8.2% since they introduced this particular option in 2010. I’m not pushing this firm, but you can make an inquiry on their website because it doesn’t hurt to ask and they are qualified to answer your questions. I’m not! They are Check Capital Management in Costa Mesa, California. They have clients all over, but don’t know about international clients.
Very good information Neil. We have employed a similar strategy as well, we have enough to live on several years so our retirement accounts will continue to grow. It really is all about being flexible and willing to control expenses. Looking forward to the next video about draw down strategy (even though we already spoke about it on that lovley ship)
Great analogy and similar to my approach. I have about 7 years living expenses as "cash" (MMFs and gilts) and the remaining (~70%) of my pension is invested in equities (low cost index funds). I also have some gold in my SIPP portfolio, which has outperformed everything!
Neil you present this subject well & in a very engaging manner. Your comment around different attitudes to risk is very true and often misunderstood. My wife & I are in a very similar situation to yourselves in that we are of a similar age, live nomadically and own an overseas property. When you talked about the 3 buckets I said to my wife that I don't agree with this, but it was for exactly the opposite reason to you! I do not want to forego the higher return from the market in order to have the certainty of bank or money market interest. We are fortunate in that we have some relatively small DB pension funds which will cover some of our expenses. In the event of a major market crash we will lower our living costs by spending more time in our overseas property and in SE Asia where living costs are low. We also have the potential to sell our overseas property in a worst case scenario.
My god this is brilliant! I’ve never thought about doing it that way round having 9 years cash and a smaller amount in equity that is given the much needed time to grow. Just doing the numbers and it just makes sense.
Thanks Neil, But what will you do if pot 2 is down (market crash) in year 8 or 9 when your pot 1 is running low? Do you rebalance every year to always ensure pot 1 is sufficient for 9 years?
I have several pensions. Which I use as my bucket and another bucket is my long term investment portfolio bucket. Pensions give you a great opportunity in retirement. Obviously not everyone can retire with pensions.
After spending a LOT of time learning all about investment, I concluded that simple is best. Provable so. Global Index funds. Several months cash in money markets. And above all avoid people who will charge 3% to do less well. The tax implications of drawdown are worth understanding. Especially if you have an ISA and need to plug a gap with non taxable income. But actually choosing the investments. Easy!
Mark you are quite right. Tax is a big question to answer and we have our own plans around that. Getting away from the people charging huge percentages for very little is a wonderful start eh 😃
Thanks, Neil. Yes, everyone’s plan is different. My public pension covers 85% of my final salary for life, is COLA-adjusted and 100% passed to surviving spouse for life. Retired at 58 and just started our Social Security at 62. Life is great traveling abroad without having to rely on market returns.
Sounds sound and sustainable for the tax payer. You are very lucky however the reality is that final salary enhanced pensions are unaffordable to a society in the modern world.
@@iancford Depends on the solvency of each jurisdiction’s plan. Different ways to skin the retirement cat and sometimes 35 years of loyalty and an employer and union who cares about its workers pays off. Glad you have a plan that works also.
Another great video, but I’m just curious, is it not better to withdraw 3 to 4% from the global stock fund, adjusted for inflation and only switch to your 9 year cash savings if the market drops?
Hi Carly, firstly a massive thank you for the Super Thanks! We don't tend to get that so it's a shock when it happens... In fact, the last one was 2 years ago lol. Yes you're right to an extent, I'd say if we saw a massive bill run during the 9 years, we may look to take some of that benefit (we've been doing this 4 years already so only 5 years of the 9 remaining). The other factor in this is around taxation. I don't know if you are UK based, but if you are, with the Tax Free 25% lump sum and the small income we get from UA-cam how we approach this is a little more complex. If you have any other questions just email me at neil@2goroam.com and I'll get back to you. Thanks again! Neil
Thank you. Think I've got it sorted myself, coming to 59 soon and do not want too much risk - working on my simple life style and spend per year, which is quite basic I will be happy with my pensions and savings ( all savings in CASH ISA/ S&S ) - all tax efficent wrappers and looking to retire next year - must admit my pension fee is high and tied in for the next 3 yrs unless I pay a exit fee ( SJP), then I'll move to a SIPP and more than half the fees, this should give me and my wife a good retirement. Thank you for the great advise as always. Most people will have nothing towards a pension and savings. I do feel for them and to be honest, many do not have a choice but some do and It's about education - i reckon 90% of UK people do not have a clue about forward investing and do not look at the later years inlife, Cheers Nick
Thanks Nick, sorry to hear you are locked in at SJP at the moment but you have a plan. I also think you are being generous by saying 90%, sadly I think that figure is likely much higher. Thanks for the thoughtful comment.
@@2GoRoam - I just plucked that 90% figure from what I have read..... - although SJP is charging me a very high charge they have out performed my work placed pension by 6% this year ( @ 18% ), although I guess with the platform what i get from from work place pension to be a basic "life blanaced fund", It's hard and for anyone who knows nothing about investents can be a mindfield - i tell many people about investing in stocks & shares for the long term but it falls on deaf ears - wish I had more knowledge 10 years ago - should be OK with me and my wife, with me working on a with a part time job ( own busness ), not for the money, just to feel my time, cheers Nick
Any chance of a video on how the whole Spanish property ownership works? Buying, running, mothballing (or renting?) etc? I love this idea for real life hedging.
One thing I’ve learnt- the UKs definition of ‘risk’ is way too conservative. This happened post financial crash and as a result many U.K. savers have missed out on decent growth. I’m invested in supposed high risk funds, but when you look at the ‘risk’ it’s companies like Apple and Google etc- where all the growth is. I’ve made £160k investment growth this year in my pension, my colleagues and friends in low risk funds have hardly made anything. I can certainly see the logic of your thinking. What pot did you retire with and what age if you don’t mind me asking? Great video, you are doing what we plan to do when I hit 58, so will subscribe. Funnily enough our first plan is a transatlantic, and then drive coast to coast US, one ambition is to hit every state, and we have done 28 so far, so I need to drive across the middle and northern states. I’m planning to film the trip.
