Retirement - planning assumptions

Plasticman

Does anybody else have assumptions set out as part of their retirement planning? Mine include:

Inflation of 4% p.a. post retirement 
LGPS and state pension broadly keep up with inflation
Tax position remains consistent 
Children won't be a cost or contributor to household income by the time of retirement
Investments won't generate any gain or any loss
Savings won't generate any interest
We won't come in to any inheritance 

Do you have others?

NedS

I don't try to model inflation or investment gains. I think of everything in terms of today's values. I assume any investment gains will match inflation over the long term. I know some choose to model gains of x% above inflation.

Most of my DB pensions (and SP) are uncapped (CPI) so I assume that they will broadly keep their value.

My children are not going to University, so I agree with your assumption of them being cost neutral. Assuming they live at home, they can hopefully contribute a little towards their household costs. If they have left home, any contributions from us will be based on what we can afford to give.

We have no savings, only investments. I would model to expect savings to lose value over time to inflation whereas we agreed above investments should hold their value.

I agree not to rely on any potential inheritance.

I assume we will pay tax in retirement. We will look to manage it as effectively as possible based on the tax positions at the time.

I have assumed life expectancy of 95, but aim to have sufficient resources indefinitely, helped by essential costs being met by uncapped DB+SP.

I have not modelled care costs. I have assumed the house will cover those if a care home should be required. Once the house has gone, the State is picking up the bill from there.

MK62

Plasticman said:

Does anybody else have assumptions set out as part of their retirement planning? Mine include:

Inflation of 4% p.a. post retirement 
LGPS and state pension broadly keep up with inflation
Tax position remains consistent 
Children won't be a cost or contributor to household income by the time of retirement
Investments won't generate any gain or any loss
Savings won't generate any interest
We won't come in to any inheritance 

Do you have others?

You need to model numerous different scenarios......atm inflation is the big  player, but that could change quickly.
Modelling using averages is only of limited use once your portfolio is in drawdown, as the sequence of returns (and indeed inflation) can make the outcome of periods with the same averages, very different.......

Albermarle

Savings won't generate any interes

This assumption seems a bit unlikely. Probably would be better to have an estimate of the deficit between savings interest and inflation.

JohnWinder

Investments won't generate any gain or any loss
Savings won't generate any interest

Nominal or real? Don't waste typing an answer, but choose for your own planning.

optoutDB

When running my numbers, as a practical measure I had to keep everything in current prices because otherwise looking at the future numbers was meaningless. So I set my inflation index to 0% and then all the other indices relative to that. 

In my case, short term factors such as earnings and inheritance are way more important than investment return (my DB pension is bigger than my other wealth), so I just set investment to inflation plus 1%.  If I was relying on investment return I would have to give it more thought. 

bigfer

There are only 3 certainties in life you can rely on. Death, taxes and gravity. 
Not sure that is of much use.

bluenose1

I do similar to yourself Plasticman.
I also use guiide.co.uk as nice, simple tool to confirm my figures. Though at moment think that only assumes inflation 2.5%, though you can set it to have 0% return from savings. 

I will have a DC pot as well as a DB pension so need to make sure I pay as little tax as possible when withdrawing. 

Plasticman

bluenose1 said:

I do similar to yourself Plasticman.
I also use guiide.co.uk as nice, simple tool to confirm my figures. Though at moment think that only assumes inflation 2.5%, though you can set it to have 0% return from savings. 

I will have a DC pot as well as a DB pension so need to make sure I pay as little tax as possible when withdrawing. 

Thanks. I've never seen guiide.co.uk so I'll take a look

Plasticman

@bluenose1 - that was a helpful tool. Real shame that it doesn't allow you to enter details as a couple though. 

bluenose1

Plasticman said:

@bluenose1 - that was a helpful tool. Real shame that it doesn't allow you to enter details as a couple though. 

Glad you found it useful. 
Never thought about it not doing couples, despite being married as my oh is already retired so I am only ever predicting my own pension.