Investment return and drawdown assumptions financial modelling tool

eastcorkram

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.

I can't make that work.
Example, enter a current value of pension pot as £100,000, no matter how I type it, it takes as a total figure of £10.

Likewise , enter a DB pension of £10,000 a year, it takes it as £10 a year , no matter how I type it in. 

michaels

MK62 said:

michaels said:

SouthCoastBoy said:

Pat38493 said:

There is also a site cfiresim that lets you measure a plan against historical data of inflation and growth.  Unfortunately in the real world, the returns are not constant but volatile.  Depending on the sequence of those returns (in other words, the date you retire and luck) you could get massively different end results.  If you get several negative years early in your retirement your pot will get depleted quicker, no matter what the long term average will be. 

As such, if you are using a spreadsheet it’s advisable to use pretty conservative growth assumptions in order to approximate the worst case.  I use inflation + 2% when doing flat rate modelling.

p.s. Don’t forget to include state pension in your modelling and check your state pension entitlements on gov.uk web site. 

If you have a suitable cash buffer you can eliminate some of the sequence of returns risk as during fallow return years cash can be used rather than selling equities

Generally the size of the buffer needed means that historically this strategy gives a lower safe withdrawal rate than having a mix of stocks and bonds.  People who suggest this mostly do not understand the maths.

...or perhaps they fully understand the maths, but are just not assuming that the early years of their retirement will necessarily follow the historical average.....

Timing the market is certainly one approach to investing....

MK62

michaels said:

MK62 said:

michaels said:

SouthCoastBoy said:

Pat38493 said:

There is also a site cfiresim that lets you measure a plan against historical data of inflation and growth.  Unfortunately in the real world, the returns are not constant but volatile.  Depending on the sequence of those returns (in other words, the date you retire and luck) you could get massively different end results.  If you get several negative years early in your retirement your pot will get depleted quicker, no matter what the long term average will be. 

As such, if you are using a spreadsheet it’s advisable to use pretty conservative growth assumptions in order to approximate the worst case.  I use inflation + 2% when doing flat rate modelling.

p.s. Don’t forget to include state pension in your modelling and check your state pension entitlements on gov.uk web site. 

If you have a suitable cash buffer you can eliminate some of the sequence of returns risk as during fallow return years cash can be used rather than selling equities

Generally the size of the buffer needed means that historically this strategy gives a lower safe withdrawal rate than having a mix of stocks and bonds.  People who suggest this mostly do not understand the maths.

...or perhaps they fully understand the maths, but are just not assuming that the early years of their retirement will necessarily follow the historical average.....

Timing the market is certainly one approach to investing....

Not quite sure how you derive that assuming the early years of a retirement may not follow the historic average, is then market timing........