Retirement - planning assumptions

marlot

I have scenarios with:

Permanent drop of 40% in savings/investments
State pension becoming means tested
Care home fees

Silvertabby

Plasticman said:

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

Don't fixate on your joint incomes - you also need a plan to ensure that the one left behind will be ok on one income.

billy2shots

Lots of great points but....


Sequence of return risk!


This is the make or break for retirement portfolios. 

There are plenty of modeling sites out there (I like FIcalc). 
Retirement pots don't go down it a linear fashion. 

A pot big enough to survive sequence of return risk is a much larger pot than many people factor in and has sent more than the odd person back to the drawing board. 

Or, have a chuffing great DB pension and never worry about SOR. 

westv

Silvertabby said:

Plasticman said:

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

Don't fixate on your joint incomes - you also need a plan to ensure that the one left behind will be ok on one income.

Still desirable to have a joint plan. Spending won't necessarily be equally apportioned.

Plasticman

Silvertabby said:

Plasticman said:

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

Don't fixate on your joint incomes - you also need a plan to ensure that the one left behind will be ok on one income.

Yes, we have a joint plan but with figures for individual incomes too.

DT2001

billy2shots said:

Lots of great points but....


Sequence of return risk!


This is the make or break for retirement portfolios. 

There are plenty of modeling sites out there (I like FIcalc). 
Retirement pots don't go down it a linear fashion. 

A pot big enough to survive sequence of return risk is a much larger pot than many people factor in and has sent more than the odd person back to the drawing board. 

Or, have a chuffing great DB pension and never worry about SOR. 

Both you and Marlot make very good points. Have either of you adjusted your plans?

My thinking was that if the only reason you ‘need’ a bigger pot is to cope with SOR then you use a fixed term annuity (taking the inflation hit which is hopefully much less than say your worst case 40% drop). 

SOR is more important for early retirees and those whose income requirements after SPA are higher.

To return to the original question I would look at how much flexibility I had on the expenditure side of the equation.

cfw1994

I agree SORR is a concern….it has prompted me to pause drawdown and use cash for the time being.

One area I feel that is almost impossible to cater for are care home costs.

Most people don’t use them, and of those that do, most are in for less than 26 months.
Making allowances for being one of the outliers that might have many years of care would mean working for far, far too many years for me to contemplate 🤷‍♂️

billy2shots

DT2001 said:

billy2shots said:

Lots of great points but....


Sequence of return risk!


This is the make or break for retirement portfolios. 

There are plenty of modeling sites out there (I like FIcalc). 
Retirement pots don't go down it a linear fashion. 

A pot big enough to survive sequence of return risk is a much larger pot than many people factor in and has sent more than the odd person back to the drawing board. 

Or, have a chuffing great DB pension and never worry about SOR. 

Both you and Marlot make very good points. Have either of you adjusted your plans?

My thinking was that if the only reason you ‘need’ a bigger pot is to cope with SOR then you use a fixed term annuity (taking the inflation hit which is hopefully much less than say your worst case 40% drop). 

SOR is more important for early retirees and those whose income requirements after SPA are higher.

To return to the original question I would look at how much flexibility I had on the expenditure side of the equation.

I am 40 so still far from retirement, however I plan to FIRE in the next couple of years.

No changes to my plans. I will look to drawdown from ISA, GIA, SIPP, LISA at a combined rate of 3% of the total pot each year. 
If 3% of my total pot is not enough for for my needs due to inflation (£32,500) then I will have to hold off FIREing. 

I will keep 3 years worth of essential living expenses (£20k at present) to use incase of a market crash. 

I do plan on paid employment in the future, part time low paid in something I enjoy (on call firefighter/ army reserves) but I don't count this potential money.