Retirement Drawdown

Drawdown In Retirement: From Saver To Spender

As someone on “the other side” of the FIRE journey, I’ve been meaning to write about retirement drawdown for a while. Making the leap from saver to spender.

So when Sovereign Quest threw down the challenge in March to write about decumulation (inspired by Monevator’s great 3-parter) – it seemed about time to get on with it. Never was good at turning down a challenge yet after all.

But what can I offer above and beyond the many, many words of wisdom already shared on this? Especially with Indeedably doing his usual fine job of eloquently expressing much of how I think about it.

Well, the one thing I do have is actual experience. I’ve done it. I’m doing it. And if all goes well, I’ll be doing it for a long time yet, hopefully.

For me, there’s two distinct parts to making the transition from planner to do-er.  First up, there’s the financial side, the logical side if you like. Questions to be answered about risk, reward. Getting the balance right. What is ‘enough’.

The second part though is far less clear cut, the emotional side. At some point all the planning becomes a question of belief. Of desire vs security. Do I really want to make the jump? Will it be worth it? This side of pulling the trigger is much harder for some than others.

I’ve been through both sides when making my own transition.  I’ve made the jump. Committed to the plan. What have I learned and what can I share that may help others looking to do the same at some point? How does the reality compare to the theory?

Let’s take a look!

Retirement Drawdown - The Financial Side

Maybe it’s because I’ve always been comfortable around numbers. A background story including a maths degree and a career in energy trading means I know my way around a spreadsheet for sure.

However, the financial side of FIRE has never been the most interesting one to me. Any regular readers will know I write way more about living life than actual numbers. I like grey, ambiguity. Happiest in the land of possibilities, opportunities.  

But I’m also a big believer in that dreams happen way more often when you have a plan and a strategy to deliver them. And so we built ours – basing it on our best view of our proposed ‘life scope‘. Using our existing known cash-flows and then working out the gap needed to fund an early retirement.

Finally, we balanced it up the way we hoped would work best for us.

Compromising between time and money. Working longer for extra padding – but not so long we couldn’t physically do what we wanted to do.

Numerous assumptions, tested out. Coming up with a plan

The Grand Retirement Drawdown Plan

So – what was the grand drawdown plan then? First – clearly I am not a financial adviser in any shape or form. I’m sharing this in the spirit of answering the challenge set, not as advice. 

Our plan was not that complicated. It doesn’t have a fancy name or a long string of supporting analytical evidence. Sorry guys. 

It basically boiled down to three things;

1. Save & invest enough in ISA/other to provide my required cash-flow between FIRE’ing and 60

2. Invest in work and personal pensions so that they meet cash-flow from 60

3. Have a decent amount of flex in plans plus back-ups

Not that exciting eh? I could and probably will go into more detail at some point about each. The how, what, where and why. The assumptions and testing behind each simple statement.

But that’s not what I want to write about now else this post will go on forever. What I want to write about is accepting the ambiguity in any plan, however good (or bad 😉 )

“Planning for early retirement is an educated leap of faith”

It’s not an exact science. Pretending it is may give you a sense of comfort. If that helps you, great. I prefer to acknowledge it for what it is.

A huge set of assumptions about pretty much every aspect. Historical data is great and it obviously helps to improve your best guess. But I’ve worked in risk management too long to ever see data as more than a guide to decision making. 

And if I could share one thing that’s what it would be.

That there is no right or wrong answer. What matters is that you understand your own assumptions. Your own plan.  

This isn’t a “do it once and you’re done” activity. As things change, as you learn more – you adapt. You reflect. You update.

That’s why I consider the emotional side of making the jump the tougher side to figure out. It’s not a black or white question like a maths exam – it’s grey and muddy.

I find that empowering but I realise to a lot of people it can be scary to embrace the uncertainty. Moving to the drawdown side of retirement is a big change, even when it’s something you’ve been planning and dreaming about for a while.

Emotional Swings: From Saver To Spender

Talking of changes – I don’t think you get a much bigger one than switching mentality from saver to spender.

It’s very different – especially when habits are well-ingrained after years of planning and saving. A Purple Life did a great job recently blogging about her evolution of spending money. Everybody reacts differently.

I read a lot of financial independence stories whose motivation for FIRE is security. This may not be popular to say but I think those folk will struggle in particular to make the jump.

There’s a big difference between saying you are saving for financial freedom – to actually then using your investments to do so.

It’s not wrong to change your mind when you get there. Obviously. This is all about doing what you believe is best for your life. But being honest with yourself earlier on about whether FIRE really is the dream for you could help a lot of people make their current struggle easier.

