Alternative to CASH ISA

20122013

masonic said:

For the 'retirement year', you should use the year you will start spending from the portfolio. You can also add the state pension in the 'social security' section.

For portfoliovisualizer, just select the closest equivalent US ETF to the funds you hold. If you are using 

trackers, then they will be almost identical.

As I have an index tracker (high risk), savings and pension (low growth),  which on is more appropriate for these, please?

1)

In the 'Data Method' box

- Historical data - all
- Historical data - specific years
- Constant market growth
- Single stimulation cycle

2) In the 'Inflation type' box

- CPI Historical

- Flat rate

I have entered the figures as per your reply, and the result is '0.00% - Failed 109 of 109 total cycles.'

It says total withdrawl is '$1,540,000', is this in future money? including inflation as I thought it will be a lot more?

Some posters have previously worked out that I will need triple that amount to last 45 years.

masonic

You should leave it as "Historical Data - All" if you want to see how the portfolio would have performed over all 45 year periods in the dataset. If you use CPI Historical inflation, then that will match the inflation rate (albeit US inflation) with the market returns from the same year, so that's the most sensible thing to choose.

The amounts are expressed in today's money so they have been inflation adjusted and would be a lot more in future money.

You'll be able to see from the first chart how your assets grew or shrank based on different start years. "0.00% - Failed 109 of 109 total cycles." means that your portfolio ran out of money in every one of the simulations, so you have virtually no chance of success based on the information you entered.

Just using some of the default values, starting with $1m, withdrawing an inflation adjusted $40k per year (4%) with 75% equities gives "82.57% - Failed 19 of 109 total cycles" for a 45 year retirement, which is a much better success rate, suggesting that you probably do need significantly more money in your retirement pot, or to take a lot more risk.

Did you include the state pension under social security? As this might make a big difference.

masonic

Having 22% in equities is very low, but even then gives an 80-95% success rate depending on when the state pension kicks in based on reasonable assumptions. Even increasing this to 40% equities with a withdrawal rate of 3.5% of starting portfolio and state pension after the first 20 years gives a 100% success rate without an unreasonable ask, such as cash returns of inflation+2%. The worst simulation in that case was 1966-2011 where it would have depleted to $20k by the end.

20122013 said:

PS did you see my reply £65 fees which was also in this thread? _ I think it was on the last page - do a 'thanks' if you have read it, if you'd like.

I didn't see the bit at the bottom, which I think you added after I saw the initial post. If you try to live off dividends and keep the capital, then for a standard global equities tracker with a yield of about 1.5%, the average growth rate would still be ahead of inflation based on historic returns, but average growth is not guaranteed and there would have been some historic periods where the growth would have not kept up with inflation.

20122013

masonic said:

Having 22% in equities is very low, but even then gives an 80-95% success rate depending on when the state pension kicks in based on reasonable assumptions. Even increasing this to 40% equities with a withdrawal rate of 3.5% of starting portfolio and state pension after the first 20 years gives a 100% success rate without an unreasonable ask, such as cash returns of inflation+2%. The worst simulation in that case was 1966-2011 where it would have depleted to $20k by the end.

I didn't see the bit at the bottom, which I think you added after I saw the initial post. If you try to live off dividends and keep the capital, then for a standard global equities tracker with a yield of about 1.5%, the average growth rate would still be ahead of inflation based on historic returns, but average growth is not guaranteed and there would have been some historic periods where the growth would have not kept up with inflation.

Sorry if you didn't see the bit at the bottom.

20122013

masonic said:

20122013 said:

With a 2 Year Fixed Rate Cash ISA: 4.42% AER, interest pay monthly back to this account.

What is the maximum amount to pay into this account to keep within the FSCS protection?

Would  £78000 ? (£77,750 seem to work out just be below £85k)  be the the lump sum deposit ? so at the end of the 2 year including the monthly interest it will just under £85K?

I have use the compound interest calculator L https://www.thecalculatorsite.com/finance/calculators/compoundinterestcalculator.php

and have inputted various numbers until I get the figure closest to £85K

The way to calculate this is by converting the AER rate to a decimal multiplier (1.0442) and then using this to work backward from a final balance of £85k.

e.g. 85000 / 1.0442^2 = £77,956

If the account is the Shawbrook 2 year fix, then this is compounded annually (not monthly), which is why the compound interest calculator is over-predicting the interest and under-predicting the maximum balance to keep within £85k over 2 years. If you had an account paying interest monthly, then you should use the gross rate, not AER, because AER already factors in compounding over the course of the year. AER should always be used with annual compound frequency in such a calculator.

