Reserve for One-Off Expenditure

[Crazbe7]

You also touch on another important point where you acknowledge that a particular method of dealing with these situations that suits you best *now* might well change in the future as you become more accustomed to living with things on a longer ongoing basis, and where you'll then possibly be quite happy to take a more relaxed approach to this issue than the one that might suit you more at this particular point in time, and I think taking both of these aspects into account and appreciating that not only is there some flexibility in the types of approach you can take now, but also that there's likely to be some flexibility in what type of approach you might want to take going forward over what will hopefully be many years of retirement, puts you in a good position of open-mindedness around these issues that's likely to pay ongoing benefits from here on in..

and breath!!!!

[1nvest]

I am honing in on my goal of a 3% SWR to cover expected regular expenditure with a 10% contingency.

Aside from this I am looking to build a separate reserve for one-off items.

just target a lower SWR so that you could accommodate one-offs as they arose

That.

SWR is just a guideline, helps with initial 'do I have enough that I can retire' type decisions. Once running you may very well find that are a number of years a former 3% SWR value amount has declined to being 2.5%/whatever.

I don't have separate 'pots' (investment styles) for different objectives.

[kempiejon]

With no DB provision, I would not want to add leverage to take out credit, but I could see the benefit of this if a large proportion of someone's income was guaranteed.

I've just seen Wren offering 5 year interest free credit for a new kitchen, other big ticket retailers often do the same and as I said many credit cards offering 12 months or more interest free spending which you could contrive to suit a large unexpected expense why not take advantage?

[CliffEdge]

With no DB provision, I would not want to add leverage to take out credit, but I could see the benefit of this if a large proportion of someone's income was guaranteed.

I've just seen Wren offering 5 year interest free credit for a new kitchen, other big ticket retailers often do the same and as I said many credit cards offering 12 months or more interest free spending which you could contrive to suit a large unexpected expense why not take advantage?

Equity release has effectively been interest free in real terms.

[stevie1912]

I am looking to build a separate reserve for one-off items.

So some of this one-off expenditure may be short term and some long term. The expenditure is unknown on timing and amount.

I am really keen to understand whether or how others allow for this. Do you have a separate reserve or did you just target a lower SWR so that you could accomodate one-offs as they arose? How many years of regular expected expenditure do you hold in a reserve? Do you run as a separate pot or do you have a nominal amount of an overall pot allocated to one-offs? When you spend or gift, do you aim to bring your reserve back up to the original level - do you top up from investment returns or if you spend is less than your regular withdrawl amount?

6 months on and I am very grateful to the replies posted. I have decided that I was complicating things way too much by having a separate reserve! I was never on track for separate funds for regular expenditure and reserve. What would happen when I had more than I needed in my fund to cover regular expenditure - did this become an increase to my reserve? Way too complicated.

Needless to say, I just have one fund that will cover me for regular expenditure and one-off items.
Having a dynamic withdrawl rate depending on CAPE ratio (not as complicated as it sounds), means my surplus is reasonably stable as equities move and I pretty much know how much extra I have to cover one-off items in the future.

Having simplified things, I am now confident for the future. In April, I will start talking to my employer about retiring, after bonus paid in March. Want to be paid until the end of the year. And despite Hunt's protestations, I will be found on the golf course on a regular basis or doing other things!