Pension Cashflow Retirement Planner - Key Info?

SouthCoastBoy

I have spent quite a while "perfecting" my spreadsheet. I have modelled money outside of pension (S&S ISA, CASH ISAs and CASH) and pension (Funds 100%). I have then got variables for each of the "buckets" which I enter anticipated growth. I also have a variable for inflation. The variables are set at a yearly level. I also have factored in the 25% TFLS and income tax at 20% where applicable. I have also added state pension, I do not adjust this for inflation as I anticipate it should keep up with inflation or thereabouts. Then I have forecast out to age 90. Doing this will give you an insight into the significance of inflation and growth. Amazing what a 1% difference in growth will do compounded over 35 years. By having this detail I can get an array of projections based on what I plan to take out of my pots each year. For each year I also have a 2020 value and current value for whatever year the forecast is on, just so I can see the numbers in today's terms.
I find it helps me a great deal in understanding the impact of inflation or -ve growth over a sustained period.

GSP

SouthCoastBoy said:

I have spent quite a while "perfecting" my spreadsheet. I have modelled money outside of pension (S&S ISA, CASH ISAs and CASH) and pension (Funds 100%). I have then got variables for each of the "buckets" which I enter anticipated growth. I also have a variable for inflation. The variables are set at a yearly level. I also have factored in the 25% TFLS and income tax at 20% where applicable. I have also added state pension, I do not adjust this for inflation as I anticipate it should keep up with inflation or thereabouts. Then I have forecast out to age 90. Doing this will give you an insight into the significance of inflation and growth. Amazing what a 1% difference in growth will do compounded over 35 years. By having this detail I can get an array of projections based on what I plan to take out of my pots each year. For each year I also have a 2020 value and current value for whatever year the forecast is on, just so I can see the numbers in today's terms.
I find it helps me a great deal in understanding the impact of inflation or -ve growth over a sustained period.

This sounds really good! Better than “quick and dirty”.
Have you been looking after this spreadsheet for a while. If you have, just wondering what you thought of planners where metrics have stayed the same, projected out 30 or 40 years? Would you have found yourself well out of kilter or off track from reality if you hadn’t adjusted? How far out do you think planners are unadjusted?

SouthCoastBoy

GSP said:

SouthCoastBoy said:

I have spent quite a while "perfecting" my spreadsheet. I have modelled money outside of pension (S&S ISA, CASH ISAs and CASH) and pension (Funds 100%). I have then got variables for each of the "buckets" which I enter anticipated growth. I also have a variable for inflation. The variables are set at a yearly level. I also have factored in the 25% TFLS and income tax at 20% where applicable. I have also added state pension, I do not adjust this for inflation as I anticipate it should keep up with inflation or thereabouts. Then I have forecast out to age 90. Doing this will give you an insight into the significance of inflation and growth. Amazing what a 1% difference in growth will do compounded over 35 years. By having this detail I can get an array of projections based on what I plan to take out of my pots each year. For each year I also have a 2020 value and current value for whatever year the forecast is on, just so I can see the numbers in today's terms.
I find it helps me a great deal in understanding the impact of inflation or -ve growth over a sustained period.

This sounds really good! Better than “quick and dirty”.
Have you been looking after this spreadsheet for a while. If you have, just wondering what you thought of planners where metrics have stayed the same, projected out 30 or 40 years? Would you have found yourself well out of kilter or off track from reality if you hadn’t adjusted? How far out do you think planners are unadjusted?

I have been using it since 2012 so for a while. If I had used a standard metric without year on year changes I would have been quite a bit out. Mainly because over this period funds have performed way above what has been expected. Maybe the next 8 years will be negative growth so we get near the 3.5 average I initially factored in. Who knows.

jamesd

Bobziz said:

Anyone care to share their experience of replenishing their depleted cash reserves after a market slump ?

Routine rebalancing will take care of it. Like this if using the Guyton-Klinger rules from the withdrawal statement linked to in an earlier discussion:

"All interest and dividend distributions are taken in Cash and held in your investment account(s). Capital gain distributions are reinvested in IRA accounts and held in Cash for after-tax accounts.

Following years with positive returns that cause an equity category to exceed its target allocation, the excess amount is sold and reinvested in Cash or Fixed Income to fund future WDs.

Yearly WDs are funded from equities when markets are favorable and from fixed income when they are not, using this priority: 1) Cash; 2) Selling Fixed Income assets; 3) Selling Equity assets in descending order of the prior year’s performance. No WDs are funded by selling an Equity asset after a negative return year as long as Cash or Fixed Income assets are able to fund that year’s WD amount."

For the March 2020 drop the second paragraph would have led to equity selling to generate cash in previous years and that would remain intact after a short drop. The first paragraph already provides a regular cash flow to help fund withdrawing.

jamesd

GSP said:

Going back to my OP, what would you consider to be the key metrics to create a planner? One observation when constructing, surely certain numbers need to be calculated separately. My FA came up with a real return figure of 1% which appeared to be growth of 3% less 2% inflation and applied every year for forty years. £36,000 outgoings remained constant as well. Surely the inflation relates to the outgoings, and the growth for the fund should be left alone with outgoings plus inflation deducted?

Key is your anticipated spending and of course it's fine to adjust that.

Investment returns are normally expressed as x plus inflation in this sort of planning and what he's doing is keeping the pot value expressed  in todays money a well as the spending. £36k is constant in today's money because inflation adjustments are being applied throughout. He's doing that correctly.