The way I do this is... Bucket 1) 3 years of cash like assets, liquid and low volitile assets. E.g. cash, premium bonds, Money Market Funds, high interest savings, Bucket 2) largely an inflation hedge holding Intermediate bonds/Giltts, Divident paying equities, Rental Property, 3) more volitile, but higher rewards - longer term investments. Rebalance periodically.
I am planning something similar with maybe a 5 year glass of water. Whilst getting ready for retirement (2 years to go) I am building an oversize glass of water - more than I will need when I start retirement. That is because a bear market or even crash is almost inevitable in the next 5 years and when it comes I'll throw a load of that extra water into the cocktail glass and it should have plenty of time to grow. It is a risk I am losing some growth now, of course, but I'm getting 5%+ interest on the water and still have a fairly decent sized cocktail. I too can't be bothered with a ginger ale!
Hi great video and 2 bucket strategy with 9 years of money safe is thought provoking but didnt tou say in a previous video a long time ago you also have money in a lifestrategy 80-20 account?Looking forward to more videos around Spain in future 🇪🇸
Hi Pat, I don't think I would have said that. I think we used Lifestrategy 80 some time ago but certainly for the last 4 years we have been doing this. You'll see a lot from Spain. Make sure you check out our travel channel.
Ah ok maybe it was a comment about were you invested in the past.Do you know yet when you will be able to divulge were you bought in Spain?as I have a holiday home in Mazarron,Murcia
Interesting. I am thinking of creating a safe bucket for 5 years because that‘s the period of time I have to cover myself until I will be getting my pension. The second bucket will be kept untouched. After these 5 years the needed withdrawal rate will be much less and I will decide from there how to proceed. My pension will cover what I will need for a normal living so that the rest of my savings is there to make my live more comfortable and pay for my travels.
Interesting approach. Are you really only re balancing every 9 years? What happens if in nine years you are in a deep bear market? I retired early and have adopted a 2 bucket approach but I am reviewing annually and re balancing annually .
You don’t have to rebalance at 9 years you can review yearly and say at 7 years out rebalance but if the market crashes you’ve got 2 years for it to recover which is the average buffer to mitigate sequence of returns risk. Also by year 7 the investment should have doubled.
Hi Bracebarian, exactly what Sid mentions here. If I see in year 7 for example, a crazy Bull run then I expect to be moving some of that money. I won't know till I get there though.... that will be a result of risk appetite for us at the time.
I take risk and invest in growth stocks , my main investments have been Pltr , Tesla and bitcoin and I’m very happy with the way things are going , in the near future I will be selling probably 50% for security and waiting with cash for market crashes.
@ uh huh…that’s true. Though this is Goldman Sachs view, and it fits with the current exceptionally high valuations and the economic outlook for the US. And after all, you are basing your strategy on past performance, which is also attempting to predict market futures.
Careful. Since the financial crash of 2008, a combination of virtually zero interest rates and QE have made it very favourable for markets. The next decade could be very different and it’s definitely not low risk.
Another approach could be buying an annuity to meet your base level of costs instead of bucket 1 and keep your bucket 2 or 3 for yield and growth. Although I wouldn’t buy an annuity until later in retirement when rates improve. I’m probably doing your bucket 1 and bucket 3 approach from age 55 to 70 then buying an annuity at age 70 to replace bucket 1.
Hi Conor, if you look back through our videos you will see that we sold our house in the UK some time ago where we had significant equity. That was a good start for this alongside our other investments.
As you say everyone has different priorities and personal circumstances , I personally would hate to spend that much time travelling and would rather spend my retirement with my children and grandchildren, and help them financially if possible with my third bucket, not easy now under this present regime !
dl you pull from the cash bucket first? I thought perhaps you’d leave the cash alone and only pull from it *if* the stocks are down/flat. In a good year (eg growth > the % you’d be drawing down) you take from the investment pot and leave the rest to grow.
Neil has explained his approach a bit too simplistically I think. It would be risky to literally drain the full 9 year pot before replenishing it as there could be a crash in the year or two before his 9 year pot runs out. I expect he is replensihing the 9 year pot intermittently when the funds are doing OK.
There is another bucket, the most important one of all, and it's called D'Amalfi Limoncello Supreme, and that is Bitcoin-the hardest asset known to mankind. Salute!
I’m guessing you don’t have children so no need to plan to leave them anything? I have two and want to 1. Leave them a chunk 2. Help them out from time to time. I’m also at 57 semi retired after selling my business but have currently 4 properties, stocks, crypto ( which has done Amazing) ISA’s, cash, private pension (80-20 stocks/bonds) and savings plus state pension when that kicks in. But I still wonder what’s the best way to draw down but not to be too greedy and spend it all if that’s even possible. I’m not sure if at 57 I should retire completely or not…..Definitely want to travel more though.
Drawdown? Not my problem. Retired 27 years (from early 50s) around half my pension income still goes into my savings. Why? Because I cannot find anything worth spending it on. Ocean cruise? You could not pay me to do that! What am I saying? That spending is way more important than earning/saving. If you have a low cost lifestyle that you really enjoy, then all the complexity falls away. All you ever need is 'Enough'. More than that is pointless- you will never spend it. If people spent half the time on costs rather than investments, they would be much better off. And able to retire earlier.
Re buckets. If the first bucket is for the first 3 years only , why do you top it up ? If you've got 3 years cash to one side why keep topping it up at all ? I'm confused.
Do you replenish the 9 year bucket annually from the other, or only at the end of nine years Neil? I suspect the former, based on the earlier part of the video, but I'm unsure based on your later comments.
