Pension Cashflow Retirement Planner - Key Info?

BritishInvestor

GSP said:

Looking at my FA’s ‘quick & dirty‘ planner, he has used a real return of 1% for forty years. Every year for the next forty years my numbers go down anywhere between £20k and £35k until it runs out when I am 94. Does this seem sound? Does anyone have a very ball park run of returns. Thanks

"Does this seem sound?"
We seem to be going round in circles.

NottinghamKnight

BritishInvestor said:

GSP said:

Looking at my FA’s ‘quick & dirty‘ planner, he has used a real return of 1% for forty years. Every year for the next forty years my numbers go down anywhere between £20k and £35k until it runs out when I am 94. Does this seem sound? Does anyone have a very ball park run of returns. Thanks

"Does this seem sound?"
We seem to be going round in circles.

Only for 13 pages.

GSP

BritishInvestor said:

GSP said:

Looking at my FA’s ‘quick & dirty‘ planner, he has used a real return of 1% for forty years. Every year for the next forty years my numbers go down anywhere between £20k and £35k until it runs out when I am 94. Does this seem sound? Does anyone have a very ball park run of returns. Thanks

"Does this seem sound?"
We seem to be going round in circles.

Not really. It seems growth and health of the pot determines how much you draw from it at that time. Try and protect that balance as much as you can. The 1% return every year for forty years seems too pessimistic to me. Yes, I know WW3 etc could happen at the drop of hat, but would be good to see a recent past run of returns which would be closer to reality, just in their volatility.
Even the moneyfacts avg pension fund growth back to 2008 in above posts Is sort of misleading as withdrawal activity goes on at different times of the year and can paint a very different picture to their data. It seems to depend on when you withdraw and that effect on YOUR fund.

BritishInvestor

GSP said:

BritishInvestor said:

GSP said:

Looking at my FA’s ‘quick & dirty‘ planner, he has used a real return of 1% for forty years. Every year for the next forty years my numbers go down anywhere between £20k and £35k until it runs out when I am 94. Does this seem sound? Does anyone have a very ball park run of returns. Thanks

"Does this seem sound?"
We seem to be going round in circles.

Not really. It seems growth and health of the pot determines how much you draw from it at that time. Try and protect that balance as much as you can. The 1% return every year for forty years seems too pessimistic to me. Yes, I know WW3 etc could happen at the drop of hat, but would be good to see a recent past run of returns which would be closer to reality, just in their volatility.
Even the moneyfacts avg pension fund growth back to 2008 in above posts Is sort of misleading as withdrawal activity goes on at different times of the year and can paint a very different picture to their data. It seems to depend on when you withdraw and that effect on YOUR fund.

As I covered in a previous post straight-line forecasting can be a good starting point, and is useful for evaluating (at a high-level) chances of success and also looking at "what-if" scenarios.
BUT, retirement planning brings a whole new challenge, with issues such as sequencing risk, volatility drag etc leading to potential hiccups during retirement and your chances of success (given the same set of historical data) are very specific to you. 
You can allow for this (fudge:)) in straight-line forecasting, but you'd need to have an idea of what your asset allocation and all-in costs were (for example), and even then I'd question what the point might be - far easier to use a tool such as Timeline (or free equivalent) that is designed for that specific purpose. 

garmeg

Might be worth modelling with a 30% reduction in your start fund then 1% return every year after that. If that still gives the desired outcome you should be pretty confident that your plans are robust enough.

Time4T_Accounts

garmeg said:

Might be worth modelling with a 30% reduction in your start fund then 1% return every year after that. If that still gives the desired outcome you should be pretty confident that your plans are robust enough.

I think that really is the point : stress test it to the point where you can’t live with the results and then judge, in your own opinion, the likelihood or otherwise of those sorts of returns occurring.

GSP

BritishInvestor said:

GSP said:

BritishInvestor said:

GSP said:

Looking at my FA’s ‘quick & dirty‘ planner, he has used a real return of 1% for forty years. Every year for the next forty years my numbers go down anywhere between £20k and £35k until it runs out when I am 94. Does this seem sound? Does anyone have a very ball park run of returns. Thanks

"Does this seem sound?"
We seem to be going round in circles.

Not really. It seems growth and health of the pot determines how much you draw from it at that time. Try and protect that balance as much as you can. The 1% return every year for forty years seems too pessimistic to me. Yes, I know WW3 etc could happen at the drop of hat, but would be good to see a recent past run of returns which would be closer to reality, just in their volatility.
Even the moneyfacts avg pension fund growth back to 2008 in above posts Is sort of misleading as withdrawal activity goes on at different times of the year and can paint a very different picture to their data. It seems to depend on when you withdraw and that effect on YOUR fund.

