Do you carry on using retirement planning tools after retirement?

westv

Linton said:

westv said:

When I retire the only spreadsheet I'll be using will be one for annual budgeting. And that will have only:-
Total Income
Spending
Holidays
Bills

What about current assets or is all your income guaranteed?  Assuming your investments matter how will you assess whether you have sufficient to meet your future needs?

My IFA will deal with all that but even if they didn't, SWR theory (as applicable to the UK) would be good enough for me on a rolling period of, say, every 5 years. 

Bostonerimus1

Sea_Shell said:

sgx2000 said:

My concern at 63, and fast approaching retirement is ....
Will your mental acuity match your desire to manage your own funds into your 80's or 90's???

Surely non of us can predict this....

If we don't buy an annuity, then we'll definitely look at simplifying everything as we get older.   Especially if interest rates are less important by then, due to level of guaranteed income from elsewhere.

Amalgamate pensions, or just let them run (out!), once they're in payment.
Have 2 joint current accounts and one (or 2) savings accounts.   Stop switching funds around.
Maybe move back into Premium Bonds?

That is, unless one of our niblings turns out to be the next ML and then we'll turn it all over to them!!   

My investments have always been pretty simple and I made sure my finances were well organized when I retired ie no mortgage or other debt and a well controlled budget. My investments are mostly a few large index trackers and I haven't done any management of them in almost 10 years

NedS

sgx2000 said:

My concern at 63, and fast approaching retirement is ....
Will your mental acuity match your desire to manage your own funds into your 80's or 90's???

Surely non of us can predict this....

My plan is to gradually move towards a set-and-forget portfolio that doesn't require any management. For equities, I'm thinking something like JGGI that pays out 4% of NAV as a dividend and select to have income paid out into my bank account. The main issue with that strategy is varying income as NAV rises and falls. A decent cash buffer can probably smooth out the varying income though, so should be good for the later years once my marbles are all gone.

Bostonerimus1

Pat38493 said:

dunstonh said:

Pat38493 said:

dunstonh said:

Timeline grabs a valuation from adviser software once a week and does a weekly report on people at risk or moving outside tolerances.

Thanks @dunstonh - I suppose as DIY investors we don't have access to that level of automation at a reasonable price.  However, how does it then deal with the situation I mentioned?  Presumably if there is a 40% crash of the stock market at some point, all of the alarms for all your clients will go off when the balances are updated to the new much lower values, even though the 40% stock market crash might have already been part of a prior scenario that passed a few months earlier.

Its worth noting that whilst three of the crashes in the last 25 years have been in the circa 40% range, there have been crashes historically which have been double that.

And remember that timeline is 1915 to 2022 with its modelling.  Gilts suffered losses over 2022/23 that were last seen before 1915.  So, playing it safe by modelling scenarios from the current position, even if it's after a fall, is a sensible thing to do.

It can be worth taking timeline out of real terms and showing it in nominal:

This is a chart from someone with a 95% success rate.  Their fund was over £1m at age 76 but ran out by age 86 in the worst case scenario.    When shown in real terms, it looks like this:



Real terms makes the declines look steadier and whilst more realistic, we need to remember that consumers/investors make decisions on behaviour in the now.   Going back to that chart, the worst case scenario was actually above the median at a few stages.      

Nobody is unhappy if their investments outperform their planning.   Cashflow modelling in this scenario is more about making sure you have enough.  i.e. looking at the worst case to pessimistic scenario range.   From this point in time, if your plan works 85% of the time, you would be pretty happy.    

Also, you have to factor in longevity and timeline does that in the longevity section.  So, whilst the chance of running out of money at age 98 is 7%.  The chance of being alive at that point is 10%.   So, the chance of running out of money AND being alive is less than 1%.

You have to look not just at the charting for the values but also the longevity.   Indeed, the longevity data in timeline is more important than a values chart that says you could run out of money by age 86 or have over £2m.     How much use is there in data that says you could have anything between £0 and £2m?   Whereas the longevity chart shows age 86 as 53% survival probability with 100% success rate for portfolio and 100% for longevity adjusted.

Thanks - very useful comments.  I guess the other point is that if you are in a bridging situation where you are planning to make much larger withdrawals in the first 10-12 years, you might see a success rate of 95% plus, but still see running out of money within 8 years in worst case scenarios well before anticipated longevity is making much difference.  This is maybe where either flexibility or annuities or gilt ladders might come into the mix?