I have the same 2-bucket approach using low cost Global market tracker fund with money market funds… Completely understand why you’ve chosen the 9yr time period for your ‘cash-like’ bucket but for me that seems way too conservative. As you say though, horses for courses and everyone’s circumstances and risk appetite is different. Although I don’t think the average person understands the term ‘risk’ that well, with the focus being often too heavily weighted toward the risk of losing value in your investments due to a market crash, while ignoring the potentially more damaging risk of your investments underperforming and so not keeping up with inflation...
I can understand your feelings but having lived through many events since the 70.s unless you can hold your nerve and not sell and have funds to draw on your mindset could change when and if the market tanks
Good points. Inflation in the coming years could be horrible ( let’s hope not) but negative carry on savings rates compared with market inflation means that the current value of money will be significantly diluted over 9 years. The avoidance of risk is not free.
Yes I agree totally. I am currently achieving 5% on savings and I will continue to track and look at alternatives where possible. Where I speak about the house in Spain, that is part of the mitigation. Our total Tax and costs for the house each year is less than £1,000 which is significantly below the costs when we owned in the UK. There is only so much we can all do with our money, we make savings in some areas and win in others. It is a battle for us all, I am sure you appreciate that. Understand cash loses value, that is a given. Thanks for the engaging comment, I like it.
@@2GoRoam Good luck to you ( and all retirees) It looks like you and your wife are enjoying yourselves and really that’s what a good retirement should be about. Who knows for sure what tomorrow brings . Hopefully any surprises will be good ones
Some good ideas ,the trouble with stocks and shares is if you don't know anything about investing in them it's a risk.I found a financial adviser who does this with my pension to be earns less than 1% after their fees.A few years ago like most things you do better if you do things yourself so I put money in savings interest accounts and earn 4% to 5% a lot more than the adviser has ever done in stocks and shares and I'm in control. Just wish I'd found out ten years earlier.
In my experience financial advisors are a complete drain on your funds. They play off the line ' our cost is less than 1% per year of your fund value' - and then hope you think that isn't much. It is a huge year on year drain on your funds though. Especially as they then chose funds that also have a c.1% fund charge. So if you have £1M then they will cost you £100k over 5 years!!! They generally don't beat the market so what are they adding? Low cost tracker is much more likely to yield performance and at a fraction of the cost.
@iancford there a complete waste of money but years ago everyone who was in the "know",said take out a private pension for your retirement the only pension it's helping is the advisers ,I'm no expert but in life I've found do everything yourself regarding savings if you can yo will then avoid the leeches creaming off your savings
Did you find property is spain was more expensive than in the uk. From yourctravels so far, other than Spain any other cheaper than the uk places to buy you could reccommend for about £300k. Thanks
Isn’t there a risk in year 9. If the market does ok 1 to 8 and then crashes by 40 or 50 percent year 9 then cash bucket is exhausted and stock bucket less than needed. Why not top up as you go if market is up sufficiently each year ? Also that’s a lot of cash. A comfortable retirement is now classed as at nearly 60k for a couple. So this means you need to hold close to 570k cash (540 plus inflation increase per year over 9 years). If interest rates are low that cash isn’t going to be working that much. To implement this strategy you got to have a large fund at the start and for vast majority of people not feasible.
I’ve got most of my money in s and p 500 If the market does drop ( like COVID) it will drop But history shows it will then bounce back and carry on growing
Hi Bonnie, yes part of our plan is giving time for us to get to state pension age. I don't speak of occupational pensions (assuming you mean DB schemes) as we don't have those, we only speak of what we know about.
I agree. I retired at 60 and have a DB pension which kicked in at 60 and another 2 which cut in at 65, together with the state pension at 67 mean that after then, drawdown on the DC pensions will drop drastically. There is a degree of sequential risk which can be managed by taking the DB pensions early if needed. This means the DC risk can be higher for me personally. Generally though for a DC strategy this seems a good approach with a rolling 3 year cash buffer.
With your 9 years of cash is it a set amount multiplied by 9 or have you added enought for inflation.Say you spend £30,000 each year your buying power in year 8-9 isnt as good as year 1 so might need £30,000+yearly expected inflation added?
I wonder if any of the Vanguard (or other provider) lifestrategy type funds can attempt to do this automatically for us,or whether they just de risk ever greater amounts out of stocks into bonds based on age as they do prior to retirement.
Hi Simon, I state regularly in our videos that we do not accept sponsorship. We are offered opportunities for sponsorship DAILY and do not take any offer, this channel is about helping you, our viewers.... not a corporate. Hope that clarifies for your question.
The Vanguard Lifestrategy funds stay at the percentage stated, rebalancing automatically. Their Target Retirement funds adjust stock bond allocations as get closer to the Target Retirement year chosen.
I do tend to think that there’s too much FOMO out there, which can lead retirees to feel ‘less than’ if they don’t have a higher risk strategy than perhaps they really need. So long as the mix isn’t allowing inflation to Rob their pot, why worry unless your pot isn’t sufficient perhaps.
Interesting insight. It's easy to feel that others are doing better because they have a plan that gives greater returns of course. But that can come with other issues of course. Best to do you and let everyone else do their thing eh,
Does bucket 3 have income producing investments like dividend stocks? I'm just wondering if it would be possible to have a higher weight invested in bucket 3 and then use the income portion for expenses and still have the capital gains portion for longer term portfolio growth..
If you spend £40,000/annum it's £360000. But that's not accounting for 5% interest on the initial deposit. Likewise that's the amount you'll need in your investment account to replenish your water glass.
£700,000 would do it. £400,000 in a money market fund £300,000 in S&P or global equity fund and in 10 years rinse and repeat it’s a perpetual fund that would give you the same £40k income as having £1 million pot and drawing down 4% each year but without worrying about market volatility because of the investing time frame.
