Tools to plan for retirement?

Stubod

..I will have to google "Monte Carlo" analysis and see if I can get my rather simple brain to understand it!

cobson

It isn't perfect of course....
https://www.investopedia.com/financial-edge/0113/planning-your-retirement-using-the-monte-carlo-simulation.aspx

kinger101

cobson said:

Stubod said:

The only problem with this is that if you work on "safe" / worst case  numbers, (eg I use 4% inflation and 1% interest / growth on all savings and investments), then potentially you are not spending enough money! 

Your other problem is that spreadsheets hide sequence of return risk - even using 'safe' return rates doesn't make you immune to this.  Thats why the specialist tools use techniques like Monte Carlo analysis to try and gauge the risk.

It is possible to run Monte Carlo analysis in Excel.

AnotherJoe

I previously used firecalc, firesim and retireeasy. Don't need those any more but they were very helpful getting me on the right track. 

I'd also say if you need to use UK data then you have the wrong investment strategy because you should  be investing globally (and maybe in specific industries and companies) ,so  that the U.K. economy is a very small part of your investments, and thus if you have the requirement to source the last hundred years of FTSE100 or similar U.K.  data then it's like choosing which hammer to knock a nail in when you should be using screws. 

garmeg

cobson said:

Stubod said:

The only problem with this is that if you work on "safe" / worst case  numbers, (eg I use 4% inflation and 1% interest / growth on all savings and investments), then potentially you are not spending enough money! 

Your other problem is that spreadsheets hide sequence of return risk - even using 'safe' return rates doesn't make you immune to this.  Thats why the specialist tools use techniques like Monte Carlo analysis to try and gauge the risk.

You could always start the spreadsheet with a couple of -20% returns in years 1 and 2 and a small recovery afterwards. If the plan works in that scenario then it should pretty much past muster.

cfw1994

garmeg said:

cobson said:

Stubod said:

The only problem with this is that if you work on "safe" / worst case  numbers, (eg I use 4% inflation and 1% interest / growth on all savings and investments), then potentially you are not spending enough money! 

Your other problem is that spreadsheets hide sequence of return risk - even using 'safe' return rates doesn't make you immune to this.  Thats why the specialist tools use techniques like Monte Carlo analysis to try and gauge the risk.

You could always start the spreadsheet with a couple of -20% returns in years 1 and 2 and a small recovery afterwards. If the plan works in that scenario then it should pretty much past muster.

That is pretty well my approach.   

I reckon (& have read elsewhere!) if you can get through your first 10 y, you’ll probably do well enough.   I am absolutely certain it is possible to overthink this stuff (hence why I am on here most days, eh!).....

Of course no one can be certain we won’t have a 10 year recession ahead of us....but I remain positive, and also “globally invested” 

Law_man

Dandytf said:

OP
I uses EPA's ILife Saving+Spending Tool,
Which allows me to view effect of frozen DB and Active DC schemes.

Do you have a link to this? Sounds interesting.
I tend to use Excel. Perhaps we should all look at sharing a vanilla spreadsheet of our workings and work together to create a super dooper version.

BritishInvestor

kinger101 said:

cobson said:

Stubod said:

The only problem with this is that if you work on "safe" / worst case  numbers, (eg I use 4% inflation and 1% interest / growth on all savings and investments), then potentially you are not spending enough money! 

Your other problem is that spreadsheets hide sequence of return risk - even using 'safe' return rates doesn't make you immune to this.  Thats why the specialist tools use techniques like Monte Carlo analysis to try and gauge the risk.

It is possible to run Monte Carlo analysis in Excel.

It's possible to do lots of things in Excel but I'm not sure that it would be the optimal choice nor what you would gain from the exercise.

BritishInvestor

AnotherJoe said:

I previously used firecalc, firesim and retireeasy. Don't need those any more but they were very helpful getting me on the right track. 

I'd also say if you need to use UK data then you have the wrong investment strategy because you should  be investing globally (and maybe in specific industries and companies) ,so  that the U.K. economy is a very small part of your investments, and thus if you have the requirement to source the last hundred years of FTSE100 or similar U.K.  data then it's like choosing which hammer to knock a nail in when you should be using screws. 

You need UK inflation data

BritishInvestor

cobson said:

It isn't perfect of course....
https://www.investopedia.com/financial-edge/0113/planning-your-retirement-using-the-monte-carlo-simulation.aspx

I think it's far from perfect, even for someone that uses MC modelling regularly and has a handle on reasonable input parameters.