What retirement planning software do you use?

yorkshireman2

bigadaj wrote: »

I think the big problem is that the vast majority of people have no appreciation of risk. Just look at nervous fliers who may well be the same people who drive like idiots. Even when risk is reasonably explained then most people wanta guaranteed return, which doesn't exist or at least doesn't if a reasonable rate of return is also required.

You're absolutely right. Calculating risk and probability in general is not something most people are confident at doing or confident at understanding.

After reading hale I was surprised at the fact that they suggested only running a few tens of thousands of iterations whereas we typically run the high hundreds of thousands to the low millions.

In my experience running even a thousand simulations tends to uncover a trend for outliers as far as financial timescales go as over a fifty year period there are only 600 monthly data points. Even with a multitude of variables and accompany standard deviations, any trends should be clearly apparent. Whereas with engineering, space programmes, and science in general, I would imagine the scope is staggering in some situations.

yorkshireman2

chucknorris wrote: »

I'm not sure that I have a definitive plan to be honest, the main problem is going to be spending it rather than making sure that we have enough. I just use an excel spreadsheet. Currently I am trying to boost my pension as a hedge against living a lot longer than anticipated.

I'm in a similar situation Chuck.

I think the problem with retiring whilst you still might have a few decades ahead (hopefully) it is difficult to get a clear picture of 'what if?'.

Some people figure 25k per annum will see them through, but there's so many assumptions bundled in with that.

For example:

- At what rate of inflation?
- Will you really be spending the same (at today's NPV) than when you're 80?
- What if you live to a hundred?
- What if there's a market crash one week after you retire?
- What if you don't get that inheritance

I think a spreadsheet can work these things out in isolation (possibly), but it is far from ideal.

I've seen software over in the states for more detailed retirement planning, but there doesn't seem to be anything for mere mortals (i.e. not IFAs) that will let me run the numbers.

chucknorris

yorkshireman2 wrote: »

I'm in a similar situation Chuck.

I think the problem with retiring whilst you still might have a few decades ahead (hopefully) it is difficult to get a clear picture of 'what if?'.

Some people figure 25k per annum will see them through, but there's so many assumptions bundled in with that.

For example:

- At what rate of inflation?
- Will you really be spending the same (at today's NPV) than when you're 80?
- What if you live to a hundred?
- What if there's a market crash one week after you retire?
- What if you don't get that inheritance

I think a spreadsheet can work these things out in isolation (possibly), but it is far from ideal.

I've seen software over in the states for more detailed retirement planning, but there doesn't seem to be anything for mere mortals (i.e. not IFAs) that will let me run the numbers.

Unfortunately I am a lot closer to retirement than that, as I'm 56 in Jan. I didn't really have any interest in pensions until a couple of years ago when my wife and I were chatting and we suddenly realised that we were going to have to really start spending much more money when we retire as we don't have children. The next step of course was thinking about how do we spend it all (in reality most, not all) if we don't know how long we are going to live. Then I suddenly realised the true value of pensions (to us), previously I had only thought along the lines of do we have enough (yes easily), but I hadn't thought beyond that. But when we started to think how and when do we spend the money, I started to realise that having enough is only part of the answer. Which is why I am investing as much as I can in pensions now. Annoyingly though the Gov has started to cap pension investment by reducing the annual allowance (lifetime allowance won't be a factor to us).

I can definitely see myself deferring a couple/few years on both my TPS and the state pension, if at the time it looks cost neutral or only slightly poor value.

System

I use a simple program called Excel:

pension A = £
pension B = £
pension C = £
Other income = £

TOTAL Income = £


Expenditure A =£
Expenditure B = £

TOTAL Expenditure = £


Result = Happiness

FatherAbraham

yorkshireman2 wrote: »

Which software, if any, do you use to put together a personal financial plan.

MoneyVista (http://www.moneyvista.com), which is crude but easy. It doesn't model variability of outcomes at all, but it does make it very easy to visualize changes in income through life.

Seeing future income holes graphically can be very motivating in terms of sticking to the savings plan.

Warmest regards,
FA

yorkshireman2

FatherAbraham wrote: »

MoneyVista (http://www.moneyvista.com), which is crude but easy. It doesn't model variability of outcomes at all, but it does make it very easy to visualize changes in income through life.

Seeing future income holes graphically can be very motivating in terms of sticking to the savings plan.