With all due respect this is BS for most people. I retired 6 years ago and spend about $70k ausi dollars each year to live. We live a comfortable life with in effect zero deb. Using your approach we need 630k in water. And then supposedly a similar amount in the cocktail glass. We do have 7 figures in super which i draw about 10%. But there would be very very few who would have the asset volume you are talking about unless they sold their home - which you end up saying that u still need a property to hedge against inflation. I just dont see that what you are saying stacks up. The major stock markets, DOW, FTSE, ASX which everyone rates as "high risk" HAVE ALL consistently grown on a high trajectory FOREVER. WHY would you put 630 k in a low risk (eg bank acct) for 9 years.
Different thinking when dealing with draw down. Of course parking 9 years of cash will produce a lower return BUT!! That’s 9 years of healthy life to enjoy retirement worry free without it being screwed up by a market crash. The other money invested in equities at an achievable 8% will double in value over that time. They can then rinse and repeat and if the markets didn’t do as well their state pension will be kicking in to take up the slack. It’s a simple system that gives you the money when you’re young enough to enjoy it. Also they had a deliberate 15 year run up to make it happen.
@sid35gb you are missing the main point.. very very very few have the capacity to have 1.4 million so what's the point of the proposal. It's unachievable for most
I’m a bit confused too. Usually ppl recommend you 2-3 yrs cash available as this would allow for a market crash correction. I’m confused why they use 9 years. Btw don’t most super products have to have a % in cash?
This info generally tracks with most financial experts - although it’s 2 buckets, it’s essentially 3 but with less risk in bucket 2. I can get more complicated when you add in tax optimization strategies.
Look at the forecast foe next decade your future returns are ambitious i really hope they are correct as i retire soon but plan for less be more conservative in my opinion
Thanks John. Any projection is conjecture and any decision made based on past performance is going to be flawed. Basically, no one (however many will tell you they can) can predict the future. Hence why I have looked at past performance and then reduced my expectations by more than 20%, that seems sound, but we'll only know in the future.
8% over 10 years in a accumulation global index fund is achievable. Even the S&P 500 has an average return of 10% over the last 90 years it has returned 25% this year already.
@2GoRoam I must own up though - I was working. 12 hours a day, 7 days a week. Was tough but it allowed me to retire early like you. I enjoy your videos.
Not concerned about IHT on SIPP? I expect many retired will/have leave UK sell all assets and settle somewhere with zero IHT/CGT...warmer climate etc.UK is finished.
My best advise is that belly fat in men in their 60s is particularly dangerous because it is often linked to an increased risk of serious health conditions like heart disease, diabetes, and high blood pressure. This type of visceral fat, which surrounds internal organs, can lead to inflammation and insulin resistance, further escalating the risk of chronic diseases. I'm sure you want to live long enough to enjoy your retirement, and as a health professional I'd like to politely suggest that you don't look particularly well.
I am retiring next yr at 57 with 3 houses paid off worth 4.5 million. One is my place of residence the other 2 properties will give me $150,000per/yr rent. I have steady income stream from my dividend portfolio total $250,000 a yr to live comfortably, thanks to my Fiduciary. I also have no debts ... Stay Motivated!!🌹✅
I am looking for how to venture into Dividend investing on a long term basis, I really seek to create an alternate source of income. how did you find a good Fiduciary?
Essmildaa Morgan is well known, just look her up.
I did quick research on her, She has pretty decent credentials, left a well organised mail after going through her webpages & reviews. I found this very helpful, Thank you!
Congratulations on your breakthrough. Essmildaa Morgan is finally getting the popularity she deserves and this doesn't come as a surprise.
Essmildaa Morgan has been the key factor in the buildup of my dividend growth portfolio. I am learning more and pushing more to buy assets, with one goal of steady dividend income.
Watching in my 40s... And only just starting investing I feel so behind!
Gotta start somewhere
Keep going mate I started at 41... was in 7K debt and living in my overdraft. I'm now debt free have a 15K emergency fund. 20K saving pot and just surpassed ~£100K. My portfolio is roughly ETFs, REITs, and small-cap stocks... I am almost 43 now!
Fantastic video, you have a great way of explaining concepts. Thanks very much for posting!
Glad you enjoyed it!
Great video, thank you for sharing. Wishing you both well!
inspirational as always, thank you for sharing :).
I am retiring soon and using a 2-bucket approach. I will keep in Bucket #1 some 3-5 years in liquid assets like cash, money market, and Berkshire Hathaway covered call options. Will review my Bucket #2 yearly and answer the question, “is my account at a new high?” If yes, refill Bucket #1. If no, don’t refill.
Neil, your approach is similar to mine, only I keep much less in liquid (water) accounts. Why am I confident to keep more money in play in the stock market? When digging into the returns each year on the stocks or index funds I invest in going back 40 years, I see that after a drop (and we’ve had some huge drops within this period of 40 years), the fund ALWAYS reaches a new all-time high within 5 years and usually within 1-3 years. This way, I will never need to sell at a loss when I refill Bucket #1 only when my account is at a new all-time high. And if the past 40 years with all its ups and downs is a predictor of the next 40 years, I’ll be good! Well, I’ll be dead by then, but you know what I mean 😂
Thanks for another excellent video. The drink analogy: 👍🏻
Thanks Denise, that too looks a really good way to approach this. Also agree wholeheartedly about the movement post a drop. Sounds like you have a good plan too :-)
All the best.
Is it useful for UK citizens to invest in BRK, how do Berkshire Hathaway covered call options work? Thanks
Hi @metro1361, no idea! My financial advisor models the business around Warren Buffet’s investment strategy 100%. One of the cash-like conservative options they offer for Bucket #1 is a BRK B covered calls option whereby they do the trades. Has never lost money, including in down years and has averaged 8.2% since they introduced this particular option in 2010. I’m not pushing this firm, but you can make an inquiry on their website because it doesn’t hurt to ask and they are qualified to answer your questions. I’m not! They are Check Capital Management in Costa Mesa, California. They have clients all over, but don’t know about international clients.
