SigNet Slides 4 – Psychology and Decumulation

Big Picture Investors

3 Responses

  1. Avatar Al Cam says:

    Mike,
    Could you say a bit more on why you believe a CETV > 21 times “annual pension” is your trigger for cashing in a DB pension?

    For example:
    a) do you mean ratio of CETV to annual pension at current age (if eligible to retire) or ratio of CETV to pension forecast for the so-called normal retirement age (NRA) from the scheme? Depending on how close you are to NRA these values could vary significantly as could the CETV too;

    b) why is this number rather different from the SWR number of 30-31 you recommend?

    • Mike Rawson Mike Rawson says:

      I can’t think of a clever answer so I’m going to say that was a typo. It says 31 now.

      I meant CETV ratio to the pension at normal age (60 in my case). The last two quotes I got were at a 39 ratio.

  2. Avatar Al Cam says:

    Thanks for the response.

    39 seems generous, especially if you are/were less than 60 when your CETVs were calculated?

    IMO the ratio of CETV to “annual pension” needs to be treated carefully. In my particular case both the annual pension payable (in todays money at a future age) increases annually with inflation and the CETV changes too – primarily depending on age, bond rates and discount rate(s) applied.

    Hence in my case and assuming (somewhat unrealistically) static bond rates and unchanged discount rates, the nearer you are to a given retirement age (say 60) the higher this ratio will be!

    However, all DB schemes are not alike!

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SigNet Slides 4 – Psychology and Decumulation

by Mike Rawson time to read: 2 min
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