I think the switch is harder still for those like us who don’t plan on leaving an inheritance. Purposely looking to run the investments down slowly.  No longer watching numbers increase month on month.

It’s another big emotional change once that monthly salary stops coming in. Beforehand, no thought required beyond continuing with the routine. Earn, save, invest, repeat.

Now, the need to think about how to generate cash each year. Using a mix of growth investments, interest earned, dividends paid. Looking to take advantage of all the different kinds of tax allowances and maximise the financial value of our choices.

Sometimes I still find it really odd to generate cash without actually really “doing anything”. I’m so used to working hard and earning money – be it through my career, our house-building or our rentals.

It feels strange to ‘get paid’ simply for investing our cash.

Intellectually I understand it, emotionally I’m still catching up on the idea. So some old habits die hard for sure.

Another example is that even though I don’t need to, I still like to ensure I get good value for my money. One of my natural secret FIRE powers was always being pretty much immune to the lure of shiny objects. Apparently that hasn’t changed much with the switch.

It’s more the challenge and delight in getting a perceived bargain than anything else I think. Certainly we haven’t restricted ourselves from doing anything since we pulled the trigger. It just seems that what we want to do easily fits in our budget.

And that’s the biggest test of all of any financial plan – does it let you do what you wanted it to?

Does reality match up to expectation?

Testing Out The Theory - Reality Bites

It’s now coming up for three years since I left the world of work. That’s a pretty good test for how well or not our plans have faired I think. Especially since that was through the covid ‘dip’ and everything else since.

So how has reality stacked up against theory when actually living off investments in retirement? Turns out the answer is a real mixed bag!

Some things we were surprisingly accurate on, some we were a mile off

I guess it’s not that surprising when you consider that 50% of our ‘retirement time’ so far has been through a global pandemic. 

You plan for the average and test against realistic extremes

Our approach has always been a little different to most that I read about. It might shock you to know we don’t have any kind of significant bond allocation, for example.

Reason being by the time we were seriously investing, bond returns were already really low, below our view on inflation. I’m not a fan of locking in a loss. So we planned to ride out the additional volatility in our portfolio instead. 

As such, our investment portfolio basically comes down to a ‘growth’ element and an ‘income’ element. Growth is our share market investments, a mix of ETF’s in the large. Some fun/speculative growth views but largely global. The ‘Income’ side is largely a mix of dividend shares and P2P investments.

As mentioned earlier, this has helped us make the most of all the different tax allowances the UK government have. Which between the two of us is already a pretty generous £55k/yr. Combine that with the knowledge that about 45% of our investments are in ISA sheltered accounts.

That ability to entirely legally reduce your tax bill makes a big difference to your real rate of return 

But the proof is in the pudding they say. Or something like that. How did our plan work out in reality?

Have we been able to do what we wanted to do? How have our investments actually done?

So - How Did It Work Out?

To cut the suspense that’s clearly been building – it turns out that the first year was great. And the second year has worked out fine despite everything.

Year one the income portion chugged along nicely. Depositing regular income into the cash accounts. In the background the growth investments continued to, well, grow.

A charmed start to the first year. Year two started much the same.

Then March ’20 arrived. Ouch. It’s not much fun watching your hard work slip away.

Even when you are on a sunny balcony in Vietnam.

‘Fortunately’ the drama associated with finding a way home as the world shut down kept us busy during the worst of it. I did actually sneakily invest some spare cash I had in my SIPP though.

So I guess I pass the whole “don’t panic sell but buy” test with flying colours?!?

Whilst we waited it out back home in lockdown, the dip undoubtedly made for uncomfortable updates to the investment spreadsheet. 

Interestingly though – it didn’t make that much difference to us in real life. What really hit us was the following impact on the income portfolio. Dividends cut by many and a real mixed bag across different P2P investments.

As a result we saw a substantial hit on the regular income front which was a far bigger concern by far

So what happened? Where we forced into selling out our growth portfolio exactly when we didn’t want to? The nightmare scenario for early retirees only a few years in?

Hopefully you’ll be pleased to hear the answer was a resounding ‘no’.

But what exactly did we do then? And how did our planning help us?

What Really Makes A Successful Retirement Plan?

What do I think really makes a successful retirement plan? One word.


If there is one thing I can guarantee you – it’s that the future will not turn out exactly how you think. You need to expect change. Both financially & emotionally.

I firmly believe that there is no ‘right’ answer to what the ideal retirement drawdown strategy is.

Sure, with the power of hindsight you can test out what strategies would have maximised your investments.

