Annual growth projection %

SouthCoastBoy

I currently model 3.5% growth after fees for my invested funds, is this too pessimistic, about right, or too optimistic 

JohnWinder

The yield on 10 year nominal government bonds is currently just under 4%/year, so that's the best guess return on intermediate term high quality bonds.

Linton

Is  the 3.5% gross or in addition to inflation?

In choosing your growth assumption it makes sense to be pretty pessimistic so that you can hope over time to get a higher return rather than continually fearing that you wont achieve your objective. .   Especially if you are planning for retirement you probaly  don't want a 50% chance of having insufficient money.

 In my long term planning over the past 20 years I have assumed 3% inflation and 4%investment return ie 1% above inflation.  This has proved to be pessimistic so I can now afford to put a significant % of assets into wealth protection and have no worries about the occasional crash or year or two of rapidly rising prices.

SouthCoastBoy

It is independent of inflation, I have factored inflation as 11% for this tax year. So in real terms -7.5% growth this year.

I'm just concerned that if I'm being too pessimistic I am working longer than I need to. 

dunstonh

Always be pessimistic.    It may take you several decades to get close to the long term averages.  For example the 10 year period of 2000 to 2009 was loss making. 

Better to plan using a lower figure and come in over rather than the other way around.  

Kim1965

SouthCoastBoy said:

It is independent of inflation, I have factored inflation as 11% for this tax year. So in real terms -7.5% growth this year.

I'm just concerned that if I'm being too pessimistic I am working longer than I need to. 

From memory your well provided for, when are you planning to pull the trigger? Whats stopping you? For me its having a lad at uni (finishes in may), after that its defo pt! 
 

SouthCoastBoy

In answer to your question Kim1965, confidence really. My youngest has one more year at uni, my liability in that respect is the accommodation which I pay up front, due in May so after that uni responsibilities are hopefully complete.

I think I should have enough but one or two more years will give me another 100k or so, problem is where does it stop!

bostonerimus

I use a range of growth projections from 10% to 0% and also use a normally distributed set of annual returns with similar average values. I made sure that my plan survives all scenarios by budgeting and relying on guaranteed retirement income sources like pensions and annuities to cover my basic costs.

Secret2ndAccount

Yes 3% is pretty pessimistic. Why not run the same model with 3%, 5% and 7%. If you can get by at 3%, and it looks comfortable at 5% you should be retired.
What are you using for the inflation rate?

SouthCoastBoy

If I put in 5% I will have plenty to live off. I was using 2.5% for inflation, but have now adjusted, this year 11%, next year 6% then 4% for next ten years after that, then back to 2.5%

Kim1965

Out of interest, how much do you need to live off in retirement and what sort of provision have you got?
 At 59 ( in11months) already mf, i will go to 2 days a week (about 20k), ive got 7.5kdb paying now, will have 60 k isa 220 ksipp and 40k in cash for emergencies. Need about 25k pa and feel v confident if i work pt for a few years i have enough. Many would disagree.