Very good information Neil. We have employed a similar strategy as well, we have enough to live on several years so our retirement accounts will continue to grow. It really is all about being flexible and willing to control expenses. Looking forward to the next video about draw down strategy (even though we already spoke about it on that lovley ship)
Another very insightful video that's easy to understand. Thanks! -n
Great analogy and similar to my approach. I have about 7 years living expenses as "cash" (MMFs and gilts) and the remaining (~70%) of my pension is invested in equities (low cost index funds). I also have some gold in my SIPP portfolio, which has outperformed everything!
Neil you present this subject well & in a very engaging manner. Your comment around different attitudes to risk is very true and often misunderstood.
My wife & I are in a very similar situation to yourselves in that we are of a similar age, live nomadically and own an overseas property.
When you talked about the 3 buckets I said to my wife that I don't agree with this, but it was for exactly the opposite reason to you! I do not want to forego the higher return from the market in order to have the certainty of bank or money market interest. We are fortunate in that we have some relatively small DB pension funds which will cover some of our expenses. In the event of a major market crash we will lower our living costs by spending more time in our overseas property and in SE Asia where living costs are low. We also have the potential to sell our overseas property in a worst case scenario.
A very sensible approach. I'm just in 5% cash and 95% cocktail.
My god this is brilliant! I’ve never thought about doing it that way round having 9 years cash and a smaller amount in equity that is given the much needed time to grow. Just doing the numbers and it just makes sense.
Very cool Sid. Pleased it is making you think about how you can approach your situation maybe differently.
Nice analogy Neil. Our approach is very similar to the 3 bucket strategy.
Thanks Neil,
But what will you do if pot 2 is down (market crash) in year 8 or 9 when your pot 1 is running low?
Do you rebalance every year to always ensure pot 1 is sufficient for 9 years?
I have several pensions. Which I use as my bucket and another bucket is my long term investment portfolio bucket. Pensions give you a great opportunity in retirement. Obviously not everyone can retire with pensions.
Excellent way to explain it
After spending a LOT of time learning all about investment, I concluded that simple is best. Provable so. Global Index funds. Several months cash in money markets. And above all avoid people who will charge 3% to do less well.
The tax implications of drawdown are worth understanding. Especially if you have an ISA and need to plug a gap with non taxable income. But actually choosing the investments. Easy!
Mark you are quite right. Tax is a big question to answer and we have our own plans around that. Getting away from the people charging huge percentages for very little is a wonderful start eh 😃
Thanks, Neil. Yes, everyone’s plan is different. My public pension covers 85% of my final salary for life, is COLA-adjusted and 100% passed to surviving spouse for life. Retired at 58 and just started our Social Security at 62. Life is great traveling abroad without having to rely on market returns.
Sounds sound and sustainable for the tax payer. You are very lucky however the reality is that final salary enhanced pensions are unaffordable to a society in the modern world.
@@iancford Depends on the solvency of each jurisdiction’s plan. Different ways to skin the retirement cat and sometimes 35 years of loyalty and an employer and union who cares about its workers pays off. Glad you have a plan that works also.
Another great video, but I’m just curious, is it not better to withdraw 3 to 4% from the global stock fund, adjusted for inflation and only switch to your 9 year cash savings if the market drops?
Hi Carly, firstly a massive thank you for the Super Thanks! We don't tend to get that so it's a shock when it happens... In fact, the last one was 2 years ago lol.
Yes you're right to an extent, I'd say if we saw a massive bill run during the 9 years, we may look to take some of that benefit (we've been doing this 4 years already so only 5 years of the 9 remaining). The other factor in this is around taxation. I don't know if you are UK based, but if you are, with the Tax Free 25% lump sum and the small income we get from UA-cam how we approach this is a little more complex.
If you have any other questions just email me at neil@2goroam.com and I'll get back to you.
Thanks again!
Neil
Thank you. Think I've got it sorted myself, coming to 59 soon and do not want too much risk - working on my simple life style and spend per year, which is quite basic I will be happy with my pensions and savings ( all savings in CASH ISA/ S&S ) - all tax efficent wrappers and looking to retire next year - must admit my pension fee is high and tied in for the next 3 yrs unless I pay a exit fee ( SJP), then I'll move to a SIPP and more than half the fees, this should give me and my wife a good retirement. Thank you for the great advise as always. Most people will have nothing towards a pension and savings. I do feel for them and to be honest, many do not have a choice but some do and It's about education - i reckon 90% of UK people do not have a clue about forward investing and do not look at the later years inlife, Cheers Nick
Thanks Nick, sorry to hear you are locked in at SJP at the moment but you have a plan. I also think you are being generous by saying 90%, sadly I think that figure is likely much higher.
Thanks for the thoughtful comment.
@@2GoRoam - I just plucked that 90% figure from what I have read..... - although SJP is charging me a very high charge they have out performed my work placed pension by 6% this year ( @ 18% ), although I guess with the platform what i get from from work place pension to be a basic "life blanaced fund", It's hard and for anyone who knows nothing about investents can be a mindfield - i tell many people about investing in stocks & shares for the long term but it falls on deaf ears - wish I had more knowledge 10 years ago - should be OK with me and my wife, with me working on a with a part time job ( own busness ), not for the money, just to feel my time, cheers Nick
Any chance of a video on how the whole Spanish property ownership works? Buying, running, mothballing (or renting?) etc? I love this idea for real life hedging.
One thing I’ve learnt- the UKs definition of ‘risk’ is way too conservative. This happened post financial crash and as a result many U.K. savers have missed out on decent growth.