That still doesn’t necessarily mean it would have been the best strategy for you.

If we could leap into the future and look back, it may well turn out that being all in on Bitcoin really was the way to go after all. Do I want to ride that volatility train whilst trying to enjoy my life? Not really.

I don’t need my investments to make as much as they possible can.

I do need them to reliably meet my spending needs over the years.

That’s a totally different question to answer. In today’s low interest world, taking risk in pretty much a necessity to make a decent return above inflation.

So you need to know ahead of time how you will ride that out if/when you need to.

Building in adaptability to your plans is the ultimate snuggly comfort blanket.

Planning ahead as to how you will adapt when needed is probably the most useful thing you can do. And that means knowing what financial levers you have available to pull. 

Knowing Your Financial Levers

When we put our retirement drawdown plan together, we included a pretty generous amount of flexibility. Some was on purpose and some was just how things worked out.

Two key things ended up seeing us through the tough period. They were;

  • Budget Flexibility
  • Cash Holding

Diving into the first, budget flexibility – for those really interested, I wrote a whole post on how the different budget elements worked out. But for our purposes here, what you need to know is we planned for an income ~2.5 times what we could exist on. Probably 3 times if we really pushed it. 

We knew we wanted to spend a large part of our retirement actually doing all the things we never had time for. Travel was a big part for sure. Eating out, entertaining friends and family. All the stuff we enjoy. So we budgeted way over what we spent on them whilst working, given we would have more time to indulge.

It turns out that so far we haven’t got close to spending that much. Even in the pre-covid year when we travelled for pretty much six months. 

So when our income portfolio took a temporary nose dive, we never actually reached the point where we would need to cut back.

Yes, that obviously means with hindsight we could have pulled the trigger and retired earlier. But I have to say, having that large comfort zone did make riding it out a whole lot easier. Worth it to us for sure.

But just needing less than expected is not going to save you if you have no income at all. And so moving on to the second reason we didn’t need to sell out during the drop –  having enough cash in our portfolio mix.

We tend to hold about 3-5% worth of our pre-pension investments in cash. That gives us about one year of spending at our maximum rate, two years at what we actually seem to spend so far.

Yeah, it’s painful with the interest rates so low and you do what you can but holding cash isn’t about creating wealth. It’s about being able to preserve it when needed.

Having that relatively large cash reserve meant that even if we had been spending to our budget, we still wouldn’t have needed to sell out at a loss.

Not having to lock in a large drop in value is well worth missing out on some small additional potential growth in wealth

So all has worked out fine so far. Clearly it’s still a bumpy road ahead for a while yet. But living through something like that and still seeing your plans let you adapt as needed is a good confidence boost for dealing with the future.

Since then, as everyone knows, things have recovered remarkably. Our growth portfolio can now easily provide our income as and when we need it. Especially those investments I made at the bottom of the fall 😉

Which is good since we’re still waiting on some of the income side to sort itself out. A few lessons learned there about yet more diversification needed. A broader set of income shoulders. 

And if anyone is still with me at this point – I hope that’s what sharing this has helped you with too. Some lessons learned about how plans stack up against reality.

Expect change, plan for it. Adapt and thrive as the saying goes.

But above all, remember, there is no right answer – just the answer that works best for you.

Love to know what you think & your own plans below…let me have ’em!

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25 thoughts on “Drawdown In Retirement: From Saver To Spender”

  1. Great post. Captures the difficulty of moving from saver to spender well.

    We were fairly relaxed when FIRE’ing in 2018 but surprised at how much time we then spent thinking and tweaking things only to come back to our original drawdown plan a year or two later! It is simple, builds in the main variables and remains adaptable.
    We found the mental crutch of paying ourselves a minimum income once or twice a year by forming a 5 year ‘bond ladder’ of building society fixed income accounts helpful- foregoing maximum return for guaranteed income and substitute for all the years of receiving a salary. (I would wait for inflation/interest rates to stabilise post lockdown if doing this now). Our circumstances and travel bug seem very aligned and look forward to reading more about your journeys -financial and physical!

    1. Hey Daz,

      Thanks, appreciated! Cheers for taking the time to comment, love hearing from others in this space.

      It’s funny how many people say that about adaptability – so true. Great point.

      Yeah, by the time we looked at creating an income bonds/fixed income was pretty much locking a loss against inflation. Not exactly helpful. Our P2P worked really well in the main but we need to work it a bit now with all the recent changes.

      Ah, the travel bug….hard to kill even whilst in lockdown! Lots of plans ready to go as & when!

