Pension Cashflow Retirement Planner - Key Info?

BritishInvestor

Linton said:

GSP said:

dunstonh said:

GSP said:

BritishInvestor said:

dunstonh said:

You are not paying him to do  ‘a quick and dirty cashflow projection'”, you are paying him to create a robust retirement plan that stops you having to spend time fretting and posting on here!

The OP does say that the adviser did say that it is just the start.

Is a real return of 1% throughout realistic? Is that too safe?

What investment assets are you using?  are you at the lower risk end or the higher risk end?    What margin of safety do you want to include?

Before inflation but after fees are taken off I estimate my fund has grown by c15% in the last three years since I started. It’s 5/10 risk strategy.

Long term average on that sort of risk profile would be around 5.5%.   Knock off 2% for inflation and you have 3.5%.  Knock off any extra you feel happy with for margin of error.

"The OP does say that the adviser did say that it is just the start."
It's really easy to pick holes in someone else's work, but I'm not aware of many planners working in the retirement planning space that would operate this way, especially given that it's not the start of the relationship (I believe).

Nope, I am into my fourth year and the first I have seen of this. Even his words quick and dirty and using just a few metrics to base my future on does seem ‘a bit light’. That’s where I am going to try develop my own spreadsheets, as I know myself better. I won’t try and work it so I get the answer  I want. I’d prefer something that reflects more the truth, good or bad.

Some advisers and some consumers really buy into the cashflow software and take it to an extreme.   Others do a basic cashflow planning as they have no need to go so in-depth.  Over the years I have seen cashflow planning outputs that were highly detailed but reality turned out to be nothing of the sort.  Indeed, I don't think I have ever seen a long term cashflow planner reflect anything close to reality.    So, personally, I don't put much faith in the comprehensive cashflow planning model unless it is something that is continuously updated on a very regular basis.  However, sensible cashflow planning can be very useful.   

Interesting as you say you haven’t see a long term cash flow planner reflecting anything close to reality. It makes you wonder why a number will act on them then. I suppose it’s because they use it in the absence of anything else, but from my time in management information you always seek ‘other data’ to back up your results. Not just rely on that ‘one version of the truth’, especially with so many variables, calculations, market forces, life events to go through.
.......

The problem is that to make an accurate retirement plan you need to know the future behaviour of the markets, inflation and when you are going to die.  No one knows, there is no "other data".  The best one has is historical data and the life expectancy predictions from the ONS.  There is no good reason why the future should match the past especially over the relatively short term of your life in retirement compared with the perhaps 150 years of fairly solid data.  The past includes 2 world wars, the rise and fall of empires,countries and economies and revolutions in technology.  What the next 30 years or so will see is a pure guess. As to life expectancy data, that just tells you about the average.  Where you fit in wont be known until the grim reaper knocks on your door.

People have been building perfectly robust retirement plans and dealing with this uncertainty for years. 

BritishInvestor

GSP said:

dunstonh said:

GSP said:

BritishInvestor said:

dunstonh said:

You are not paying him to do  ‘a quick and dirty cashflow projection'”, you are paying him to create a robust retirement plan that stops you having to spend time fretting and posting on here!

The OP does say that the adviser did say that it is just the start.

Is a real return of 1% throughout realistic? Is that too safe?

What investment assets are you using?  are you at the lower risk end or the higher risk end?    What margin of safety do you want to include?

Before inflation but after fees are taken off I estimate my fund has grown by c15% in the last three years since I started. It’s 5/10 risk strategy.

Long term average on that sort of risk profile would be around 5.5%.   Knock off 2% for inflation and you have 3.5%.  Knock off any extra you feel happy with for margin of error.

"The OP does say that the adviser did say that it is just the start."
It's really easy to pick holes in someone else's work, but I'm not aware of many planners working in the retirement planning space that would operate this way, especially given that it's not the start of the relationship (I believe).

Nope, I am into my fourth year and the first I have seen of this. Even his words quick and dirty and using just a few metrics to base my future on does seem ‘a bit light’. That’s where I am going to try develop my own spreadsheets, as I know myself better. I won’t try and work it so I get the answer  I want. I’d prefer something that reflects more the truth, good or bad.

Some advisers and some consumers really buy into the cashflow software and take it to an extreme.   Others do a basic cashflow planning as they have no need to go so in-depth.  Over the years I have seen cashflow planning outputs that were highly detailed but reality turned out to be nothing of the sort.  Indeed, I don't think I have ever seen a long term cashflow planner reflect anything close to reality.    So, personally, I don't put much faith in the comprehensive cashflow planning model unless it is something that is continuously updated on a very regular basis.  However, sensible cashflow planning can be very useful.   

Interesting as you say you haven’t see a long term cash flow planner reflecting anything close to reality. It makes you wonder why a number will act on them then. I suppose it’s because they use it in the absence of anything else, but from my time in management information you always seek ‘other data’ to back up your results. Not just rely on that ‘one version of the truth’, especially with so many variables, calculations, market forces, life events to go through.
I think your last line on being sensible is near the mark. I’d say withdraw when times are good, huncker down when they are not and do what you have to do. Has anyone ever known someone getting a loan when markets have crashed and they need money, to pay it back when it improves and so protected their fund from pound ravaging? Think there are still options.

