Pension Cashflow Retirement Planner - Key Info?

pip895

I'm often puzzled by the widespread assumption that spending will decrease as you move into old age - I think while this is highly personal it could be that spending actually increases as more comfort is required - i.e. a growing reluctance to travel cattle class  for example.  Another factor that should be considered is that other costs creep in.  Firstly help with household maintenance and gardening - then housework and cooking meals etc.  Finally the possibility of personal and nursing care need to be factored in - both of which can be prohibitively expensive.  
In working on my own long term plan I am struck by how drastically assumptions on growth impact on the results - pretty obvious I know but if I factor in the growth I have had for the last 10 years continuing, OH can afford that Tesla he has been drooling over and  we will still be making the tax man unreasonably happy (LTA & IHT). If on the other hand I assume 1% over inflation (my current assumption) he can keep the 12 year old Lexus he has lol.

jamesd

pip895 said:

I'm often puzzled by the widespread assumption that spending will decrease as you move into old age

It's not an assumption, it's data. In the US spending declines until age 75 and in the UK throughout retirement, with the excess going into savings. About 35% drop from 65 to 80. The drop is greatest at higher income levels like the ones being discussed in this thread. Someone might be unusual but in general exploiting this is a useful way to increase income in the earlier years.

pip895 said:

In working on my own long term plan I am struck by how drastically assumptions on growth impact on the results - pretty obvious I know but if I factor in the growth I have had for the last 10 years continuing, OH can afford that Tesla he has been drooling over and  we will still be making the tax man unreasonably happy (LTA & IHT). If on the other hand I assume 1% over inflation (my current assumption) he can keep the 12 year old Lexus he has lol.

Safe withdrawal rates can show  what worked historically. Current conditions for starting drawdown are merely mediocre (say bottom 30% of cases) based on cyclically adjusted price/earnings levels and those also imply a lower returning next ten years, at least for many markets.

The Lexus looks like a good move, trying to wait for far more affordable electric vehicles.

pip895

jamesd said:

It's not an assumption, it's data. In the US spending declines until age 75 and in the UK throughout retirement, with the excess going into savings. About 35% drop from 65 to 80. The drop is greatest at higher income levels like the ones being discussed in this thread. Someone might be unusual but in general exploiting this is a useful way to increase income in the earlier years.

Both interesting studies but not ones I would want to base my own retirement planning on
- the UK study seems to, buy its nature exclude anyone in a care home.  
- It may also be being influenced by past generations having different expectations - current 90 year olds lived through the war
- So far in our retirement spending has tended to go up rather than down 😊 so not in line with those expectations - I would in any case find it depressing to think I had factored in having less money each year. 
-75 is far to young to be thinking of moving into the slow lane - we have several friends who are still flying light aircraft in their mid eighty's! 

cfw1994

pip895 said:

jamesd said:

It's not an assumption, it's data. In the US spending declines until age 75 and in the UK throughout retirement, with the excess going into savings. About 35% drop from 65 to 80. The drop is greatest at higher income levels like the ones being discussed in this thread. Someone might be unusual but in general exploiting this is a useful way to increase income in the earlier years.

Both interesting studies but not ones I would want to base my own retirement planning on
- the UK study seems to, buy its nature exclude anyone in a care home.  
- It may also be being influenced by past generations having different expectations - current 90 year olds lived through the war
- So far in our retirement spending has tended to go up rather than down 😊 so not in line with those expectations - I would in any case find it depressing to think I had factored in having less money each year. 
-75 is far to young to be thinking of moving into the slow lane - we have several friends who are still flying light aircraft in their mid eighty's! 

From what I hear from older friends & relations, spending does reduce over time.   Not just for this exceptional year, either!
Have you read about the "Go-Go, Slow-Go and No-Go years" ?
My thinking is that I want a decent amount for the earlier part of retirement, rising by inflation....but that it is likely to drop a bit later on, perhaps in stages.  Especially post 80s. 
Of course, there will be some exceptions to that generalisation: that is just my thoughts (having also witnessed older generations slow quite dramatically after 80).
So for me it is about picking a number to be happy with from 'early retirement' that rises with inflation to about 70, then if that was (for example!) 55k by the age of 70, I might drop that to 50k for the next year.   Continue to rise by inflation until 80.  Maybe it was back up at 65k by then: plan to drop to 60k.
Nothing overly dramatic, but I feel "reasonable and realistic".....
& I am also acutely aware that numbers for inflation are VERY subject to change over those lengths of time....but one has to have a plan, eh!
Oh yes - & electric vehicles are AMAZING - but you don't have to go Tesla: we have had a Kona EV for around 16K miles now, absolutely love it!!

jamesd

pip895 said:

- So far in our retirement spending has tended to go up rather than down 😊 so not in line with those expectations - I would in any case find it depressing to think I had factored in having less money each year. 

If you're satisfied that your own spending won't follow that decreasing pattern, definitely plan for what you expect for yourself.

GSP

jamesd said:

pip895 said:

- So far in our retirement spending has tended to go up rather than down 😊 so not in line with those expectations - I would in any case find it depressing to think I had factored in having less money each year. 

If you're satisfied that your own spending won't follow that decreasing pattern, definitely plan for what you expect for yourself.

At least the economy will be booming in a few years as more spend their money. You can’t take it with you!