Pensions Planning: The NUMBER

michaels

So I have modelled this in cfiresim and get £620k assuming you are both the same age, the 32,400 is gross and that the surviving spouse can manage with the loss of 1x SP and DB if applicable.  Note SP is modelled to rise with cpi, no triple lock and I think the historic returns are based on US equities and bonds.

https://www.cfiresim.com/cb8f4f31-bbda-44f7-b8ea-e9a7d5d62830

I have not tried this before so please let me know if the model link works and you can see and amend the parameters.

Note cfiresim tells you if a scenario would have worked subject to all historic market movements, not what will happen in the future.

When I model this I also tend to put in a life expectancy of 95 not 85, not because I think I will live that long but more because I don't want to run out of money if I were to.

The EarlyRetirementNow spreadsheet uses pretty much the same datasets and will give similar results but is less 'black box' and there is therefore scope to configure more stuff yourself if you are a spreadsheet person.
https://earlyretirementnow.com/2018/08/29/google-sheet-updates-swr-series-part-28/

MarriedWithKids89

michaels said:

So I have modelled this in cfiresim and get £620k assuming you are both the same age, the 32,400 is gross and that the surviving spouse can manage with the loss of 1x SP and DB if applicable.  Note SP is modelled to rise with cpi, no triple lock and I think the historic returns are based on US equities and bonds.

[Link snipped because MSE wouldn't let me post a message containing a link]

I have not tried this before so please let me know if the model link works and you can see and amend the parameters.

Note cfiresim tells you if a scenario would have worked subject to all historic market movements, not what will happen in the future.

When I model this I also tend to put in a life expectancy of 95 not 85, not because I think I will live that long but more because I don't want to run out of money if I were to.

The EarlyRetirementNow spreadsheet uses pretty much the same datasets and will give similar results but is less 'black box' and there is therefore scope to configure more stuff yourself if you are a spreadsheet person.

[Link snipped because MSE wouldn't let me post a message containing a link]

Yes the link worked. Thank you. I had not seen this website before - but it is definately very useful to see how risky, historically, it would have been trying to make it through retirement with various amounts and different strategies. Anyway, I fiddled around with the figures and I was surprised to see that it appeared to be less risky transferring the OHs DB pension into the portfolio rather than taking the DB itself! Regardless, we intend to draw everything down to 0 after 30 years, therefore, it seemed like the VPW method/spending plan was the most appropriate. Setting a lower limit spending of 22400 (no discretionary spending) seemed appropriate as well. Does this seem reasonable?

NedS

MarriedWithKids89 said:

So if our NUMBER is £32400 and that my OH can take a small DB pension of £2400/annum when they reach 55, how much do you think that would we need in savings/pension pots to last, say, 30 years from 55-85? Assume that we are both the same age and that we will both be eligible for a full state pension when we reach 67 (dangerous I know).

On a pure withdrawal basis you'd need around £575k. If your investment returns after fees match inflation, that gives you your NUMBER rising with inflation, which is presumably what you want. If your investment returns can beat inflation after fees, slightly less. Being so dependent on drawdown, and near 100% drawdown in the first 12 years, you are particularly susceptible to SoR risks so I'd want £600k minimum before I'd give up the day job and a large amount in cash or near cash to ride out any market volatility. Even then I think you'd be at high risk of running out of cash before you hit 85. How does your plan look if one of you dies?

MarriedWithKids89

Thanks Ned. £600K is re-assuring, it is not far off of what cfiresim said would have been 100% successful historically (£620K) and my own, simplistic flat rate calculations (£588K). How much of that should I hold in cash? I was planning on 5 years of non-discretionary spending (about £112K). Do you think that would be enough? 
"How does your plan look if one of you dies?" - less certain. Surprisingly, cfiresim seems to indicate that it is better to transfer the OH DB pension into the portfolio. This would mitigate the drop in the DB pension if they pop their clogs before me. However, the loss of one of the SPs would knock a very big hole in the discretionary spending. Food for thought. 

Ganga

MarriedWithKids89 said:

Thanks Ned. £600K is re-assuring, it is not far off of what cfiresim said would have been 100% successful historically (£620K) and my own, simplistic flat rate calculations (£588K). How much of that should I hold in cash? I was planning on 5 years of non-discretionary spending (about £112K). Do you think that would be enough? 
"How does your plan look if one of you dies?" - less certain. Surprisingly, cfiresim seems to indicate that it is better to transfer the OH DB pension into the portfolio. This would mitigate the drop in the DB pension if they pop their clogs before me. However, the loss of one of the SPs would knock a very big hole in the discretionary spending. Food for thought. 

But if one of you  "pops your clogs " and you loose one SP there will be one less to need money ,food etc.

Gatser

stephenadarglas said:

Here's our numbers. 

The NUMBER is about what each person feels they (ideally) need to have a comfortable retirement.
Income is something else and hopefully exceeds The NUMBER! 
What is your NUMBER?

MarriedWithKids89

So Gatser, or anyone else who has already retired, how much (under normal circimstances) do you actually live on in retirement and what does that buy you, e.g. 2 weeks all inclusive in the caribbean or a week in a mobile home in Crewe? How often do you eat out? Have weekends away, takeaways, change you car, etc.?

MarriedWithKids89

MarriedWithKids89 said:

So Gatser, or anyone else who has already retired, how much (under normal circimstances) do you actually live on in retirement and what does that buy you, e.g. 2 weeks all inclusive in the caribbean or a week in a mobile home in Crewe? How often do you eat out? Have weekends away, takeaways, change you car, etc.?

And do you wish you had saved more or retired earlier?

BuildTheWall

Anonymous101 said:

The whole University model is broken to me especially when it comes to means testing. I really hope it changes fundamentally in the next decade or so prior to my children getting to that age. I can't think of anywhere else in life where your ability to get financial assistance is judged on your parents income. These young people are all adults but the system still treats them as children in many respects.
That being said we as individuals are only trying to do the best for our own so I don't disagree with digging as deep as you can to provide support. Its certainly something I'll be budgeting in although as it sounds like circa £20k a child it certainly could result in an extra few years work.

Lol, am not surprised why Martin Lewis keeps saying people don’t understand the student loan system! 

Would you stop supporting your children just because they turned 18? 

Would you promise not to transfer a single pound of your wealth to your children?
 If yes, then your logic makes sense that loans for students shouldn’t be judged by parents’ income. 

If some people are using loopholes in the law, it’s a different issue, but by and large the system is fair. The fact that you cannot come up with an alternative that’s fair for everyone, means it’s not broken! 

Gatser

MarriedWithKids89 said:

MarriedWithKids89 said:

So Gatser, or anyone else who has already retired, how much (under normal circimstances) do you actually live on in retirement and what does that buy you, e.g. 2 weeks all inclusive in the caribbean or a week in a mobile home in Crewe? How often do you eat out? Have weekends away, takeaways, change you car, etc.?

And do you wish you had saved more or retired earlier?

My post of 17 Feb:
Prompted to check where our latest NUMBER is after numerous revisions ...
Groceries / Food           £ 6,000
Car running costs          £ 2,500
Household bills               £ 5,500
Holidays/Leisure             £ 5,000
Cash/Clothes/bits&bobs  £ 5,000  inc birthdays/xmas
Repairs/Replacements     £ 2,000
The NUMBER                   £ 26,000   (it was £22k in 2009)
Thankfully we cover this so we can spend the surplus on:
helping the children, more adventures, healthcare provision, next car, house mods.