The key risk isn't the investment volatility that risk questions tend to be about but what the probability is of your plan succeeding. If 50:50 equities:bonds won't do it then the SWR can be increased by  increasing equities to 60% or perhaps 70%. Trading off higher investment volatility for lower risk of plan failure. If that volatility gets outside acceptable bounds, either the failure chance (adjustment beyond drawdown rules) must be accepted or the spending plan revised.

It's this sort of risk to the plan driving investment allocation that I think BritishInvestor has been getting  at. It's what can lead someone to recognise that quite low investment risk or partial or total annuitisation can do the job.

cfw1994

BritishInvestor said:

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

I was wondering the same.
I sometimes feel that some FAs hold a Svengali-like power over their victims customers!
Why would you be happy with his behaviour when you’ve come to a MSE retirement forum to get some advice!?  Very confusing.....

GSP

cfw1994 said:

BritishInvestor said:

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

I was wondering the same.
I sometimes feel that some FAs hold a Svengali-like power over their victims customers!
Why would you be happy with his behaviour when you’ve come to a MSE retirement forum to get some advice!?  Very confusing.....

Not really..... Perhaps some people on here are after opinions, advice etc, something they are not able to get indoors. Why not ask for another opinion, question what my FA is doing if it’s freely available. It’s a forum, a place where people ask, contribute, inform, help, I am quite surprised you are confused at my posts. Why are you here? Quite, information, and why not.
Anyway, moving on from what a forum is for and why we frequent here.

BritishInvestor

jamesd said:

GSP said:

Going back to my OP, what would you consider to be the key metrics to create a planner? One observation when constructing, surely certain numbers need to be calculated separately. My FA came up with a real return figure of 1% which appeared to be growth of 3% less 2% inflation and applied every year for forty years. £36,000 outgoings remained constant as well. Surely the inflation relates to the outgoings, and the growth for the fund should be left alone with outgoings plus inflation deducted?

Key is your anticipated spending and of course it's fine to adjust that.

Investment returns are normally expressed as x plus inflation in this sort of planning and what he's doing is keeping the pot value expressed  in todays money a well as the spending. £36k is constant in today's money because inflation adjustments are being applied throughout. He's doing that correctly.

The key risk isn't the investment volatility that risk questions tend to be about but what the probability is of your plan succeeding. If 50:50 equities:bonds won't do it then the SWR can be increased by  increasing equities to 60% or perhaps 70%. Trading off higher investment volatility for lower risk of plan failure. If that volatility gets outside acceptable bounds, either the failure chance (adjustment beyond drawdown rules) must be accepted or the spending plan revised.

It's this sort of risk to the plan driving investment allocation that I think BritishInvestor has been getting  at. It's what can lead someone to recognise that quite low investment risk or partial or total annuitisation can do the job.

"It's this sort of risk to the plan driving investment allocation that I think BritishInvestor has been getting  at. It's what can lead someone to recognise that quite low investment risk or partial or total annuitisation can do the job."
Yep, spot on

BritishInvestor

GSP said:

cfw1994 said:

BritishInvestor said:

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

I was wondering the same.
I sometimes feel that some FAs hold a Svengali-like power over their victims customers!
Why would you be happy with his behaviour when you’ve come to a MSE retirement forum to get some advice!?  Very confusing.....

Not really..... Perhaps some people on here are after opinions, advice etc, something they are not able to get indoors. Why not ask for another opinion, question what my FA is doing if it’s freely available. It’s a forum, a place where people ask, contribute, inform, help, I am quite surprised you are confused at my posts. Why are you here? Quite, information, and why not.
Anyway, moving on from what a forum is for and why we frequent here.

The fact that you have identified potential concerns is a positive step. I recently heard of a broadly similar case where someone had been offered a full financial planning exercise (it was free so I assume it was used as a hook to sell a product) and the person in question found it so poor he abandoned it halfway through. I understand that he was a clued up individual so could understand that things weren't heading in the right direction. Others may not be so lucky and I think a poor planning exercise can be worse than not planning at all as it can give a false of security.

The way I see it you have 3 choices
1. Stick with the adviser and hope you can come to a reasonable outcome, with support from here
2. Terminate the relationship and find a professional that can offer a retirement planning service which gives you the confidence to enjoy your retirement (and you not spend so much time on here )
3. Terminate the relationship and DIY, with support from here.

cfw1994

GSP said:

cfw1994 said:

BritishInvestor said:

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

I was wondering the same.
I sometimes feel that some FAs hold a Svengali-like power over their victims customers!
Why would you be happy with his behaviour when you’ve come to a MSE retirement forum to get some advice!?  Very confusing.....

Not really..... Perhaps some people on here are after opinions, advice etc, something they are not able to get indoors. Why not ask for another opinion, question what my FA is doing if it’s freely available. It’s a forum, a place where people ask, contribute, inform, help, I am quite surprised you are confused at my posts. Why are you here? Quite, information, and why not.
Anyway, moving on from what a forum is for and why we frequent here.

Oh, I’m all for the opinions we find here: some very erudite and helpful posters!

I remain confused that you “don’t want to upset the relationship”.  
The relationship is that you are paying him for a service, and the ‘quick and dirty’ work he appears to have done for you have raised question marks in your head that you appear concerned about yet unable to raise with him for fear of...what?

You appear concerned that you might be better at planning than him, and he might take offence.  Perhaps he will....or perhaps he might be grateful for you doing his work for him!! 
To me, that sounds like you are ready to fly free and DIY.......what % could that save you every year?

Alternatively: why not discuss with him?  Surely a good relationship would make that a useful conversation?

My offer from page 1 to share a simple spreaddie that could perhaps be of interest still stands....others have mentioned theirs....what other snippets do you hope to glean here?