Retirement income strategy on the back of a fag packet

Albermarle

Obviously the above is not recommended, but my question is that is it really necessary to get involved in such detailed analysis as some regular posters seem to do?
By this I mean recording in detail daily expenditure ; long term cash flow analysis ; stress testing ; XIRR monitoring ;  monte carlo scenarios ( whatever that means ), using MS money and other similar programs   etc .
Obviously some ' informed layman'  knowledge of investing, pensions, tax etc is necessary, but if you are reasonably confident that you have reached 'the figure ' and maybe a bit more, can one avoid this 'new job' ? 
I suspect that it depends to a large extent on your work background whether you like this sort of spreadsheet detail, or not ?
I suppose if it is necessary but it is not your cup of tea , then it is maybe time to finally pay for that IFA to do it for you?

Bravepants

Well, the simplest method is to work out how much you need net per month to live a decent retirement, work out what you will have available per month on your day of retirement, make sure this is sustainable by adjusting for inflation each year going forward, and have some cash safe somewhere incase you need to fork out a lump sum for some reason at some point. And that's it, job done!

RobM99

I just look at it this way - If income exceeds expenditure, I'm happy.

crv1963

Albermarle said:

Obviously the above is not recommended, but my question is that is it really necessary to get involved in such detailed analysis as some regular posters seem to do?
By this I mean recording in detail daily expenditure ; long term cash flow analysis ; stress testing ; XIRR monitoring ;  monte carlo scenarios ( whatever that means ), using MS money and other similar programs   etc .
Obviously some ' informed layman'  knowledge of investing, pensions, tax etc is necessary, but if you are reasonably confident that you have reached 'the figure ' and maybe a bit more, can one avoid this 'new job' ? 
I suspect that it depends to a large extent on your work background whether you like this sort of spreadsheet detail, or not ?
I suppose if it is necessary but it is not your cup of tea , then it is maybe time to finally pay for that IFA to do it for you?

Spreadsheets are definitely not my cup of tea! Not quite the back of a fag packet but a few sheets of A4 paper worked out 3 scenarios basic, comfortable and luxury retirement income levels, what we have already and how much more we need to reach each level. Got the EF worked out before that and then earnestly began planning which pot we needed to add to or start to reach our goals, asked lots on here as the best way forward, read around different sites and of course threads on here. Aimed for luxury passed basic and should land at the upper end of comfortable depending on when we turn off the wage tap.

coyrls

To answer your question, no, I don’t think the level of granularity that some posters use is necessary.  You can get a good view of your spending at quite a high level by looking at monthly and annual cash flows, without going down to the level of individual budget items.  You can estimate what contingency/emergency fund you might need as a percentage of annual spending, rather than researching new boiler pricing.  I have never budgeted at the item level, although I do record my expenditure in MS Money.

That said, having been retired for over 5 years, with no DB pension income and no state pension (yet), I am surprised at the amount of time and effort I have had to spend sorting out and tracking my finances, even at a relatively high level.  Over time I have now got it down to one “money day” a month when I spend between 4 to 6 hours dedicated to sorting and monitoring my finances.  I also spend too much time on this forum!

shinytop

I used Excel to model how much money we would and should have over the coming years, including various scenarios regarding likely investment returns, tax, SP, etc. That's convinced me we've enough not to have to worry about detailed budgets, so I don't.   

craig1912

Don’t (can’t use a spreadsheet) so I used an IFA for the first time in my life 12 mths before I retired. I knew I had enough to retire but wanted to understand various scenarios and how the money would last over my retirement. I do think some of the detail some people go into is a little over the top but each to their own.

Amateurretiree

I think maybe for some people it is an exercise to keep the old grey matter ticking over.
After being in control of your working life, some people need something to take its place.
I have done a very basic spreadsheet on google sheets, assuming 0% growth, deduct every month the amount we anticipate we will deduct from OH’s SIPP until SP s kick in then reduce withdrawal by SP amounts.( Once SP ‘s are in place we shouldn’t need to touch the SIPP)

As I have a DB pension it’s easy to predict income streams.
Might sound simple to some but it’s working so far!

cfw1994

RobM99 said:

I just look at it this way - If income exceeds expenditure, I'm happy.

“Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.”

For many who inhabit these boards (me included!!), I think it is a bit of a hobby/obsession......
Also, for those (like me!) who are considering jacking things in 5-15 years ahead of State Pension age, it is important to have a decent handle on things, I would say.

Everyone has their own lives to lead....some are simple, some can be more complex (children, elderly relatives, people or charities you want to help, maybe second homes or side businesses, expensive hobbies or holidays to continue....or start!) - all these can add a need to control finances (not to mention emotions!) with more detail than the back of the fag packet or even a few pages of A4.

But no....many probably don’t need to, and some of the strategies that get discussed here in depth go way above my head.  I like my finances in a box that I can easily understand....but I like to pick up snippets here and there too!

Each to their own 

Albermarle

Thanks for the reassuring comments that one can get by 90/95%  without too much fine detail I am looking to retire in about 9 months and felt that maybe my few sheets of A4 might be a bit inadequate  when I read some other posts. Probably helps that I have quite a good safety buffer, and I am generally 'good with money' so the last few per cent of detail about income or expenditure will probably not make that much difference either way in the real world.  

Robert_McGeddon

Albermarle said:

I suppose if it is necessary but it is not your cup of tea , then it is maybe time to finally pay for that IFA to do it for you?

Seems right. At retirement people generally lose the chance to earn decent income going forward. So knowing you have enough to live on is important. If you can't or won't do the exercise yourself then paying an IFA a few £000 to help you sleep at night makes sense. No fag packet necessary.

If you don't use an IFA then you do the work yourself. Or don't, I suppose - but that doesn't seem very sensible to me. A back of a fag packet calculation is hardly appropriate in planning 30 years of financial independence, spouse considerations, care home provision and maybe legacies to children and IHT. So spreadsheeting long-term scenarios becomes a given. Yet preparing spreadsheets has little value in itself. In order to create a believable spreadsheet the data going into it needs to be believable as do the assumptions and rationale. To me, the real benefit of financial modelling is the knowledge acquisition necessary to make the spreadsheet believable. Pension v ISA, World economic cycle, gilts v bonds v cash, funds v ITs v ETFs, SWR, tax, trusts, inflation, state pension, risk, volatility etc etc. Personally, I've done next to nothing on retirement planning until 18 months ago. Since then I'm learning as much as I can and doing the financial modelling. I think that by April 2021 I'll have sorted my retirement plan and will drop out of day-to-day involvement and just review annually or half yearly. No fag packet necessary.