Pension Cashflow Retirement Planner - Key Info?

GSP

coyrls 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.

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.

Thank coyrls. I suppose a constant SWR does provide a constant withdrawal, but doesn’t this decrease with time as the pot shrinks? Also, and we don’t know either way but if there were a few good years of growth, isn’t it an opportunity to withdraw more and do more if you play it by ear every year?

coyrls

The "classic" SWR takes a percentage of the initial pot and increases it each year by inflation, so there is no decrease over time if the pot shrinks.  In practice it is likely that most people will use a SWR as a guideline but it is important to understand that the whole motivation for SWR studies was to establish a fixed sum increased by inflation that could be withdrawn over a period of time (usually 30 years) with a high probability (>95%) of not running out of money.  Since the classic 4% study there have been more refinements that allow you to take a higher start % if you are willing to have a variable income.  It also likely that net of fees and in the UK environment a figure of 3% to 3.5% is a safer fixed SWR.

GSP

coyrls said:

The "classic" SWR takes a percentage of the initial pot and increases it each year by inflation, so there is no decrease over time if the pot shrinks.  In practice it is likely that most people will use a SWR as a guideline but it is important to understand that the whole motivation for SWR studies was to establish a fixed sum increased by inflation that could be withdrawn over a period of time (usually 30 years) with a high probability (>95%) of not running out of money.  Since the classic 4% study there have been more refinements that allow you to take a higher start % if you are willing to have a variable income.  It also likely that net of fees and in the UK environment a figure of 3% to 3.5% is a safer fixed SWR.

Thanks coyrls. Does that mean if the fund contracted over the year, the drawer would take even more money out of it? Surely then we are getting into the realms of those key things not to do to protect the fund.

shinytop

GSP said:

coyrls 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.

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.

Thank coyrls. I suppose a constant SWR does provide a constant withdrawal, but doesn’t this decrease with time as the pot shrinks? Also, and we don’t know either way but if there were a few good years of growth, isn’t it an opportunity to withdraw more and do more if you play it by ear every year?

The percentage you take of each year's balance increases year on year.  In the first year it's 4%.  In your last year, ideally you withdraw 100%, spend it all and then slip away peacefully ...

GSP

shinytop said:

GSP said:

coyrls 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.

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.

Thank coyrls. I suppose a constant SWR does provide a constant withdrawal, but doesn’t this decrease with time as the pot shrinks? Also, and we don’t know either way but if there were a few good years of growth, isn’t it an opportunity to withdraw more and do more if you play it by ear every year?

The percentage you take of each year's balance increases year on year.  In the first year it's 4%.  In your last year, ideally you withdraw 100%, spend it all and then slip away peacefully ...

Haha. Should be the other way round.

shinytop

GSP said:

shinytop said:

GSP said:

coyrls 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.

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.

Thank coyrls. I suppose a constant SWR does provide a constant withdrawal, but doesn’t this decrease with time as the pot shrinks? Also, and we don’t know either way but if there were a few good years of growth, isn’t it an opportunity to withdraw more and do more if you play it by ear every year?

The percentage you take of each year's balance increases year on year.  In the first year it's 4%.  In your last year, ideally you withdraw 100%, spend it all and then slip away peacefully ...

Haha. Should be the other way round.

Well hopefully the 100% at is the same amount as the initial 4%, adjusted for inflation.

GSP

A question. Okay I’ll ask him but assume this is on other planner’s as well.
Why would my FA put growth and inflation together on a metric. He has assumed 3% growth less 2% inflation and applied the 1% throughout for forty years.
I would have thought growth relates to the pot, inflation relates to outgoings.
Bearing in mind there is also a huge difference in the numbers.
£750,000 * 1% = £7,500.
£750,000 * 3%. = £22,500.
£36,000 (outgoings) * 2% = £720.
Quite a difference when you apply differently?

BritishInvestor

GSP said:

A question. Okay I’ll ask him but assume this is on other planner’s as well.
Why would my FA put growth and inflation together on a metric. He has assumed 3% growth less 2% inflation and applied the 1% throughout for forty years.
I would have thought growth relates to the pot, inflation relates to outgoings.
Bearing in mind there is also a huge difference in the numbers.
£750,000 * 1% = £7,500.
£750,000 * 3%. = £22,500.
£36,000 (outgoings) * 2% = £720.
Quite a difference when you apply differently?

I think it would be cheaper for me to build you a retirement plan FOC than post on here
Why don't you post up the anonymised sheet or PM me it and I'll take a look

GSP

BritishInvestor said:

GSP said:

A question. Okay I’ll ask him but assume this is on other planner’s as well.
Why would my FA put growth and inflation together on a metric. He has assumed 3% growth less 2% inflation and applied the 1% throughout for forty years.
I would have thought growth relates to the pot, inflation relates to outgoings.
Bearing in mind there is also a huge difference in the numbers.
£750,000 * 1% = £7,500.
£750,000 * 3%. = £22,500.
£36,000 (outgoings) * 2% = £720.
Quite a difference when you apply differently?

I think it would be cheaper for me to build you a retirement plan FOC than post on here
Why don't you post up the anonymised sheet or PM me it and I'll take a look

From left to right BI, here are the following that has been populated with figures.
Year, Age, Savings at year start (which is the pot), total income (which is populated throughout at £9,000 when my state pension starts at 67), total expenses (which is exactly £36,000 throughout), income surplus/deficit (which is the £36,000 less state pension when that starts), savings at year end (which is the 1% real return less the income surplus/deficit.

jamesd

garmeg said:

jamesd said: People who don't live through near worst case times should recalculate what is safe, perhaps every five years.

Would you use 4% of the then fund in the recalculation to rebase going forward?

Or perhaps a higher percentage given that you are 5 years older at that point - perhaps 4.5% at the first review then 5% at the second with larger increases as you age?

You'd use the new remaining plan time to work out the new SWR.