I’m invested in supposed high risk funds, but when you look at the ‘risk’ it’s companies like Apple and Google etc- where all the growth is. I’ve made £160k investment growth this year in my pension, my colleagues and friends in low risk funds have hardly made anything.
I can certainly see the logic of your thinking.
What pot did you retire with and what age if you don’t mind me asking?
Great video, you are doing what we plan to do when I hit 58, so will subscribe.
Funnily enough our first plan is a transatlantic, and then drive coast to coast US, one ambition is to hit every state, and we have done 28 so far, so I need to drive across the middle and northern states. I’m planning to film the trip.
Great stuff thankyou!
The way I do this is... Bucket 1) 3 years of cash like assets, liquid and low volitile assets. E.g. cash, premium bonds, Money Market Funds, high interest savings, Bucket 2) largely an inflation hedge holding Intermediate bonds/Giltts, Divident paying equities, Rental Property, 3) more volitile, but higher rewards - longer term investments. Rebalance periodically.
That is a sound approach also, I like that.
I am planning something similar with maybe a 5 year glass of water. Whilst getting ready for retirement (2 years to go) I am building an oversize glass of water - more than I will need when I start retirement. That is because a bear market or even crash is almost inevitable in the next 5 years and when it comes I'll throw a load of that extra water into the cocktail glass and it should have plenty of time to grow. It is a risk I am losing some growth now, of course, but I'm getting 5%+ interest on the water and still have a fairly decent sized cocktail. I too can't be bothered with a ginger ale!
That is a fabulous comment! And it makes a lot of sense too.
I'll drink to that.
@@2GoRoam Cheers! Enjoy Miami.
Hi great video and 2 bucket strategy with 9 years of money safe is thought provoking but didnt tou say in a previous video a long time ago you also have money in a lifestrategy 80-20 account?Looking forward to more videos around Spain in future 🇪🇸
Hi Pat, I don't think I would have said that. I think we used Lifestrategy 80 some time ago but certainly for the last 4 years we have been doing this.
You'll see a lot from Spain. Make sure you check out our travel channel.
Ah ok maybe it was a comment about were you invested in the past.Do you know yet when you will be able to divulge were you bought in Spain?as I have a holiday home in Mazarron,Murcia
Still waiting on that TV programme Pat. So sorry.... I'll tell you that it's north of Mazarron :-)
Interesting. I am thinking of creating a safe bucket for 5 years because that‘s the period of time I have to cover myself until I will be getting my pension. The second bucket will be kept untouched. After these 5 years the needed withdrawal rate will be much less and I will decide from there how to proceed. My pension will cover what I will need for a normal living so that the rest of my savings is there to make my live more comfortable and pay for my travels.
That sounds a really solid plan Sonja, like it.
Interesting approach. Are you really only re balancing every 9 years? What happens if in nine years you are in a deep bear market? I retired early and have adopted a 2 bucket approach but I am reviewing annually and re balancing annually .
You don’t have to rebalance at 9 years you can review yearly and say at 7 years out rebalance but if the market crashes you’ve got 2 years for it to recover which is the average buffer to mitigate sequence of returns risk. Also by year 7 the investment should have doubled.
Hi Bracebarian, exactly what Sid mentions here. If I see in year 7 for example, a crazy Bull run then I expect to be moving some of that money. I won't know till I get there though.... that will be a result of risk appetite for us at the time.
I take risk and invest in growth stocks , my main investments have been Pltr , Tesla and bitcoin and I’m very happy with the way things are going , in the near future I will be selling probably 50% for security and waiting with cash for market crashes.
S&P 500 index. Averages 10% growth year on year. Easy to invest in, low risk, good returns
Hmmm…some analysts are predicting only 3-4% for the next decade…
@anjux3673 market predictions are about as much use as reading your horoscope.
@ uh huh…that’s true. Though this is Goldman Sachs view, and it fits with the current exceptionally high valuations and the economic outlook for the US. And after all, you are basing your strategy on past performance, which is also attempting to predict market futures.
@@anjux3673Those analysts with their crystal balls 😂
Careful. Since the financial crash of 2008, a combination of virtually zero interest rates and QE have made it very favourable for markets. The next decade could be very different and it’s definitely not low risk.
Another approach could be buying an annuity to meet your base level of costs instead of bucket 1 and keep your bucket 2 or 3 for yield and growth. Although I wouldn’t buy an annuity until later in retirement when rates improve. I’m probably doing your bucket 1 and bucket 3 approach from age 55 to 70 then buying an annuity at age 70 to replace bucket 1.
Another option is 3-4 years of cash and the Permanent Portfolio (similar approach really)
True, there are many ways to cut this. Just wanted to share how we do it.
This is solid. To get the 9 years cash, did you sell off investments or build up separately?
Hi Conor, if you look back through our videos you will see that we sold our house in the UK some time ago where we had significant equity. That was a good start for this alongside our other investments.
As you say everyone has different priorities and personal circumstances , I personally would hate to spend that much time travelling and would rather spend my retirement with my children and grandchildren, and help them financially if possible with my third bucket, not easy now under this present regime !
dl you pull from the cash bucket first? I thought perhaps you’d leave the cash alone and only pull from it *if* the stocks are down/flat. In a good year (eg growth > the % you’d be drawing down) you take from the investment pot and leave the rest to grow.
That’s my intention.
Neil has explained his approach a bit too simplistically I think. It would be risky to literally drain the full 9 year pot before replenishing it as there could be a crash in the year or two before his 9 year pot runs out. I expect he is replensihing the 9 year pot intermittently when the funds are doing OK.
Sorry mate..were they buckets or glasses? Very confusing but it started to make more sense as you had more of the cocktail.
Haha glass buckets
Keep it coming. looking forward t the next
Cheers!
Thanks, will do!
