Investment return and drawdown assumptions financial modelling tool

SarahB16

I was wondering if anybody could kindly direct me to a modelling tool that would enable me to enter various assumptions please so that I could see how long my investments and savings would last please from drawing a certain amount per year.  I presume it would be something that somebody may use re their DC pot.

By way of background I am in the very fortunate position that in retirement I will have two separate DB pensions and would like to retire when I can afford to do so.  I make LGPS AVCs so may have my AVC pot, S&S ISA, premium bonds and some savings to supplement my pension and I would like to run some scenarios to see what I could drawdown from these. 

For example, say the various investments are worth £200k when I’m 58 I would like to see how much per annum I could draw from that total savings and investment pot so it reached nil when I’m say 90.

Knowing that amount would enable me to weigh up the impact of the actuarial reduction on my DB pension schemes and to decide when I may be able to afford to retire.

I’m 51 and have many unknowns from now to when I’m 58 and had always thought I may be able to retire aged 61 or 62 but if my savings and investments are high enough this may enable me to retire earlier but I can’t find a good modelling tool then I can input my assumptions into for the return that would be generated from the savings and investment portfolio.  Keeping cash aside (c.£30k for capital expenditure and permanently topped up).

I would like to enter: I have £200k in savings and investments and across these investments they are forecast to increase by 3% per annum above inflation per year.  If in year 1 £8,000 per annum was drawn (and increased by inflation each year) this would reach nil after 30 years, etc.

Alternatively: I have £200k in savings how much can be drawn per annum so that it reaches nil after 30 years assuming an annual return of x%.  Can the models assume that the drawdowns increase each year by y% to account for inflation?

I should add I’m not too bothered if the model can’t account for inflation assumptions but I would be really interested in looking at the financial forecast modelling tools that are available please.  I’m sure there must be free ones available that people use for drawing down their DC pot but with me it will be for my AVC pot (so lower returns as initially would be invested in savings accounts/fixed rate bonds I presume) that I will only be able to drip feed into my S&S ISA and for my existing S&S ISA and the savings I have.  I will have to assume an average overall level of growth for these savings and investments.

I may be overcomplicating this as I recognise I have not really looked into this previously with not having a significant DC pot. 

Thank you in advance for your help and of course also happy to use a very basic financial modelling tool that lets me to enter the various scenarios.

Hoenir

SarahB16 said:

I would like to enter: I have £200k in savings and investments and across these investments they are forecast to increase by 3% per annum above inflation per year.  If in year 1 £8,000 per annum was drawn (and increased by inflation each year) this would reach nil after 30 years, etc.

Think you'll find that this has never been achieved previously over any 30 year period of recorded market history. If investing were that easy. Everybody would be a millionaire by the time they reached retirement age.  

SarahB16

Hoenir said:

SarahB16 said:

I would like to enter: I have £200k in savings and investments and across these investments they are forecast to increase by 3% per annum above inflation per year.  If in year 1 £8,000 per annum was drawn (and increased by inflation each year) this would reach nil after 30 years, etc.

Think you'll find that this has never been achieved previously over any 30 year period of recorded market history. If investing were that easy. Everybody would be a millionaire by the time they reached retirement age.  

Thank you so yes, that's what I'm looking for with the modelling tool so instead it may say the pot would run out after 15 years then with the return assumption input only 2% per average above inflation or alternatively a drawdown of £3,000 per annum would last 30 years. 

MK62

You could have a look at     https://guiide.co.uk

SouthCoastBoy

Personally I think the best thing to do is create your own spreadsheet, one row per year, factor in inflation, growth and expenses. Then you can change the parameters and understand the potential impact. I use inflation at 2.5%, equity growth 3.5% and cash growth 1%. You can easily model a downturn by making a couple of years -20% and see the impact, or inflation up to 8% one year. 

I've found my spreadsheet invaluable and have forecast out to my 100th birthday.

Triumph13

Make yourself a large pot of tea, get a packet of biscuits to keep you going and google 'safe withdrawal rates'

Peterrr

If you have Microsoft Excel, this is a step by step tutorial video on how to build a retirement cash flow model: https://www.youtube.com/watch?v=7Wkr5QtY-G8
You can then vary the inputs, drawdown amounts, inflation and investment returns to your hearts content

kempiejon

If you've not seen it have used https://firecalc.com/ for broad trends using a Monte Carlo simulation, you might be able to tweak that for ideas. There are other examples out there.
I also made my own spreadsheet for some finer year by year assumptions. But I doubt the reality with be just like my predictions though I'll update as we go along.

SarahB16

Peterrr said:

If you have Microsoft Excel, this is a step by step tutorial video on how to build a retirement cash flow model: https://www.youtube.com/watch?v=7Wkr5QtY-G8
You can then vary the inputs, drawdown amounts, inflation and investment returns to your hearts content

Thank you so very much for sharing the tutorial video. I think that spreadsheet is exactly what I am looking for. 

booveedoo

MK62 said:

You could have a look at     https://guiide.co.uk

This is a great, free tool. No personal data needed, but just your pot sizes etc. Adjust to see different outcomes.

SarahB16

booveedoo said:

MK62 said:

You could have a look at     https://guiide.co.uk

This is a great, free tool. No personal data needed, but just your pot sizes etc. Adjust to see different outcomes.

Thank you.  Yes, I've taken another look at it and it's really simple to use and is very helpful.