What to expect from an IFA?

GenX0212

Tightboy said:

GenX0212 said:

Here are my figures:

Hi GenX0212,

What software or web site are you using to create the graphs, apologies if it's mentioned and buried in this thread?

It's the Numbers app on my iPad. The hard bit was working out what I need to go into the various columns of the table but the graphs are just a couple of clicks based on the table contents.

GenX0212

Guide.co.uk have a very good modelling tool available for free but it only really works for single incomes

GenX0212

Sorry www.guiide.co.uk with a double i

Tightboy

Oh I see, I have an iPad too, was it based on the "retirement savings" or a different template?

GenX0212

Tightboy said:

Oh I see, I have an iPad too, was it based on the "retirement savings" or a different template?

Built it myself from scratch. Build a table with your expected 'haves' at the start of retirement i.e. DB pension, DC pension, State pension, tax allowance etc with also a row for the inflation rate e.g. 103% and a row for your estimated growth rate e.g 105%

Create another table and in the first row link to the columns in the earlier table, add a column for your target income and a column for how much you are going to drawdown. in the 2nd row multiply your DB, State pension, tax allowance, target income by the inflation rate, multiply your DC pots by your growth rate less the amount you drawdown on the previous row. Assuming you will have more than your tax allowance then add your DB and State pension values together, subtract your tax allowance and create another column with the result x 20%. That's part1 of your tax. If you are taking your 25% tax free as a lump sum then create a new column as your DC drawdown and x by 20% and that's part2 of your tax; if your are not taking a lump sum then x by 75% and then by 20% and that's part2 your tax.
Add a column with the sum of your DB, state, DC drawdown amount and any savings you plan to use and that's your pre-tax total. Subtract the sum of part1 and part2 of the tax from the pre-tax total and that's your take home pay.

Play with the values of your drawdown until you reach your ideal balance. It can be done with a formulae but I can't guarantee your inputs are the same as mine so best to enter your drawdown amounts manually.
If you have a spouse then duplicate all the above to get their expected income and your joint total values. Test your results a line at a time to make sure your calculations are correct.

Change the inflation rates and growth rates to model different market scenarios.

if you aren't up to that then you either need a mate to do it for you or else you should probably seek some professional assistance.



DISCLAIMER:  I have just written all of that whilst on my 4th pint 🍺
Check and double check your results manually a line at a time. I'm not an IFA or professional of any sorts, my advice is free but it's at your own risk!

Tightboy

That’s brilliant, many thanks👍

dunstonh

Just remember that straight-line projecting is considered obsolete and risky.   You should run the same modelling with much more pessimistic figures if you are using that method.

dharm999

How have you worked out your tax figures?  Also it looks as if you are increasing the tax free allowance each year, but I think its frozen for the next few years, to 2028 I think.  Don’t think you can assume that increasing each year.  What impact would it have if the allowance was significantly lower?

GenX0212

dunstonh said:

Just remember that straight-line projecting is considered obsolete and risky.   You should run the same modelling with much more pessimistic figures if you are using that method.

I agree but it is only a model. No can predict the future not even the professionals. You need to play around with rates and ebb towards a pessimistic view.

I have also modelled a zero growth rate to see if I could live with the results and in my case I could. I have the luxury of knowing that once I and my spouse reach State Pension age that we are all but guaranteed a Moderate living standard even if there is nothing left in our pot. 

In my case I have seen too many family and friends never actually get to enjoy a decent retirement and decided a good  ten years ago that there was no way I was waiting to 67 to retire. We could have spent more and enjoyed a more lavish lifestyle whilst working but I chose to save a good amount towards my pension instead and with a bit of luck will be able to enjoy 20ish years of retirement without needing to drop our current living standards. When (if) we are 75 then I don't expect to need the same as now.

The kicker to my situation is that I have been secretly crunching the numbers for the last few months whilst telling my other half we need another 3 or 4 years. We are off on holiday in a fortnights time and I plan to let her know then that she can retire whenever she wants. I plan on one more year for myself for a few different reasons but also plan to drop to a four day week. My employer will not be in a good place if I just up and leave so hopefully it's a nice compromise with them.

GenX0212

dharm999 said:

How have you worked out your tax figures?  Also it looks as if you are increasing the tax free allowance each year, but I think it's frozen for the next few years, to 2028 I think.  Don’t think you can assume that increasing each year.  What impact would it have if the allowance was significantly lower?

I have assumed that DB, State, tax allowances all rise with inflation. Nothing is guaranteed but you have to make some assumptions and as above I'm comfortable with a slightly more pessimistic forecast for growth. Everyone's situation is different and you need to make your own choices. My other half and me are both at a point (for different reasons) where our jobs are just becoming too stressful and a change is needed. Worst comes to the worst then a different job albeit a lot lower paid for a few years wouldn't be the end of the world.