Warmest regards,
FA

Thanks for that Father Abraham. I'll take that for a spin and see how I get on.

And you're right about the holes. I think the peace of mind gained through knowing I've got my cashflow worked out correctly over the long term will be well worth the time spent.

yorkshireman2

Clifford_Pope wrote: »

I use a simple program called Excel:

pension A = £
pension B = £
pension C = £
Other income = £

TOTAL Income = £


Expenditure A =£
Expenditure B = £

TOTAL Expenditure = £


Result = Happiness

Nice idea, but alas, if only it were so simple :-)

Problem is one doesn't really know what Pension A, B or C will equal over anything but the short term, or what Expenditure A and B will be in the medium to long term, and so 'Result = Happiness' is a completely unknown.

For example, what happens if you don't get the expected results on the pensions, what if there is record inflation throughout the 2020s, what if we have three years of deflation, what if there's a market crash a week after you retire, what if annuity rates continue to drop?

If I was just planning for the next five years then that might not be too bad, but when you're looking at two, three or even four decades then the smallest variance can completely ruin the best laid plans of mice, men and IFAs.

I'd prefer to know with 99% certainty that what ever happens both my wife and I will be fine, which is why I wanted to use some proper planning software.

yorkshireman2

bigadaj wrote: »

I think the big problem is that the vast majority of people have no appreciation of risk. Just look at nervous fliers who may well be the same people who drive like idiots. Even when risk is reasonably explained then most people wanta guaranteed return, which doesn't exist or at least doesn't if a reasonable rate of return is also required.

I think you've hit the nail on the head, and I love your comparison with nervous fliers.

I suppose without a true appreciation of risk the point of financial modelling goes over people's heads (even the so-called experts) because they don't truly understand what the end results mean.

The crazy thing is that there is plenty of financial data around that can create an infinite number of realistic simulations to cover pretty much every conceivable outcome - particularly as you suggest in your previous post of running a very high number of simulations to ensure all outliers are included.

A few years ago running such simulations was only possible by the big guys with the serious computer processing resources, but these days a well spec'd PC or Mac can run tens of thousands of fifty year periods, with monthly variations, in seconds, or at worst in a few minutes.

But then, you can use all the logic in the world to explain to nervous fliers why it is statistically safer than driving to the airport, but they'll still be nervous :-)

Linton

yorkshireman2 wrote: »

Nice idea, but alas, if only it were so simple :-)

.......
For example, what happens if you don't get the expected results on the pensions, what if there is record inflation throughout the 2020s, what if we have three years of deflation, what if there's a market crash a week after you retire, what if annuity rates continue to drop?

If I was just planning for the next five years then that might not be too bad, but when you're looking at two, three or even four decades then the smallest variance can completely ruin the best laid plans of mice, men and IFAs.

I'd prefer to know with 99% certainty that what ever happens both my wife and I will be fine, which is why I wanted to use some proper planning software.

I dont think it makes sense to try and do a deep statistical analysis of the problem. No matter what arrangements you make there is always some sort of global catastrophe that renders your efforts meaningless.

The way I planned my retirement (I am now 8 years into early retirement) was to assume reasonably pessimistic investment returns (4%), inflation (3%), and expenditure needs (10% above pre-retirement expenditure). Then if things went wrong I had a lot of slack to ensure I dont end up in poverty.

As things have turned out over the past 8 years all my assumptions have indeed proved to be pessimistic so I am now in a much better position than I thought I was when I retired.

I would advocate a fairly simple year by year spreadsheet plan covering income and expenditure, inflation, investment return, and tax based on well defined assumptions. Then adjust the plan each year to correspond with reality. You can always use the plan to analyse how much slack you have by adjusting the assumptions.

doughnutmachine

Linton wrote: »

I dont think it makes sense to try and do a deep statistical analysis of the problem. No matter what arrangements you make there is always some sort of global catastrophe that renders your efforts meaningless.

The way I planned my retirement (I am now 8 years into early retirement) was to assume reasonably pessimistic investment returns (4%), inflation (3%), and expenditure needs (10% above pre-retirement expenditure). Then if things went wrong I had a lot of slack to ensure I dont end up in poverty.

tbh I think this is the best way to plan for retirement. I really don't see the point of running monte carlo simulations etc...

with modern high frequency trading etc I'm not sure that stock market movements from 100, 50 or even 10 years ago can be relevant to todays stockmarkets..