My Decumulation ‘Hypothesis’

I thought I’d take up Indeedably’s Sovereign Quest challenge to write about ‘Planning for Decumulation.

You can read about the challenge and other people’s decumulation stories in the above link.


My plan to FIRE seems quite straight forward (to me).

(A) – save and invest to get to my FIRE number (although this number frequently changes)

(B) – Call time on full-time work when FIRE number reached.

That’s it in a nutshell – simples.

However, (A) is reliant on my maintaining my moderate lifestyle, avoiding changes to my earnings or to my living situation, keeping my expenses low, maintaining a decent savings rate and a good dash of luck in the stock market to get over the finish line. Most things I’m in control of, but others I am not.

(B) depends on how I will feel once I get to my goal: will I end up with OMY (one more year) syndrome or will I say ‘Bye!’ to my colleagues, give a younger person the opportunity to do my job and waltz off into the sunset?

The FIRE Sunset

Let’s assume that I pull the trigger and skip gleefully towards the FIRE sunset – sounds fabulous but so much uncertainty and conflict will be unleashed as I change my life from being a saver to a spender.

Psychologically, I know I’m going to find this change to my life very challenging (particularly with selling my investments…) but until I’m in the situation, I don’t really know exactly how I will feel.

To say that I have a decumulation ‘plan’ would be incorrect – it’s all just a big guess right now, estimates cobbled together from various spreadsheets, speculating on how much I might need, how much I might spend, what might happen in my life, how I might react in certain circumstances.

Aiming for FIRE itself is a huge leap of faith – I’ve got faith in myself to stick to my plan but who really knows if my plan is any good, that it will work!?

The ‘unknown unknowns‘ of my future – there’s no way to plan for those!

So my decumulation plan is really a WIP hypothesis and I’ll only be able to tell you anything meaningful (ie does it work?) once I’ve FIRE’d, much in the way that Michelle of FIRE and Wide has been able to report on the success of her own plan, 3 years since she FIRE’d.

Anyway, in a very broad visualisation, here’s how my decumulation will look like to me:

Simply visualised in my mind

So in simple terms:

  • My Future Fund will provide my income from when I FIRE up to age 65
  • From age 65, my income will be from my Future Fund and my DB pension
  • From age 67, my income will be from my state pension, DB pension and my Future Fund

The State Pension

Yes, unlike many other FIRE wannabes, the state pension is part of my plan. Perhaps it’s because I’m a little older than most but my plan would not be viable if I didn’t include it. One fear of mine is that it could be means tested in the future, but chances are that by the time I come to draw on it, I’ll have spent most of my Future Fund/wealth, since I do not intend to preserve my capital, so I reckon I would likely skirt under any kind of means tested threshold.

Note that this simple diagram does not account for any income I may derive from side hustles, or even <gasp> any work I may choose to undertake if I decide to pivot and become ‘semi-retired’.

The state pension and my DB pension should provide me with a minimum income floor, which is the minimum amount I think I can live on and be reasonably comfortable. Assumptions are made here that I don’t suddenly develop expensive or extravagant tastes (or costs) in my old age.

So if I were to blow my entire Future Fund by the time I come to draw the state pension, I should still have enough to cover my basic living costs, without too many frills. Caribbean cruises will be out of the window but I might be able to enjoy a nice UK weekend away or two.

Eagle-eyed readers might have noticed that I have entered the age of 100 in the illustration – that’s just the number I’ve used in my spreadsheets, not a prediction of how long I will live!

The Back Up Plan

If it all goes t*ts up pear-shaped, perhaps I should have a decent back up plan, much like TA of Monevator, who has a plan B, C and D in the event of things going wrong.

My back up Plan B is to return to work. I know, it’s a rubbish plan but it’s an option which would have to be considered. I’m likely to have a side hustle or two to churn out a bit of income so maybe it won’t come to this drastic outcome.

Back up Plan C is to find myself a rich toyboy. I jest of course…. 😉

The Nitty Gritty

I haven’t really thought about the actual details of how I will get my income. I have ISAs and two SIPPS, will I draw down on the SIPPs one at a time or at the same time? Will I take my 25% tax relief? Will I sell my investments on an annual/quarterly basis? At what point/age should I consider buying an annuity!?

I mentioned the psychology of all this already and part of the reason why I will have part of my portfolio paying dividend income is that I feel like I need to see income dropping into my account, as if I were ‘getting paid’. That might sound strange to some, but it will be a source of comfort to me (assuming here that dividends won’t get cancelled or cut too drastically….).

I think a year from actual FIRE, I will drill down to the nitty-gritty but for now, I don’t want to stress myself about it.

The Spare Time

Whilst I haven’t planned exactly what I will be doing to fill all the spare time I will suddenly have, I’m someone who already has a lot of hobbies and interests and I know I will be able to keep myself busy and entertained. Volunteering also springs to mind.

The Family

I reckon that by the time I have FIRE’d, at least one of my siblings will have done the same, or in their case, just retired early as they’re not aware of the term FIRE.

Theirs will most certainly be considered Fat FIRE – they live very different lives to me.

I won’t have to worry about having to financially support any members of my family during my decumulation – my folks retired over 25 years ago and are financially comfortable. My siblings have all done extremely well for themselves in their careers so supporting the family is not something I need to consider but it might be something others aiming for FIRE might have build into their plans.

I have no dependants so as mentioned earlier, I don’t have to consider wealth preservation, I’m planning to spend my money, although if there’s anything left of my Future Fund when I pop my clogs, it would be nice to leave a little something to nephews and nieces.

And Finally

I’d like to say that when I re-read this post in a few years’ time, since I’d be closer to my goal, I should have more clarity and certainty about my decumulation plan, but the chances are that things will still look about as clear as mud and will just result in more lines or tabs on my spreadsheet!

How go your decumulation plans?