Pensions Planning: The NUMBER

Debt_Free_Chick

If you have MS Money, it has a useful "Lifetime Planner" which can help to determine your number, based on your current spending patterns. Helpfully, you can adjust this for the future if you believe you will spend less on certain things e.g. travel especially commuting to work (a BIG number for those of us in the SE who commute in and out of London!).

You can also change the future rate of inflation.

The planner then uses current surplus income and assumes it's saved, achieving a return of x%pa (you can define and change the x%) and will show you, year by year, how your savings accumulate towards your goal (the number). It also makes assumptions about future tax rates and other "expenses" all of which you can change/define. You can also tell the planner whether you plan to spend all current surplus income, or some of it, so it "knows" how much is available to save towards your goal.

It takes time to understand the outputs, but it's time well-spent. It's one of the more attractive and sophisticated features of Money, which is all too often overlooked by users - probably because it takes some time to put in all the inputs and some effort to understand the outputs.

No forecasting tool is going to give you "the number", but forecasts can help you to make decisions now, based on how optimistic or pessimistic your views about the future. Being pessimistic is not necessarily a bad thing though, if you accumulate more wealth/savings that you actually need

But if you have Money and really want to determine your number, it may be worth investing (time and effort) in the Lifetime Planner as a starting point.

HTH

chris_m

I use Excel - an enormous (now, it's grown) spreadsheet plotting income and expenditure, with formulae and sets of macros to allow variations of things like inflation (and whether applicable to both income and expenditure or to one only), interest rates, pension amounts, spending reductions/increases, possible prices for property changes, etc. for a range of desired retirement ages. It runs out as far as my 85th birthday so should suffice ;-)

It's given me a range of targets for desired retirement ages so I can plug in the "real" figures as they become available and adjust my plans as required.

Gatser

chris_m wrote: »

I use Excel - an enormous (now, it's grown) spreadsheet plotting income and expenditure, with formulae and sets of macros to allow variations of things like inflation (and whether applicable to both income and expenditure or to one only), interest rates, pension amounts, spending reductions/increases, possible prices for property changes, etc. for a range of desired retirement ages. It runs out as far as my 85th birthday so should suffice ;-)

It's given me a range of targets for desired retirement ages so I can plug in the "real" figures as they become available and adjust my plans as required.

--- DITTO ---
I am sure "Planning Tools" are fine, its a personal preference thing.

I prefer the full control that Excel gives you on its layout, calculations, assumptions etc.
I prefer to spend time creating my own financial model rather than learn the ins & outs of something created by other experts...

Gatser

Sobraon wrote: »

Fascinating thread!

Minimum needed £24708 .
Planned number £31668 = My ‘Number’.
Luxurious retirement £52104.
(note all after tax)

Very interesting...and reassuringly close to my 3 "comfort" levels.
Good idea to have the different levels.... we are getting sophisticated on this thread aren't we!?

Can you break the figures down please?
I am interested to see how my breakdown compares... (see POST 001)
Thanks...

Debt_Free_Chick

Gatser wrote: »

--- DITTO ---
I am sure "Planning Tools" are fine, its a personal preference thing.

I prefer the full control that Excel gives you on its layout, calculations, assumptions etc.
I prefer to spend time creating my own financial model rather than learn the ins & outs of something created by other experts...

Just out of interest, how does your spreadsheet compare with the MS Money Lifetime Planner?

Debt_Free_Chick

whiteflagreturns wrote: »

Yes , that would be good to know

DFC does the MS system allow you input various tax wrappers and recognise the difference in the taxation of any income derived from them?

I've not fine tuned it, but it certainly recognises the concept of tax-exempt savings such as ISAs .... provided the user sets up their "accounts" correctly. For example, I have a dozen or so ISAs. I've set each one up as a separate "account" in Money (which seems to be the right way to do it, AFAICS). When setting up the account, I designate it as "tax-exempt". My version of Money (2003) recognises ISAs and its limits.

Where I have surplus income in any year, it actually suggests that I use up my ISA allowance first.

Where I have an ISA, it allows the capital to accumulate free of income, capital gains and inheritance tax.

It's actually "good" and much under-rated.

Does it allow me to direct that £x in the future be paid to an ISA? I'm not sure, but my guess would be that Money assumes that it would and actually suggests that this is the best course of action.

To be honest, even I need to spend more time on the Money Lifetime Planner, even though I think I've spent "more time than the average Money user" on it

My challenge with Excel is that I need to have the coding skills of those that coded Money at the very least .... and I'm a long, long way from that!! :rotfl:

zygurat789

Computers help people make bigger !!!!-ups than they could by themselves.
Stick to the back of an envelope.

gallygirl

whiteflagreturns wrote: »

Yeah, I did a charity cycle to Paris last year and the "fast" group leader decided computers were not for him and did not trust the GPS, using a paper map instead.

The map got them to the hotel- 2 hours after my "slow" group having gone 12 miles further. Everyone to their own i suppose.

On the other hand, my GPS has tried to take me up a farm track & down a one-way street. As with all these things a healthy dose of common sense & scepticism is useful. Plus an idea of what kind of number you're expecting to get out, e.g. if you're 40, want to retire on 25k, have no savings and the programme says you only need to save £39 a month to achieve 25k you've probably got a decimal point wrong!

Liking the sound of MS Money though

zygurat789

whiteflagreturns wrote: »

Yeah, I did a charity cycle to Paris last year and the "fast" group leader decided computers were not for him and did not trust the GPS, using a paper map instead.

The map got them to the hotel- 2 hours after my "slow" group having gone 12 miles further. Everyone to their own i suppose.

GPS is not a computer

jonnyb1978

Im liking this thread but somehow can not work out anything. Currently im paying off all debts that will hopefully take around 3 years. If all is well i have 18 years left on mortgage which will be paid off by the time im 50. Although if i had more money i would like to move to a bigger house. I can not begin to add up what i will need in 30 years time. Maybe you guys who have less time to retirement a more stable in life so to speak. At present i just want enough to live comfortably, couple of holidays a year, decent emergancy fund to not have to worry about any damages etc and enough to help the kids out when needed. Oh and i would like a decent trip to Oz but in 30 years time it might not be the country it is today.

As said ealier im aiming for at least £50000 in todays money lump sum (tax free) from my AVC. That would mean getting my full pension, currently £9200 in todays money. (Estimated from last statement). Obviously i still have 30 years of investing still to go so this should be considerably higher.

I did read somewhere else that a good way to measure earning 2/3 of salary is by halfing your age when you start contributing and that is the percentage of income you should be contibuting per year. I started at 23 which means i should be paying 11.5% of my income but im actually paying (with companies contribution) 15.7% and also an additional 2.26% into my AVC.

So although no number im hopefully on the right track