I retired at age 52, three years before I could take my DB pension. I wanted to absolutely avoid any sequence of return risks as I bridged those three years. I get income from a rental that covers half of my spending and I put enough in the bank to cover the other half for 3 years, so I was decoupled from the markets. 

dunstonh

NedS said:

sgx2000 said:

My concern at 63, and fast approaching retirement is ....
Will your mental acuity match your desire to manage your own funds into your 80's or 90's???

Surely non of us can predict this....

My plan is to gradually move towards a set-and-forget portfolio that doesn't require any management. For equities, I'm thinking something like JGGI that pays out 4% of NAV as a dividend and select to have income paid out into my bank account. The main issue with that strategy is varying income as NAV rises and falls. A decent cash buffer can probably smooth out the varying income though, so should be good for the later years once my marbles are all gone.

A cash float would cover you there. i.e.   dividends/distributions paid to the cash account. Fixed monthly draw from the cash account.  Sufficient balance to ensure there is enough there to cover the variable yield and payment dates.

Bostonerimus1

dunstonh said:

NedS said:

sgx2000 said:

My concern at 63, and fast approaching retirement is ....
Will your mental acuity match your desire to manage your own funds into your 80's or 90's???

Surely non of us can predict this....

My plan is to gradually move towards a set-and-forget portfolio that doesn't require any management. For equities, I'm thinking something like JGGI that pays out 4% of NAV as a dividend and select to have income paid out into my bank account. The main issue with that strategy is varying income as NAV rises and falls. A decent cash buffer can probably smooth out the varying income though, so should be good for the later years once my marbles are all gone.

A cash float would cover you there. i.e.   dividends/distributions paid to the cash account. Fixed monthly draw from the cash account.  Sufficient balance to ensure there is enough there to cover the variable yield and payment dates.

A dividend strategy is a tried and true solution as long as the numbers work out ie your need for income can be satisfied by the distributions. I think most people will have to use a hybrid solution that includes dividends, capital gains and probably spending some capital as well. The size of the pot relative to the need for income is critical...along with the usual factors like longevity, inflation etc.

MEM62

GazzaBloom said:

For those that do and either have retired or are nearing retirement, do you expect to carry on with using the planning tool after retirement? or has it served it's purpose and you no longer need it?

For those using an advisor, do you plan to carry on using your advisor in the same way?

Retirement is a journey that, hopefully, lasts for many years and it will see many charges in your circumstances, the markets and the economy.  Therefore you will always be periodically assessing and planning to stay on top of things.  It would be naive to think that your financial situation is fixed on the day you retire and you can forget about it.  .

Linton

MEM62 said:

GazzaBloom said:

For those that do and either have retired or are nearing retirement, do you expect to carry on with using the planning tool after retirement? or has it served it's purpose and you no longer need it?

For those using an advisor, do you plan to carry on using your advisor in the same way?

Retirement is a journey that, hopefully, lasts for many years and it will see many charges in your circumstances, the markets and the economy.  Therefore you will always be periodically assessing and planning to stay on top of things.  It would be naive to think that your financial situation is fixed on the day you retire and you can forget about it.  .

Also, I think it is naive to believe there exists a pre-defined algorithmic method that can be blindly used  from retirement until death to satisfactorily deal with all situations that may occur.  At some stage you or your advisor are likely to need to reappraise your situation, planning assumptions, and hence your financial management approach.  This will require knowledge and understanding.

Bostonerimus1

Linton said:

MEM62 said:

GazzaBloom said:

For those that do and either have retired or are nearing retirement, do you expect to carry on with using the planning tool after retirement? or has it served it's purpose and you no longer need it?

For those using an advisor, do you plan to carry on using your advisor in the same way?

Retirement is a journey that, hopefully, lasts for many years and it will see many charges in your circumstances, the markets and the economy.  Therefore you will always be periodically assessing and planning to stay on top of things.  It would be naive to think that your financial situation is fixed on the day you retire and you can forget about it.  .

Also, I think it is naive to believe there exists a pre-defined algorithmic method that can be blindly used  from retirement until death to satisfactorily deal with all situations that may occur.  At some stage you or your advisor are likely to need to reappraise your situation, planning assumptions, and hence your financial management approach.  This will require knowledge and understanding.

I think this is generally true, but the amount of on going planning, and maybe associated anxiety, will vary according to the sources of retirement income. The extremes will be those folks with DB pensions who are often pictured sipping margaritas without a care in the world and the DIY couple hunched over spreadsheets as they figure out how to time the market. Neither of these extremes is a good way to manage your retirement finances.