"Interesting as you say you haven’t see a long term cash flow planner reflecting anything close to reality. It makes you wonder why a number will act on them then."
It's not intended to be a long term forecast. The value is in the planning and the plan should be revisited periodically to make adjustments and nudges where required.

Linton

BritishInvestor said:

Linton said:

GSP said:

dunstonh said:

GSP said:

BritishInvestor said:

dunstonh said:

You are not paying him to do  ‘a quick and dirty cashflow projection'”, you are paying him to create a robust retirement plan that stops you having to spend time fretting and posting on here!

The OP does say that the adviser did say that it is just the start.

Is a real return of 1% throughout realistic? Is that too safe?

What investment assets are you using?  are you at the lower risk end or the higher risk end?    What margin of safety do you want to include?

Before inflation but after fees are taken off I estimate my fund has grown by c15% in the last three years since I started. It’s 5/10 risk strategy.

Long term average on that sort of risk profile would be around 5.5%.   Knock off 2% for inflation and you have 3.5%.  Knock off any extra you feel happy with for margin of error.

"The OP does say that the adviser did say that it is just the start."
It's really easy to pick holes in someone else's work, but I'm not aware of many planners working in the retirement planning space that would operate this way, especially given that it's not the start of the relationship (I believe).

Nope, I am into my fourth year and the first I have seen of this. Even his words quick and dirty and using just a few metrics to base my future on does seem ‘a bit light’. That’s where I am going to try develop my own spreadsheets, as I know myself better. I won’t try and work it so I get the answer  I want. I’d prefer something that reflects more the truth, good or bad.

Some advisers and some consumers really buy into the cashflow software and take it to an extreme.   Others do a basic cashflow planning as they have no need to go so in-depth.  Over the years I have seen cashflow planning outputs that were highly detailed but reality turned out to be nothing of the sort.  Indeed, I don't think I have ever seen a long term cashflow planner reflect anything close to reality.    So, personally, I don't put much faith in the comprehensive cashflow planning model unless it is something that is continuously updated on a very regular basis.  However, sensible cashflow planning can be very useful.   

Interesting as you say you haven’t see a long term cash flow planner reflecting anything close to reality. It makes you wonder why a number will act on them then. I suppose it’s because they use it in the absence of anything else, but from my time in management information you always seek ‘other data’ to back up your results. Not just rely on that ‘one version of the truth’, especially with so many variables, calculations, market forces, life events to go through.
.......

The problem is that to make an accurate retirement plan you need to know the future behaviour of the markets, inflation and when you are going to die.  No one knows, there is no "other data".  The best one has is historical data and the life expectancy predictions from the ONS.  There is no good reason why the future should match the past especially over the relatively short term of your life in retirement compared with the perhaps 150 years of fairly solid data.  The past includes 2 world wars, the rise and fall of empires,countries and economies and revolutions in technology.  What the next 30 years or so will see is a pure guess. As to life expectancy data, that just tells you about the average.  Where you fit in wont be known until the grim reaper knocks on your door.

People have been building perfectly robust retirement plans and dealing with this uncertainty for years. 

It is not true that people have been dealing with uncertainty for years, at least not great majority of the general public..  Until around 2007, for most people retirement was straightforward.  You retired at State Pension Age, you got a state pension and if your were lucky you had an employer's pension either DB or an annuity mostly provided by the pension company.  That was it, no decisions, no risks apart from inflation and you could not do anything about that. 

Now, until annuities become viable again most people are going to have to be able to undertake at least basic retirement planning if they are not going to seriously risk poverty in later old age.  Sadly many of those people do not have the numeracy and skills required.

Bobziz

Really useful thread, thanks all. Anyone care to share their experience of replenishing their depleted cash reserves after a market slump ?

BritishInvestor

Linton said:

BritishInvestor said:

Linton said:

GSP said:

dunstonh said:

GSP said:

BritishInvestor said:

dunstonh said:

You are not paying him to do  ‘a quick and dirty cashflow projection'”, you are paying him to create a robust retirement plan that stops you having to spend time fretting and posting on here!

The OP does say that the adviser did say that it is just the start.

Is a real return of 1% throughout realistic? Is that too safe?

What investment assets are you using?  are you at the lower risk end or the higher risk end?    What margin of safety do you want to include?

Before inflation but after fees are taken off I estimate my fund has grown by c15% in the last three years since I started. It’s 5/10 risk strategy.

Long term average on that sort of risk profile would be around 5.5%.   Knock off 2% for inflation and you have 3.5%.  Knock off any extra you feel happy with for margin of error.

"The OP does say that the adviser did say that it is just the start."
It's really easy to pick holes in someone else's work, but I'm not aware of many planners working in the retirement planning space that would operate this way, especially given that it's not the start of the relationship (I believe).

Nope, I am into my fourth year and the first I have seen of this. Even his words quick and dirty and using just a few metrics to base my future on does seem ‘a bit light’. That’s where I am going to try develop my own spreadsheets, as I know myself better. I won’t try and work it so I get the answer  I want. I’d prefer something that reflects more the truth, good or bad.

