Pension Returns

Nick9967

SouthCoastBoy said:

With regards to university, I have found this has cost me approx £7200 annually per person, so may be something worth considering. It is very depdendent where the university is, unfortunately both my children chose expensive university cities in respect to accommodation.

Hi my two will need to work prior and during holidays and save , one is already doing this, they both have a pot of £20k to fall back on but would prefer that went on a round the world trip and a deposit on property if I can get them to do that.
not in my life time will they get 7,200pa out of me, haha!  on top of their maintenance loan which should be 5200 or similar ish! that's almost a salary in lots of instances, whilst I'm still paying phones, clothes, holidays, etc etc 
I reckon 350 p/m from me + 100 of their own from working in holidays prior to going , that should see them through everything other than accommodation i should think.

cobson

Nick9967 said:

I'm at a bit of a standstill really as far as sequence of returns,
I run 3 spreadsheets now each with a different sequence, one with a flat growth of 5% for all 22 years, one with a sequence starting badly but averaging 4.5% the other averaging  5.3% but with poor years spread in each third of the 22 year cycle.
My withdrawals stay the same with the exception of the middle sequence where the poor years are at the very beginning, my strategy for that is either to delay retirement by 2 years (or whatever is required) or still retire and use some of my cash reserve to cover the couple of bad years, and make no drawdown at all.
The problem is the annual returns are so "finger in the air" change these and the whole picture changes dramatically.
As far as I can see following the 4% withdrawal safe line is built around a pot lasting from retirement to death and not what I need which is for the pot to last 22 years from 58 to 80 with varied withdrawals, so I'm unsure what growth rate (inc. inflation) is best for me to use.

Instead of having multiple spreadsheets you could use a tool like the one at flexibleretirementplanner.com which uses Monte Carlo analysis to run thousands of different sequences of return, showing you the percentage that fail.  It also has a sensitivity analysis mode where you can compare a range of withdrawal amounts v. return rates, in order to identify how safe each combination of values are using a heat-map.

Nick9967

cobson said:

Instead of having multiple spreadsheets you could use a tool like the one at flexibleretirementplanner.com which uses Monte Carlo analysis to run thousands of different sequences of return, showing you the percentage that fail.  It also has a sensitivity analysis mode where you can compare a range of withdrawal amounts v. return rates, in order to identify how safe each combination of values are using a heat-map.

Ill give it a go thanks , problem usually is the calculators have a fixed withdrawal rate and mine isn't based on that or a % ,  but i'll try and see what it shows thanks

SouthCoastBoy

I would just have one spreadsheet but use variables that can be changed to see impact. I have tinkered with my s/sheet over the years and now have various variables defined to give flexibility. I have also conducted some stress analysiswhen first three years of retirement give a return on equities of -20%,-20%,-10% and then other instances had inflation at double digit growth but returns around 3%, all useful information. Personally I wouldn't use on online tool as most probably wouldn't be exactly what you want, I think you are better doing your own bespoke development/analysis, I would say that though as I write software for a living

cobson

Nick9967 said:

cobson said:

Instead of having multiple spreadsheets you could use a tool like the one at flexibleretirementplanner.com which uses Monte Carlo analysis to run thousands of different sequences of return, showing you the percentage that fail.  It also has a sensitivity analysis mode where you can compare a range of withdrawal amounts v. return rates, in order to identify how safe each combination of values are using a heat-map.

Ill give it a go thanks , problem usually is the calculators have a fixed withdrawal rate and mine isn't based on that or a % ,  but i'll try and see what it shows thanks

With the tool I mention you set a default withdrawal amount, but you can override it for any period that you want - setting a different amount for each year if you need to.