There is another bucket, the most important one of all, and it's called D'Amalfi Limoncello Supreme, and that is Bitcoin-the hardest asset known to mankind. Salute!
I’m guessing you don’t have children so no need to plan to leave them anything?
I have two and want to 1. Leave them a chunk 2. Help them out from time to time.
I’m also at 57 semi retired after selling my business but have currently 4 properties, stocks, crypto ( which has done Amazing) ISA’s, cash, private pension (80-20 stocks/bonds) and savings plus state pension when that kicks in.
But I still wonder what’s the best way to draw down but not to be too greedy and spend it all if that’s even possible. I’m not sure if at 57 I should retire completely or not…..Definitely want to travel more though.
Drawdown? Not my problem. Retired 27 years (from early 50s) around half my pension income still goes into my savings. Why? Because I cannot find anything worth spending it on. Ocean cruise? You could not pay me to do that! What am I saying? That spending is way more important than earning/saving. If you have a low cost lifestyle that you really enjoy, then all the complexity falls away. All you ever need is 'Enough'. More than that is pointless- you will never spend it. If people spent half the time on costs rather than investments, they would be much better off. And able to retire earlier.
Interesting video as always 👍
Cheers Matt! See you soon hopefully in the US?
@@2GoRoam From 3rd December 😁🇺🇸👍
See you there!
@@2GoRoam Definitely!
Re buckets. If the first bucket is for the first 3 years only , why do you top it up ? If you've got 3 years cash to one side why keep topping it up at all ? I'm confused.
Do you replenish the 9 year bucket annually from the other, or only at the end of nine years Neil? I suspect the former, based on the earlier part of the video, but I'm unsure based on your later comments.
9 years in cash or short term instruments is too much for me. Once rates settle down, bucket 2 will be more important.
I have the same 2-bucket approach using low cost Global market tracker fund with money market funds… Completely understand why you’ve chosen the 9yr time period for your ‘cash-like’ bucket but for me that seems way too conservative. As you say though, horses for courses and everyone’s circumstances and risk appetite is different. Although I don’t think the average person understands the term ‘risk’ that well, with the focus being often too heavily weighted toward the risk of losing value in your investments due to a market crash, while ignoring the potentially more damaging risk of your investments underperforming and so not keeping up with inflation...
Thanks Aaron. This wouldn't be for everyone as we're really not all the same. Pleased you are seeing similarities to what you are doing.
I can understand your feelings but having lived through many events since the 70.s unless you can hold your nerve and not sell and have funds to draw on your mindset could change when and if the market tanks
Good points. Inflation in the coming years could be horrible ( let’s hope not) but negative carry on savings rates compared with market inflation means that the current value of money will be significantly diluted over 9 years. The avoidance of risk is not free.
Yes I agree totally. I am currently achieving 5% on savings and I will continue to track and look at alternatives where possible. Where I speak about the house in Spain, that is part of the mitigation. Our total Tax and costs for the house each year is less than £1,000 which is significantly below the costs when we owned in the UK. There is only so much we can all do with our money, we make savings in some areas and win in others. It is a battle for us all, I am sure you appreciate that.
Understand cash loses value, that is a given.
Thanks for the engaging comment, I like it.
@@2GoRoam Good luck to you ( and all retirees) It looks like you and your wife are enjoying yourselves and really that’s what a good retirement should be about. Who knows for sure what tomorrow brings . Hopefully any surprises will be good ones
Some good ideas ,the trouble with stocks and shares is if you don't know anything about investing in them it's a risk.I found a financial adviser who does this with my pension to be earns less than 1% after their fees.A few years ago like most things you do better if you do things yourself so I put money in savings interest accounts and earn 4% to 5% a lot more than the adviser has ever done in stocks and shares and I'm in control. Just wish I'd found out ten years earlier.
In my experience financial advisors are a complete drain on your funds. They play off the line ' our cost is less than 1% per year of your fund value' - and then hope you think that isn't much. It is a huge year on year drain on your funds though. Especially as they then chose funds that also have a c.1% fund charge. So if you have £1M then they will cost you £100k over 5 years!!! They generally don't beat the market so what are they adding? Low cost tracker is much more likely to yield performance and at a fraction of the cost.
@iancford there a complete waste of money but years ago everyone who was in the "know",said take out a private pension for your retirement the only pension it's helping is the advisers ,I'm no expert but in life I've found do everything yourself regarding savings if you can yo will then avoid the leeches creaming off your savings
51, man that was a tough paper round
Worth it though?!
Did you find property is spain was more expensive than in the uk. From yourctravels so far, other than Spain any other cheaper than the uk places to buy you could reccommend for about £300k. Thanks
Isn’t there a risk in year 9. If the market does ok 1 to 8 and then crashes by 40 or 50 percent year 9 then cash bucket is exhausted and stock bucket less than needed. Why not top up as you go if market is up sufficiently each year ? Also that’s a lot of cash. A comfortable retirement is now classed as at nearly 60k for a couple. So this means you need to hold close to 570k cash (540 plus inflation increase per year over 9 years). If interest rates are low that cash isn’t going to be working that much. To implement this strategy you got to have a large fund at the start and for vast majority of people not feasible.
I’ve got most of my money in s and p 500
If the market does drop ( like COVID) it will drop
But history shows it will then bounce back and carry on growing
You don’t mention occupational pensions or state pensions and how these impact drawdown from investments over time.
Hi Bonnie, yes part of our plan is giving time for us to get to state pension age. I don't speak of occupational pensions (assuming you mean DB schemes) as we don't have those, we only speak of what we know about.
I agree. I retired at 60 and have a DB pension which kicked in at 60 and another 2 which cut in at 65, together with the state pension at 67 mean that after then, drawdown on the DC pensions will drop drastically. There is a degree of sequential risk which can be managed by taking the DB pensions early if needed. This means the DC risk can be higher for me personally. Generally though for a DC strategy this seems a good approach with a rolling 3 year cash buffer.