      Look forwards to hearing more from you too. Cheers.

  2. Saw the piece in the Telegraph and decided to pop by. I’m 48 and my trusty spreadsheet indicates I can comfortably stop working any time this year. FIRE with children is more difficult but is possible ( my son is 6 ).

    1. Hey David. Thanks for stopping by & taking the time to leave a comment – always interesting & appreciated.

      Especially great to hear from someone else who’s pretty much ready as/when they want to be. Honestly, just knowing it’s a real option makes a huge difference.

      Agreed, undoubtedly harder with kids. Both financially & the desire for a higher safety margin I imagine. But I bet it’s amazing that you can spend more time with him whilst he’s still young.

      And yeah – the Telegraph thing was defn something out of my usual comfort zone. But it was a good way to help show that different choices/lifestyles can work. It’s not easy – but it can be done!

      1. Thanks for your response. Yes, it’s a great feeling to achieve a level where continuing to work can be considered optional now.

        Being in my fortunate position has enabled me to take unpaid parental leave when required to have more fun time or simply to survive covid home schooling.

        A former colleague of mine also quit work early and they’ve since been travelling a lot in their motor home. If you’ve not glanced at their blog it might be interesting

        I think my travelling aspirations might need to wait a few years until my son is a bit bigger. However, I guess nobody is travelling much right now anyway.

        1. Hey again.

          Exactly – just having options is a fantastic feeling and can really help take a lot of stress out of situations.

          Your ex-colleague’s blog looks fantastic – added to my very long list of fav travel blogs 🙂. We’ve done a couple of RV trips over in Alaska/Canada & US East Coast. Both were fantastic experiences. I have to admit to being more than a little envious of your friends in Nerja! Lovely part of the world, that.

          But yeah, it’s still planning & dreaming on the travel front for now. Hopefully soon it will change – there’s a lot of very safe places to go and explore without endangering others safety.

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  5. Nice post!

    I’ve been on the “other side” for a handful of years now and my key numbers since jumping ship could be similarly summarised as somewhat ahead of plan. I think this ‘problem’ is far more wide spread than people initially realise and is probably the most likely outcome – but time will tell.

    With regards to non numerical factors – no disagreements from me. IMO you just need to do what you need to do to become comfortable with your decisions.

    1. Thanks! Both for taking the time to read & the feedback, appreciated.

      It’s an interesting one, right. My guess is that most people go for the extra padding/couple of extra years before pulling the trigger. And so end up with the ‘terrible’ problem of technically having too much.

      I figure unless you are literally hating every minute you are counting down to FIRE (which by itself kinda says you should change things up anyway?!) then the comfort/good night’s sleep it gives is worth it. I’ve never been one for running a strict budget, just using money well. It would have been weird to FIRE and then have to start a budget!

      And yep, agreed. A million people can tell you something will be ok but unless you believe it yourself, it won’t matter. So you do what you got to do!

      Cheers for stopping by.

  6. Thanks for this post. Adaptability is key clearly. Trying to remind myself that without overthinking things! Every down market brings new opportunities to cash out poor holdings and to re-invest and re-allocate into new opportunities. But trying to hedge all this risk sometimes can wear one out!

    1. Hey, thanks for reading & taking the time to comment!

      Defn – I think it can be easy to fall into the “analysis paralysis” trap as we used to call it back when working. But at some point you realise you are better off just knowing how you would deal with a situation than trying to eliminate every single risk. That’s actually pretty impossible to do and still make a return…and like you say, can get very tiring on the way tying yourself up in knots…!

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  8. Interesting-would the experience of a retiree further down the line be of interest?-UK investor
    Aged 74 retd 17 years -went at 57
    Made enough and now run a 30/65/5 portfolio-equities/bonds/ cash
    Cash equals 2 years expenses
    3 funds only-U.K. index tracker,World ex U.K. Tracker and a Global Bond Index Tracker Fund hedged to the Pound
    Been through many ups and downs-did nothing each time -your remark regarding Vietnam rang a bell-we were 3 weeks in the Saudi desert and missed the whole 2008 thing-no phones
    Portfolio provides half our income -Wife has a Teacher’s Pension plus 2 State Old Age pensions provide the other half
    Our retirement spending seemed to be at the same level as when we were working
    Lucky to be able do all our travel round the world before lockdown
    Probably will be too old by the time lockdown finishes to do much more
    John Bogle was the guru for me-discovered in the late 90,s
    Save,live frugally and put money in diversified trackers-then stay the course
    We were also lucky retiring in 2003 -start of a bull market till 2008
    Adaptability plus Effort and Luck

    1. Hey Malcolm. Absolutely it would be of interest! Thanks so much for taking the time to share – it’s one of the best parts about starting this blog, being connected to others & learning from them – so thanks!

