How much pension will you get? Build your own dashboard to keep track of your progress

[Deleted User]

jamesd wrote: »

The meaning of safe withdrawal rate includes variable strategies. Safe does not imply unchanging, it merely requires taking no more than specified by the rules used to calculate the safe withdrawal rate being used.

It seems that you simply have a preference for the fixed variety. Nothing wrong with that preference but it doesn't mean that others are less safe.

You might find something like cfiresim useful because it can be told to use the variable spending Guyton-Klinger rules but with a constraint that the income isn't allowed to go below a specified value. You can set that value to the SWR calculated for whatever fixed rule you prefer.

Since the relevant rates have also been calculated for the UK and include situations far worse than that is likely to produce including millions of British workers being killed and the UK changing fro a superpower to something less you might consider being less sceptical. Brexit could be unpleasant but it isn't likely to be close to what is already handled by the drawdown rules.

Interestingly, world wars are not that bad for stocks and bonds, unless you are on the losing side. Or a Russian investor in 1918. Or a Swedish one in 1945.

There are other interesting examples outside US and UK (Japan anyone?) but I don’t like stockmarket data mining to prove a point about future scenarios. Here are a couple of thoughts...

1. The speed of technological development and wealth growth worldwide has been unbelievably high over the last 100 years when compared vs any preceding period. Will it keep accelerating or revert to normal? Bound to impact investment returns.

2. You are on an island. The currency is corn cobs. Only 10 people live there, all planting corn, providing services and goods to each other in exchange for cobs. Now imagine that 6 of them have been hoarding corn and once they accumulated lots (it keeps), decided to retire. Now all the services and other products are generated by just 4 people. The other 6 now pay with accumulated corn but produce nothing. What do you think will happen to the value of a cob? Right. It will go down. The value of services and goods produced by 4 people will jump and the value of hoarded cobs will tumble.

The share of people who are retired and live of accumulated assets keeps growing. Fast. People didn’t retire at all until modern times, now everyone wants to retire at 50 (danke Bismarck). Tomorrow might be nothing like yesterday. Or maybe it won’t matter.

ctate

I'm trying to build my spreadsheet. However, one of my pensions is a so called deferred scheme. I cannot see any figure giving the current value of the pension, only the figure payable from the year I retire. As this is my main pension, I'm not sure how to proceed with the spreadsheet. Should I be able to obtain the current value (money purchase) from somewhere? Thanks.

NoMore

@ctate sounds like a defined benefit pension, in which case your not worried about Safe withdrawal rates as there's no pot, just a guarantee to pay you a fixed amount every year (usually also index linked so increases with inflation). You will never run out of money from this pension as the pension always pays out until you die.

RuleTheWorld

Deleted_User wrote: »

I really like this guy’s “cushioned withdrawals strategy”, which is a variation on variable withdrawal.

https://www.michaeljamesonmoney.com/2014/02/cushioned-retirement-investing.html
https://www.michaeljamesonmoney.com/2014/02/working-out-your-retirement-magic-number.html

I've always had in mind something like the cushioned idea.

Something like
all TFLS = pension i.e. none needed for mortgage, dream holiday or anything else - this will help over future years to make sure income is taken as tax efficiently as possible

A few years of income always ready in 'cash'

Brave enough to keep remainder of portfolio invested in 'the market'

jamesd

ctate wrote: »

I'm trying to build my spreadsheet. However, one of my pensions is a so called deferred scheme. I cannot see any figure giving the current value of the pension, only the figure payable from the year I retire. As this is my main pension, I'm not sure how to proceed with the spreadsheet. Should I be able to obtain the current value (money purchase) from somewhere? Thanks.

Have a look at rows 14 and 15 in the final step 10 picture. That type has an income but not a normal capital value.

Typically the best way to use that sort of scheme is to take the income at the scheme's normal retirement age and live off money in personal pensions from retiring until you reach that age. This is because the penalty for taking it early - the actuarial reduction - tends to be quite high. But not always and the details do matter, sometimes leading to very different suggestions. Best to post specifics in a new topic for more detailed thoughts on your own situation and possible approaches.

It can be appropriate to transfer out of such schemes sometimes, notably if life expectancy is lower than normal, there's a need for income flexibility or a strong desire to provide an inheritance. If you were to do that the cash equivalent transfer value (CETV) would be calculated and that is the pot size that you'd get. That pot could then be used to provide mixture of guaranteed income (state pension deferral or annuity buying) and non-guaranteed but flexible income (4% rule, but taking more when younger and less when older). Some worked examples of such transfers are linked from here but every situation is different.