@@davidhumphries3614 I think many of us are in these more complex pension situations.
With your 9 years of cash is it a set amount multiplied by 9 or have you added enought for inflation.Say you spend £30,000 each year your buying power in year 8-9 isnt as good as year 1 so might need £30,000+yearly expected inflation added?
I wonder if any of the Vanguard (or other provider) lifestrategy type funds can attempt to do this automatically for us,or whether they just de risk ever greater amounts out of stocks into bonds based on age as they do prior to retirement.
Hi Simon, I state regularly in our videos that we do not accept sponsorship. We are offered opportunities for sponsorship DAILY and do not take any offer, this channel is about helping you, our viewers.... not a corporate. Hope that clarifies for your question.
The Vanguard Lifestrategy funds stay at the percentage stated, rebalancing automatically. Their Target Retirement funds adjust stock bond allocations as get closer to the Target Retirement year chosen.
I do tend to think that there’s too much FOMO out there, which can lead retirees to feel ‘less than’ if they don’t have a higher risk strategy than perhaps they really need. So long as the mix isn’t allowing inflation to Rob their pot, why worry unless your pot isn’t sufficient perhaps.
Interesting insight. It's easy to feel that others are doing better because they have a plan that gives greater returns of course. But that can come with other issues of course. Best to do you and let everyone else do their thing eh,
Does bucket 3 have income producing investments like dividend stocks? I'm just wondering if it would be possible to have a higher weight invested in bucket 3 and then use the income portion for expenses and still have the capital gains portion for longer term portfolio growth..
Jay, not in how we do it as I feel the dividends would be a drag on the overall investment growth but that could be something worth investigating.
Curious to know how much money you allocated to your 9-year bucket to start with. Must have been a small fortune!
If you spend £40,000/annum it's £360000. But that's not accounting for 5% interest on the initial deposit.
Likewise that's the amount you'll need in your investment account to replenish your water glass.
£700,000 would do it. £400,000 in a money market fund £300,000 in S&P or global equity fund and in 10 years rinse and repeat it’s a perpetual fund that would give you the same £40k income as having £1 million pot and drawing down 4% each year but without worrying about market volatility because of the investing time frame.
With your house in Spain, how do you get around the three month brexit rule?
They can follow the procedure for becoming a Spanish resident. It’s not too draconian.
@@markdarby6733 in other videos on their travel UA-cam channel, Neil talks about applying for Irish citizenship and thus he’ll have an EU passport.
Thank-you, I missed that video
With all due respect this is BS for most people. I retired 6 years ago and spend about $70k ausi dollars each year to live. We live a comfortable life with in effect zero deb. Using your approach we need 630k in water. And then supposedly a similar amount in the cocktail glass. We do have 7 figures in super which i draw about 10%. But there would be very very few who would have the asset volume you are talking about unless they sold their home - which you end up saying that u still need a property to hedge against inflation. I just dont see that what you are saying stacks up. The major stock markets, DOW, FTSE, ASX which everyone rates as "high risk" HAVE ALL consistently grown on a high trajectory FOREVER. WHY would you put 630 k in a low risk (eg bank acct) for 9 years.
Different thinking when dealing with draw down. Of course parking 9 years of cash will produce a lower return BUT!! That’s 9 years of healthy life to enjoy retirement worry free without it being screwed up by a market crash. The other money invested in equities at an achievable 8% will double in value over that time. They can then rinse and repeat and if the markets didn’t do as well their state pension will be kicking in to take up the slack. It’s a simple system that gives you the money when you’re young enough to enjoy it. Also they had a deliberate 15 year run up to make it happen.
@sid35gb you are missing the main point.. very very very few have the capacity to have 1.4 million so what's the point of the proposal. It's unachievable for most
I’m a bit confused too. Usually ppl recommend you 2-3 yrs cash available as this would allow for a market crash correction. I’m confused why they use 9 years. Btw don’t most super products have to have a % in cash?
This info generally tracks with most financial experts - although it’s 2 buckets, it’s essentially 3 but with less risk in bucket 2. I can get more complicated when you add in tax optimization strategies.
Look at the forecast foe next decade your future returns are ambitious i really hope they are correct as i retire soon but plan for less be more conservative in my opinion
Thanks John. Any projection is conjecture and any decision made based on past performance is going to be flawed. Basically, no one (however many will tell you they can) can predict the future. Hence why I have looked at past performance and then reduced my expectations by more than 20%, that seems sound, but we'll only know in the future.
8% over 10 years in a accumulation global index fund is achievable. Even the S&P 500 has an average return of 10% over the last 90 years it has returned 25% this year already.
All my money is tied up in poverty
Longest I spent at sea was 4 months!!!
Good on you Graham. We did 32 nights last year and that was MORE than enough :-)
@2GoRoam I must own up though - I was working. 12 hours a day, 7 days a week. Was tough but it allowed me to retire early like you. I enjoy your videos.
Not concerned about IHT on SIPP? I expect many retired will/have leave UK sell all assets and settle somewhere with zero IHT/CGT...warmer climate etc.UK is finished.
Paying IHT on a SIPP is optional you do know that.😊
@sid35gb if you manage to withdraw it ,without higher rate tax?
Interesting. Looks to me very much like the third bucket could have been something like Sex on the beach.
My best advise is that belly fat in men in their 60s is particularly dangerous because it is often linked to an increased risk of serious health conditions like heart disease, diabetes, and high blood pressure. This type of visceral fat, which surrounds internal organs, can lead to inflammation and insulin resistance, further escalating the risk of chronic diseases. I'm sure you want to live long enough to enjoy your retirement, and as a health professional I'd like to politely suggest that you don't look particularly well.