As I covered in a previous post straight-line forecasting can be a good starting point, and is useful for evaluating (at a high-level) chances of success and also looking at "what-if" scenarios.
BUT, retirement planning brings a whole new challenge, with issues such as sequencing risk, volatility drag etc leading to potential hiccups during retirement and your chances of success (given the same set of historical data) are very specific to you. 
You can allow for this (fudge:)) in straight-line forecasting, but you'd need to have an idea of what your asset allocation and all-in costs were (for example), and even then I'd question what the point might be - far easier to use a tool such as Timeline (or free equivalent) that is designed for that specific purpose. 

Thanks BI.
”As I covered in a previous post straight-line forecasting can be a good starting point, and is useful for evaluating (at a high-level) chances of success and also looking at "what-if" scenarios”

Pulling together my information, I don’t find straight line forecasting much use at all. It’s obsolete after your first withdrawal. The ‘success’ appears to be responding to and withdrawing on market conditions at that time

” BUT, retirement planning brings a whole new challenge, with issues such as sequencing risk, volatility drag etc leading to potential hiccups during retirement and your chances of success (given the same set of historical data) are very specific to you”.

Taken from a sequencing risk article:

KEY TAKEAWAYS

• Timing is everything. Sequence risk is the danger that the timing of withdrawals from a retirement account will damage the investor's overall return.
• Account withdrawals during a bear market are more costly than the same withdrawals in a bull market.
• A diversified portfolio can protect your savings against sequence risk.

Timing appears to be everything. When you are thinking of withdrawing, you look at your fund balance and see how its grown/shrunk since your last withdrawal, and that determines what you do from healthy. Healthy growth, good withdrawal. Bad growth, little or perhaps no withdrawal at that time.

BritishInvestor

GSP said:

BritishInvestor said:

GSP said:

BritishInvestor said:

GSP said:

Looking at my FA’s ‘quick & dirty‘ planner, he has used a real return of 1% for forty years. Every year for the next forty years my numbers go down anywhere between £20k and £35k until it runs out when I am 94. Does this seem sound? Does anyone have a very ball park run of returns. Thanks

"Does this seem sound?"
We seem to be going round in circles.

Not really. It seems growth and health of the pot determines how much you draw from it at that time. Try and protect that balance as much as you can. The 1% return every year for forty years seems too pessimistic to me. Yes, I know WW3 etc could happen at the drop of hat, but would be good to see a recent past run of returns which would be closer to reality, just in their volatility.
Even the moneyfacts avg pension fund growth back to 2008 in above posts Is sort of misleading as withdrawal activity goes on at different times of the year and can paint a very different picture to their data. It seems to depend on when you withdraw and that effect on YOUR fund.

As I covered in a previous post straight-line forecasting can be a good starting point, and is useful for evaluating (at a high-level) chances of success and also looking at "what-if" scenarios.
BUT, retirement planning brings a whole new challenge, with issues such as sequencing risk, volatility drag etc leading to potential hiccups during retirement and your chances of success (given the same set of historical data) are very specific to you. 
You can allow for this (fudge:)) in straight-line forecasting, but you'd need to have an idea of what your asset allocation and all-in costs were (for example), and even then I'd question what the point might be - far easier to use a tool such as Timeline (or free equivalent) that is designed for that specific purpose. 

Thanks BI.
”As I covered in a previous post straight-line forecasting can be a good starting point, and is useful for evaluating (at a high-level) chances of success and also looking at "what-if" scenarios”

Pulling together my information, I don’t find straight line forecasting much use at all. It’s obsolete after your first withdrawal. The ‘success’ appears to be responding to and withdrawing on market conditions at that time

” BUT, retirement planning brings a whole new challenge, with issues such as sequencing risk, volatility drag etc leading to potential hiccups during retirement and your chances of success (given the same set of historical data) are very specific to you”.

Taken from a sequencing risk article:

KEY TAKEAWAYS

• Timing is everything. Sequence risk is the danger that the timing of withdrawals from a retirement account will damage the investor's overall return.
• Account withdrawals during a bear market are more costly than the same withdrawals in a bull market.
• A diversified portfolio can protect your savings against sequence risk.

