Returns and inflation forecasting

Albermarle

Also downsizing is part of our strategy so that will give us flexibility if things don't turn out as well as planned. 

Might be worth a read .

Downsizing: why the dream rarely matches reality (fidelity.co.uk)

anonmoose

Thanks Albemarle I read it but in our case it isn't relevant as we have land and it takes a massive amount of upkeep in both time and cost. We are in the higher council tax band and that is mainly due to the land with the property that we will no longer want to manage. It will be a total lifestyle change.

But I can see if you had a nice detached there would be limited benefit to simply moving to a nice semi that's a bit cheaper.

Sea_Shell

Sea_Shell said:

westv said:

Sea_Shell said:

westv said:

Sea_Shell said:

Do you have to account for inflation on both sides of the spreadsheet?   Both remaining pot "worth" and projected spending?

The money runs out very quickly doing it this way, if sustained.

Should I only be factoring inflation on EITHER pot value or spends, rather than both?   

Definitely one or the other. Not both

So, if one is likely to "make cutbacks" to spending, is it better to account for inflation on the "pot" side of the equation and leave spending at a flat figure?

Or split the difference?

Well I just leave spending as a flat figure and reduce the total pot down by an inflation figure each year. That way I have a better idea of the future value of the pot in today's terms. 
If I was going to make cutbacks in spending then, of course, I would reduce the spending figure if it's not keeping up with inflation.

Thanks.   I'll have a play with the figures.

What I'll probably to is up the spends a bit, but then leave it flat.   So allow say £18k rather than £15k.

My Brain Hurts!!!

Should the figures after 10 years vary wildly, depending on whether inflation is included within "erosion" of the pot, or on spends?


I think I'll just stick my finger in the air and see which way the winds blowing!!    It'll all do what it'll do anyway.   I only have control over our asset allocation and spends...everything else will "just happen"

westv

Sea_Shell said:

Sea_Shell said:

westv said:

Sea_Shell said:

westv said:

Sea_Shell said:

Do you have to account for inflation on both sides of the spreadsheet?   Both remaining pot "worth" and projected spending?

The money runs out very quickly doing it this way, if sustained.

Should I only be factoring inflation on EITHER pot value or spends, rather than both?   

Definitely one or the other. Not both

So, if one is likely to "make cutbacks" to spending, is it better to account for inflation on the "pot" side of the equation and leave spending at a flat figure?

Or split the difference?

Well I just leave spending as a flat figure and reduce the total pot down by an inflation figure each year. That way I have a better idea of the future value of the pot in today's terms. 
If I was going to make cutbacks in spending then, of course, I would reduce the spending figure if it's not keeping up with inflation.

Thanks.   I'll have a play with the figures.

What I'll probably to is up the spends a bit, but then leave it flat.   So allow say £18k rather than £15k.

My Brain Hurts!!!

Should the figures after 10 years vary wildly, depending on whether inflation is included within "erosion" of the pot, or on spends?


I think I'll just stick my finger in the air and see which way the winds blowing!!    It'll all do what it'll do anyway.   I only have control over our asset allocation and spends...everything else will "just happen"

Well I'm in the KISS camp. My spreadsheet has as little as is needed by me
All it has is columns for cash pot, various DB incomes, SP and spending.
DB/SP that will be index linked remain the same figure for each year.
DB which won't index linked reduces by inflation.
Spending figure remains the same on the assumption that it will stay with inflation.
Cash pot column at the end has a reduction based on inflation rate less a guess at cash interest.
I don't bother with any spreadsheets for the main pension SIPP.