The problem when you retire is that you lose the safety net of your salary and therefore it is vital that you are maximising your retirement income.   

You are left with the savings you have built up through a lifetime of working and it’s unlikely those savings are going to be topped up again.  

So how do you ensure your savings last? What amount do you withdraw so it is not too much or too little? 

What can stop you maximising your retirement income  

Simon and Jackie came to us recently as Simon has the opportunity to take a redundancy pay out from his job which has led them to consider retirement.  

Simon is 64 and Jackie is 63.  

Simon thinks now is the time to retire because it would be nice to retire a bit earlier than originally planned and with the added bonus of the redundancy money which they weren’t expecting.  

Jackie is more nervous though. She doesn’t like the thought of retiring without any ‘income’ and would prefer to wait until their State Pensions start, both at age 66. 

This is a common problem we see quite often as it’s making the step into the unknown, living off your savings and seeing them go down when all your life they have been going up.  

Of course Simon and Jackie do have the option to secure an income for life before their State Pensions start and this would involve purchasing a pension annuity 

After going through the pros and cons of an annuity, they both decided it wasn’t for them so pension drawdown it is.  

When using pension drawdown your pension will remain invested. It usually needs to be to ensure your money keeps up with inflation.  

The biggest risk you then face is something called the sequence of returns.  

We can be fairly confident of long term average returns from various different investment portfolios and risk levels. But what no one can be confident of is the order in which investment returns come.  

Taking money out of your savings when returns are low can have disastrous consequences.  

Look at the table below. It shows two investment portfolios that over 5 years achieve the same average returns, but Portfolio A has good years at the start and bad years at the end of the 5 years. Portfolio B is the opposite. Bad years at the start and good years at the end.  


Year 1 

Year 2 

Year 3 

Year 4 

Year 5 


Portfolio A 







Portfolio B 







Using the returns above and repeating them every 5 years, if we applied them to £1,000,000 portfolio and took £60,000 a year inflation-adjusted withdrawals from age 65 the end results are startling. 

  • Portfolio A would still be worth £1.1 million at age 90. 
  • Portfolio B would have run out completely at age 87. 

So this is the dilemma. Take too much out, suffer from bad investment returns at the wrong time and there is a danger you run out of money. 

On the other hand. You might not take enough out and end up dying, leaving behind too much! 

A proven way to maximising your retirement income  

The first thing we did with Simon and Jackie was to work out what income they needed in retirement. What did they want to spend on a monthly basis? Not just to pay for all the bills but all the other bits they wanted to do in their retirement like holidays and gifting to the children.  

Using the savings they had built up we stress tested their financial plan against all sorts of disaster scenarios. Using sophisticated financial planning software we are able to simulate how their retirement would have looked through different periods of history.  

There are then two tactics we use to ensure your retirement income is sustainable and doesn’t leave too much behind.   

#1 – Guardrails 

Like guardrails on a motorway, our guardrail report helps keep your portfolio on track by increasing your monthly withdrawals when your portfolio rises to a certain level and reducing them when it falls to a certain level.  

This approach has been proven to work by extensive studies originally produced by Jonathan T. Guyton and William J. Klinger. 

The beauty of this approach and our report is that at any point in the market cycle we can say how it impacts a client’s withdrawals.  

 It also ensures you don’t take too much and run out of money or end up not spending enough. 

#2 – Buckets 

Added to our guardrail report is our bucket strategy which helps combat the issue of having to sell down stocks and shares when the market has fallen.  

In Simon and Jackie’s case, in preparing for their retirement we will segregate their portfolio into three buckets.  

The first bucket will contain their next two year’s worth of income. This money will be in very safe cash deposits. All withdrawals for the next two years will come from this bucket.  

In bucket two will be another two to three year’s worth of income but this time invested in very low risk assets.  

Finally in bucket three, the rest of the portfolio will be fully invested in the stock market.  

Every year these buckets are monitored and re-balanced if appropriate. 

The beauty of this approach is that Simon and Jackie will always have around 5 year’s of income in safe assets so if the market was to crash during this time they don’t need to touch their stock market investments.  

It’s all systems go for Simon and Jackie as they now have the confidence to retire two years earlier than planned! 

Remember you don’t know what you don’t know. Producing a sustainable income in retirement is a mix of science and art.  

If you would like to discuss your options please schedule a no obligation call.  

Risk warning:

Stock market linked investments and any income from them, can fall as well as rise and is not guaranteed. Any figures quoted are for illustrative purposes and should not be taken as a forecast or guarantee. Past performance should not be seen as an indication of future returns and clients may get back less than they have invested.