Deferring drawing my HYP income
Posted: November 26th, 2017, 8:23 am
Morning all - I've been thinking about my HYP strategy and when I may start to draw on the income it generates for some time now and keep changing my mind. Originally, I was going to (and still am) planning on stopping work at 62 (various stars align at that time - mortgage repaid / youngest hopefully in work) and then drawing on my HYP income to replace work income, or, taking up some part-time work to supplement any shortfall.
I do, however, keep coming back to the compounding effect of re-investment of dividends and the positive effect this has on HYP income, especially the longer you are able to do this. Many experienced HYPers have in the past confirmed this and the recent post about a 'dividend millionaire' regretting not having re-invested his dividends as income would have exponentially enhanced (maybe regretted is not the right word, but the article suggests that ultimately income would have been so much higher).
Therefore, what I might do instead is use my Workplace Pension (WP) that started earlier this year at age 62 to live off - the plan I am thinking of is to draw the WP down to zero between age 62 - 67 as at 67, my State Pension starts. This should enable me to keep re-investing dividends in my HYP for a further 5 years and boost the 'compounding effect' by a further 5 years. This does mean having to build up my WP to a level that will support me for 5 years - but that's up to me over the next 14 years.
So, my question to those who have experienced this compounding effect and who run / draw from HYPs - does this plan sound sensible or will an extra 5 years of dividend re-investment not make that much difference overall? Just for context, I'm 48 now, my HYP is all in a SIPP with HL and have been running a HYP for just over one year and this change will mean re-investing dividends for a total of 20 years, rather than 15.
Thanks again to anyone offering an opinion - now, where's my bacon sandwich.
Cheers, OLTB.
I do, however, keep coming back to the compounding effect of re-investment of dividends and the positive effect this has on HYP income, especially the longer you are able to do this. Many experienced HYPers have in the past confirmed this and the recent post about a 'dividend millionaire' regretting not having re-invested his dividends as income would have exponentially enhanced (maybe regretted is not the right word, but the article suggests that ultimately income would have been so much higher).
Therefore, what I might do instead is use my Workplace Pension (WP) that started earlier this year at age 62 to live off - the plan I am thinking of is to draw the WP down to zero between age 62 - 67 as at 67, my State Pension starts. This should enable me to keep re-investing dividends in my HYP for a further 5 years and boost the 'compounding effect' by a further 5 years. This does mean having to build up my WP to a level that will support me for 5 years - but that's up to me over the next 14 years.
So, my question to those who have experienced this compounding effect and who run / draw from HYPs - does this plan sound sensible or will an extra 5 years of dividend re-investment not make that much difference overall? Just for context, I'm 48 now, my HYP is all in a SIPP with HL and have been running a HYP for just over one year and this change will mean re-investing dividends for a total of 20 years, rather than 15.
Thanks again to anyone offering an opinion - now, where's my bacon sandwich.
Cheers, OLTB.