Timing appears to be everything. When you are thinking of withdrawing, you look at your fund balance and see how its grown/shrunk since your last withdrawal, and that determines what you do from healthy. Healthy growth, good withdrawal. Bad growth, little or perhaps no withdrawal at that time.

"Timing appears to be everything. When you are thinking of withdrawing, you look at your fund balance and see how its grown/shrunk since your last withdrawal, and that determines what you do from healthy. Healthy growth, good withdrawal. Bad growth, little or perhaps no withdrawal at that time."
You "could" follow this approach, but you might want more income stability. Very much down to personal preference. 

GSP

BritishInvestor said:

GSP said:

BritishInvestor said:

GSP said:

BritishInvestor said:

GSP said:

Looking at my FA’s ‘quick & dirty‘ planner, he has used a real return of 1% for forty years. Every year for the next forty years my numbers go down anywhere between £20k and £35k until it runs out when I am 94. Does this seem sound? Does anyone have a very ball park run of returns. Thanks

"Does this seem sound?"
We seem to be going round in circles.

Not really. It seems growth and health of the pot determines how much you draw from it at that time. Try and protect that balance as much as you can. The 1% return every year for forty years seems too pessimistic to me. Yes, I know WW3 etc could happen at the drop of hat, but would be good to see a recent past run of returns which would be closer to reality, just in their volatility.
Even the moneyfacts avg pension fund growth back to 2008 in above posts Is sort of misleading as withdrawal activity goes on at different times of the year and can paint a very different picture to their data. It seems to depend on when you withdraw and that effect on YOUR fund.

As I covered in a previous post straight-line forecasting can be a good starting point, and is useful for evaluating (at a high-level) chances of success and also looking at "what-if" scenarios.
BUT, retirement planning brings a whole new challenge, with issues such as sequencing risk, volatility drag etc leading to potential hiccups during retirement and your chances of success (given the same set of historical data) are very specific to you. 
You can allow for this (fudge:)) in straight-line forecasting, but you'd need to have an idea of what your asset allocation and all-in costs were (for example), and even then I'd question what the point might be - far easier to use a tool such as Timeline (or free equivalent) that is designed for that specific purpose. 

Thanks BI.
”As I covered in a previous post straight-line forecasting can be a good starting point, and is useful for evaluating (at a high-level) chances of success and also looking at "what-if" scenarios”

Pulling together my information, I don’t find straight line forecasting much use at all. It’s obsolete after your first withdrawal. The ‘success’ appears to be responding to and withdrawing on market conditions at that time

” BUT, retirement planning brings a whole new challenge, with issues such as sequencing risk, volatility drag etc leading to potential hiccups during retirement and your chances of success (given the same set of historical data) are very specific to you”.

Taken from a sequencing risk article:

KEY TAKEAWAYS

• Timing is everything. Sequence risk is the danger that the timing of withdrawals from a retirement account will damage the investor's overall return.
• Account withdrawals during a bear market are more costly than the same withdrawals in a bull market.
• A diversified portfolio can protect your savings against sequence risk.

Timing appears to be everything. When you are thinking of withdrawing, you look at your fund balance and see how its grown/shrunk since your last withdrawal, and that determines what you do from healthy. Healthy growth, good withdrawal. Bad growth, little or perhaps no withdrawal at that time.

"Timing appears to be everything. When you are thinking of withdrawing, you look at your fund balance and see how its grown/shrunk since your last withdrawal, and that determines what you do from healthy. Healthy growth, good withdrawal. Bad growth, little or perhaps no withdrawal at that time."
You "could" follow this approach, but you might want more income stability. Very much down to personal preference. 

“You "could" follow this approach, but you might want more income stability. Very much down to personal preference”.

That’s true as well. With so much volatility during a year, I wonder how quickly falls are recovered. The recent one in Spring was unwound just two months or so later, though depending what pushes the markets down in the first place may decide if its short or long term.

coyrls

GSP said:

BritishInvestor said:

GSP said:

Looking at my FA’s ‘quick & dirty‘ planner, he has used a real return of 1% for forty years. Every year for the next forty years my numbers go down anywhere between £20k and £35k until it runs out when I am 94. Does this seem sound? Does anyone have a very ball park run of returns. Thanks

"Does this seem sound?"
We seem to be going round in circles.

It seems growth and health of the pot determines how much you draw from it at that time. Try and protect that balance as much as you can.

That is one approach but as I've said a few times SWR studies were designed to address the issue of maintaining a constant inflation adjusted withdrawal in the face of investment volatility.