      I love the part about the Saudi desert – now that’s a story I want to hear too… But yeah, funny isn’t isn’t it when you get back & catch up!

      It’s interesting your split, makes a lot of sense for where you are at now. I do wonder about how/if we’ll transition as we go on. Especially if interest rates/bonds pick up – our approach has always been take the risks you need to, not the ones you don’t. It’s not about making as much as we can to us – just about letting us live the life we want to.

      Thanks again, always love hearing from people. Cheers.

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  11. I recognised many things about myself in what you wrote.

    For me, there was one mindset change that made a big difference: I used to think/fear that if something went wrong, it would be a disaster. Before retiring, what if I lost my job? Disaster! Post early retirement, what if our spend is more than expected, or our investments don’t generate as much as we hoped, early retirement would have to be abondonned? Disaster!

    The mindset change was realising such thinking is off base. While not ideal, none of those things would have been a disaster. They’re fixable. For example, if my retirement investment pot isn’t generating sufficient income or is depleting too quickly, it doesn’t mean 100% of early retirement is off the table. We’re talking margins of error here, not complete meltdown. To fix a margin of error, perhaps I’d need to get a job in a local café just one day a week, so 80% of my early retirement remains intact, that’s a pretty good life still, no way a complete disaster.

    1. Hey David, nice to hear from you.

      That’s an awesome point, well made. It’s so easy to think one mistake will be the end of everything – whereas exactly right, it’s just an adjustment. And we’ll all have bigger problems to worry about if something wipes out everything!

      For me, it undoubtedly helped that I’ve been ‘lucky’ enough to go through what I considered disasters at the time earlier in my life. Once you’ve survived a few you learn that they really aren’t the end of the world & you cope/adjust as needed. In fact, bizarrely, you often end up being grateful for them!

      So yeah, as much as it would be fun to get you to make me a coffee, I think you’re gonna be ok 😉

  12. Thanks very much for sharing your experience and insights, Michelle.

    It’s put me slightly more at ease that you mention dealing with and adapting to changes and unknowns, as my own decumulation plan is still a work in progress and is very much guesswork.

    Interesting to read that you continued to buy in the dip – while I did this myself last year, I think I would have really struggled with it if I were relying on my investments for income, even though it makes sense to continue investing!

    I’ll certainly be revisiting this post as it will help me with uncertainty and doubt!

    1. Thanks Weenie – great compliment coming from you 🙂

      If I’ve helped just a little bit, that’s awesome. Absolutely, you do your best but at the end of the day it’s all educated guesses.

      Yeah – those dip buys ended up more than covering the losses on the income side – nice!

    2. I wish I had bought the dip. Instead I felt things were so bad that it was better to build up my cash reserves than add to my risk. So I froze for a year.

      Of course with hindsight I could kick myself, but given the information I had at the time and the possibility of disaster, maybe I should feel good that I held and didn’t sell. As soon as I realised my mistake I started piling in again. Anyway, although I missed some gains, my long-term investment return is still looking good and my FIRE plan is getting more attractive. Not long now!

      Thanks for your blog, which gives a unique viewpoint. I like the way you analyse your thought processes and don’t rely on wishful thinking.

      1. Hey Jeff. Hindsight is easy right! It sounds like you’ve come through the whole thing well overall and congrats on getting close to FIRE. It’s an exciting and nerve-racking thing at the same time when reality and possibility start to collide….

        Appreciate you taking the time to comment, always good to get others views and input. And thanks for the compliment. Indeed, I may be a natural optimist but just hoping something comes true or happens the way you want it to is not exactly a grand plan. Far better to o what you can to help it along!

  13. Beautifully put, Michelle.

    I’m pleased to hear the last year of uncertainty didn’t compromise your chosen lifestyle too much from a financial standpoint (the travel or the other hand… something to look forward to once more in the future!).

    Thanks for sharing your experiences, it is great to hear from someone successfully making a go of it from “the other side of FIRE”.

    1. Thanks Indeedably – much appreciated!

      It was interesting to write & reflect – even when FIRE’d it’s still easy to get caught up with living. Taking time out to think through how it’s gone was a good use of time. A few things to improve going forwards but a lot of comfort gained too. Very happy to share a real example from “the other side”, if it can help others – then it’s been worth it 🙂

      Yes, missing travel a lot but hey, lots of other things to try out in the meantime!

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