Some advisers and some consumers really buy into the cashflow software and take it to an extreme.   Others do a basic cashflow planning as they have no need to go so in-depth.  Over the years I have seen cashflow planning outputs that were highly detailed but reality turned out to be nothing of the sort.  Indeed, I don't think I have ever seen a long term cashflow planner reflect anything close to reality.    So, personally, I don't put much faith in the comprehensive cashflow planning model unless it is something that is continuously updated on a very regular basis.  However, sensible cashflow planning can be very useful.   

Interesting as you say you haven’t see a long term cash flow planner reflecting anything close to reality. It makes you wonder why a number will act on them then. I suppose it’s because they use it in the absence of anything else, but from my time in management information you always seek ‘other data’ to back up your results. Not just rely on that ‘one version of the truth’, especially with so many variables, calculations, market forces, life events to go through.
.......

The problem is that to make an accurate retirement plan you need to know the future behaviour of the markets, inflation and when you are going to die.  No one knows, there is no "other data".  The best one has is historical data and the life expectancy predictions from the ONS.  There is no good reason why the future should match the past especially over the relatively short term of your life in retirement compared with the perhaps 150 years of fairly solid data.  The past includes 2 world wars, the rise and fall of empires,countries and economies and revolutions in technology.  What the next 30 years or so will see is a pure guess. As to life expectancy data, that just tells you about the average.  Where you fit in wont be known until the grim reaper knocks on your door.

People have been building perfectly robust retirement plans and dealing with this uncertainty for years. 

It is not true that people have been dealing with uncertainty for years, at least not great majority of the general public..  Until around 2007, for most people retirement was straightforward.  You retired at State Pension Age, you got a state pension and if your were lucky you had an employer's pension either DB or an annuity mostly provided by the pension company.  That was it, no decisions, no risks apart from inflation and you could not do anything about that. 

Now, until annuities become viable again most people are going to have to be able to undertake at least basic retirement planning if they are not going to seriously risk poverty in later old age.  Sadly many of those people do not have the numeracy and skills required.

I'm speaking globally - see Bengen circa 1994.
https://en.wikipedia.org/wiki/William_Bengen

Linton

Bobziz said:

Really useful thread, thanks all. Anyone care to share their experience of replenishing their depleted cash reserves after a market slump ?

We have not had a crash of any significant duration since 2008.  Before then annuities would have been the normal option for most people.

It should not be a problem anyway since one is unlikely to use more than a year or two’s worth of cash, say 10% of your pension pot at the most.  It could be replenished as part of annual rebalancing.

GSP

Before this thread goes off on a tangent about historical occurrences, can we please keep on topic, or start another thread. Thanks
Going back, my FA has sent me in his words a ‘quick and dirty’ planner which includes just a few metrics which he using to base my future activity on. Thinking more, I assume this is based on being cautious, and he has every right to advise that.
If I came up with my own planner, results and recommendations, would he welcome I have taken the time to look through numbers in more detail, or think I am trying to undermine him. It cannot look good if I provided something more fit for purpose perhaps.
Again, he described this planner as a start. I could tell him I am filling in more detail, as long as he agrees to that.
What I don’t want to do is upset the relationship though. I am happy with the way he has reviewed my holdings.
The bit I am uncomfortable about is basing decisions just on one set of data and given the lack of it in there, it must be flakey to say the least. I prefer two sets of data or results to tell a story. If one contradicts the other one, you know you have a problem or at least something that needs looking into. That’s the ‘beauty‘ of data, sometimes!

coyrls

Has he explained what his recommended withdrawal strategy is?

GSP

coyrls said:

Has he explained what his recommended withdrawal strategy is?

No. He just said I was taking ‘a little too much’ out of the fund according to his quick and dirty spreadsheet and would run out of money.

BritishInvestor

GSP said:

Before this thread goes off on a tangent about historical occurrences, can we please keep on topic, or start another thread. Thanks
Going back, my FA has sent me in his words a ‘quick and dirty’ planner which includes just a few metrics which he using to base my future activity on. Thinking more, I assume this is based on being cautious, and he has every right to advise that.
If I came up with my own planner, results and recommendations, would he welcome I have taken the time to look through numbers in more detail, or think I am trying to undermine him. It cannot look good if I provided something more fit for purpose perhaps.
Again, he described this planner as a start. I could tell him I am filling in more detail, as long as he agrees to that.
What I don’t want to do is upset the relationship though. I am happy with the way he has reviewed my holdings.
The bit I am uncomfortable about is basing decisions just on one set of data and given the lack of it in there, it must be flakey to say the least. I prefer two sets of data or results to tell a story. If one contradicts the other one, you know you have a problem or at least something that needs looking into. That’s the ‘beauty‘ of data, sometimes!

"What I don’t want to do is upset the relationship though. I am happy with the way he has reviewed my holdings."
I'm not sure how he can review holdings in the absence of a comprehensive retirement plan. How would you choose a retirement portfolio that aligns with the risk you need to take (and are happy taking) without undertaking a planning exercise first? 
It would cut a large chunk of time from the retirement planning exercise so I'm all ears