This is getting beyond the dashboard's job - providing an overview of where your pensions are and likely income from them - though.

wrighar

I've always run a spreadsheet for my pension funds, and swapped funds round regularly.

I can go back to any week and see how much each fund was worth, and what each month contribution was by fund. I'm now investing in around 45 funds with 20-25k in each.

I'm 28 yrs in now, and have finally reached the LTA through careful choice and higher than normal payments.

Just 5 yrs left before I can claim it.

You need to own your pension pot, not bury your head.

foofi22

wrighar wrote: »

.... I'm now investing in around 45 funds with 20-25k in each.
...

You need to own your pension pot, not bury your head.

With 45 funds, sounds like you will be burying your head a lot.

jamesd

Deleted_User wrote: »

Interestingly, world wars are not that bad for stocks and bonds, unless you are on the losing side. Or a Russian investor in 1918. Or a Swedish one in 1945.

That's an interesting combination of assertions. Easy bit to agree with is that the effect varies and losing is bad. But...

would you agree that it's right to describe something like being retired for the great depression in terms like "horribly bad returns" or "extremely bad returns"?

If you do agree, you have an inconsistency to resolve between that and "not that bad", at least for UK retirees. That's because a mid 1930s start is the worst one for UK investors that Okusanya and Kitces found. That's a start putting WW2 in the most sensitive first ten years and it's notably worse than having the great depression in the first ten.

I don't agree that something worse than retiring just before the great depression can usefully be described as not that bad. Horrendously or horribly bad fits better.

Deleted_User wrote: »

There are other interesting examples outside US and UK (Japan anyone?) but I don’t like stockmarket data mining to prove a point about future scenarios.

You get similar results from modelling using non-historic sequences using expected returns.

Deleted_User wrote: »

1. The speed of technological development and wealth growth worldwide has been unbelievably high over the last 100 years when compared vs any preceding period. Will it keep accelerating or revert to normal? Bound to impact investment returns.

Such things will have effects but before they change the safe withdrawal rate they will need to be worse than a world war, the great depression and sustained high inflation to the extent seen so far. That's not impossible but it's also not likely. As Bill Bengen put it in 2017:

"I like to remind people that the 4.5% rule is not a law of nature, like Newton's laws of motion, which will probably never change. Markets can change, and it is possible that in the future the 4.5% rule, which has held up for 50 years, might be violated. But I haven't seen those circumstances yet."

Deleted_User wrote: »

What do you think will happen to the value of a cob?

The corn price won't change. The six will import labour, goods and services or export production if four aren't enough to meet demand.

We've had a sustained example of this in Japan, where the population demographics shifted dramatically older, to as many being over 65 as between 15-64 in 2015. Japan is a very insular example, with the language providing a substantial barrier to importing labour and significant goods and services import barriers, while the stock market has been dominated by locals. The government has had great trouble over decades in trying to produce inflation (reduce the value of corn) and has consistently failed. The barriers to importing labour have led to a trend towards older people returning to work and lots of exporting of production to meet the labour demand.

Deleted_User wrote: »

The share of people who are retired and live of accumulated assets keeps growing. Fast.

Globally or just parochially? The UK dependency ratio is expected to increase but there are other countries with different properties. The English language isn't a Japanese level barrier to labour mobility, while foreign owners are very active in UK markets and UK firms in global markets.

Much data on dependency ratio skips interesting past times and you might find this chart of the UK dependency ratio from 1960 interesting, particularly the 1973 high, 2007 low and pretty low 1990. There's a very important difference between the late 60s to early 80s higher dependency ratio and now: children can't vote but those children who are now retiring can.

bostonerimus

wrighar wrote: »

I've always run a spreadsheet for my pension funds, and swapped funds round regularly.

I can go back to any week and see how much each fund was worth, and what each month contribution was by fund. I'm now investing in around 45 funds with 20-25k in each.

I'm 28 yrs in now, and have finally reached the LTA through careful choice and higher than normal payments.

Just 5 yrs left before I can claim it.

You need to own your pension pot, not bury your head.

So what's your asset allocation and your average annual return over those 28 years?

MK62

That might take a while to work out......😉