Drawdown Pension Growth

MrDinosaur

I have a nice spreadsheet which calculates my drawdown amount and I have used the following growth rates.
3% growth with 2 % inflation - which gives me an overall value of 1%.
does this look about right or is there a standard which i should be using.

Triumph13

That rather depends on which asset classes you are invested in!

Albermarle

From comments on other threads , I think you can say this is what you might expect from a 40% equity portfolio if you were erring on the slightly pessimistic side.

Brilley

..I work on 4% inflation and 1% "interest"...but I am naturally pessimistic...

coyrls

Brilley wrote: »

..I work on 4% inflation and 1% "interest"...but I am naturally pessimistic...

With those assumptions, will you ever be able to retire?

MrDinosaur

Triumph13 wrote: »

That rather depends on which asset classes you are invested in!

Invested in 60% equity at present, but may drop down to 40% just before I retire.

MarkCarnage

Brilley wrote: »

..I work on 4% inflation and 1% "interest"...but I am naturally pessimistic...

That's not just pessimistic it's illogical!

Are you wholly 'invested' in cash? Do you expect to be wholly in cash indefinitely?

Inflation is about half that right now too, and if it does pick up, the nominal returns on real assets will eventually do so too.

Thrugelmir

MrDinosaur wrote: »

I have a nice spreadsheet which calculates my drawdown amount and I have used the following growth rates.
3% growth with 2 % inflation - which gives me an overall value of 1%.
does this look about right or is there a standard which i should be using.

No standard. As the future is unpredictable and uncertain. Growth is unlikely to be linear. How much volatility and risk can you afford to be exposed too?

DairyQueen

I project future returns and withdrawal amounts using different combinations of growth and inflation rates. Stress-testing helps focus the mind on a back-up plan for a poor sequence of returns and/or period of high inflation. The risk of running out of cash is mitigated by using variable drawdown. Many strategies are available and jamesd has created an excellent thread on safe withdrawal rates:
https://forums.moneysavingexpert.com/discussion/5466114/drawdown-safe-withdrawal-rates&highlight=drawdown+jamesd

MrDinosaur

I can afford to have zero growth and will be good into my eighties, so I believe I can afford some volatility. Cash lump sum can also get me through 4 years prior to state pension and then probably ten years. For me it’s all a sour taking more when investments are good and less or zero when poor.

cfw1994

MrDinosaur wrote: »

I have a nice spreadsheet which calculates my drawdown amount and I have used the following growth rates.
3% growth with 2 % inflation - which gives me an overall value of 1%.
does this look about right or is there a standard which i should be using.

Tricky questions, eh!
I doubt there is any "standard"....be good if any IFAs here felt like sharing their views!

This is one of the harder problems to answer.

FWIW, I would personally aim for an expected difference of +2 to +5 over inflation....but I would also fiddle with a few "what if's"

For example, "what if the value of the pot drops 30% near the beginning, or after 5 years?"

Difficult to be scientific, & you might want some other income pot/s to sit out such an event, in my view....

MrDinosaur wrote: »

I can afford to have zero growth and will be good into my eighties, so I believe I can afford some volatility. Cash lump sum can also get me through 4 years prior to state pension and then probably ten years. For me it’s all a sour taking more when investments are good and less or zero when poor.

Sounds like a breeze then!