So to work  backward from a final balance, you convert (whatever the number) to a decimal multiplier (eg 1.0442) and then divide it

When do you use the multiple (and not divide) then? would it be for something like for a 'draw down' rate?

masonic

20122013 said:

masonic said:

20122013 said:

With a 2 Year Fixed Rate Cash ISA: 4.42% AER, interest pay monthly back to this account.

What is the maximum amount to pay into this account to keep within the FSCS protection?

Would  £78000 ? (£77,750 seem to work out just be below £85k)  be the the lump sum deposit ? so at the end of the 2 year including the monthly interest it will just under £85K?

I have use the compound interest calculator L https://www.thecalculatorsite.com/finance/calculators/compoundinterestcalculator.php

and have inputted various numbers until I get the figure closest to £85K

The way to calculate this is by converting the AER rate to a decimal multiplier (1.0442) and then using this to work backward from a final balance of £85k.

e.g. 85000 / 1.0442^2 = £77,956

If the account is the Shawbrook 2 year fix, then this is compounded annually (not monthly), which is why the compound interest calculator is over-predicting the interest and under-predicting the maximum balance to keep within £85k over 2 years. If you had an account paying interest monthly, then you should use the gross rate, not AER, because AER already factors in compounding over the course of the year. AER should always be used with annual compound frequency in such a calculator.

So to work  backward from a final balance, you convert (whatever the number) to a decimal multiplier (eg 1.0442) and then divide it

When do you use the multiple (and not divide) then? would it be for something like for a 'draw down' rate?

You would multiply if working forward from a starting balance, or divide if working backwards from a target balance.

20122013

'FLEXIBLE' CASH ISA accounts

I was looking at Paragon which allows you to put the amount of money you take out, back in within the same tax year  (previous poster have explained it very well above) however, there is a 120 day penalty charge.

more details here. https://www.paragonbank.co.uk/savings/cash-isas/fifteen-month-fixed-cash-isa

Before this year, I had opened a Coventry ISA Account, my online account says: '6 Access ISA (Online) - Monthly (inactive) 4.22% Tax-free* account and I would like to know whether this is a Flexible account?? as Coventry said that I have 6 free withdraw with no penalty and said that I can still pay into it and the rate is 4.22% but I had forgotten to ask whether I can put back the amount in and keeping the tax free status. I hope this account allows me to do that but unsure.

I had a look online under all the different '6 Access ISA (Online)' product but none of the interest rates matched.

see link https://www.coventrybuildingsociety.co.uk/member/savings/closed-accounts.html

Any ideas, please?

slinger2

20122013 said:

'FLEXIBLE' CASH ISA accounts

I was looking at Paragon which allows you to put the amount of money you take out, back in within the same tax year  (previous poster have explained it very well above) however, there is a 120 day penalty charge.

more details here. https://www.paragonbank.co.uk/savings/cash-isas/fifteen-month-fixed-cash-isa

Before this year, I had opened a Coventry ISA Account, my online account says: '6 Access ISA (Online) - Monthly (inactive) 4.22% Tax-free* account and I would like to know whether this is a Flexible account?? as Coventry said that I have 6 free withdraw with no penalty and said that I can still pay into it and the rate is 4.22% but I had forgotten to ask whether I can put back the amount in and keeping the tax free status. I hope this account allows me to do that but unsure.

I had a look online under all the different '6 Access ISA (Online)' product but none of the interest rates matched.

see link https://www.coventrybuildingsociety.co.uk/member/savings/closed-accounts.html

Any ideas, please?

4.22% monthly is the same as 4.30%AER which is perhaps what the table is using.

20122013

slinger2 said:

4.22% monthly is the same as 4.30%AER which is perhaps what the table is using.

Under the descriptions 

'As part of our simplifying savings programme, this account was created and several products transferred into it. Allows 6 charge-free withdrawals per year (a year starts on the 9th January or the anniversary of that date). '

It does not seem to say you can put back the tax free money back into account, or does it? So no good, if you want to take and back it back in within the ISA wrapper? 

TheTelltaleChart

20122013 said:

slinger2 said:

4.22% monthly is the same as 4.30%AER which is perhaps what the table is using.

Under the descriptions 

'As part of our simplifying savings programme, this account was created and several products transferred into it. Allows 6 charge-free withdrawals per year (a year starts on the 9th January or the anniversary of that date). '

It does not seem to say you can put back the tax free money back into account, or does it? So no good, if you want to take and back it back in within the ISA wrapper? 

That doesn't say you can put money back into the account — or that you can't.

However, I think you can, because the terms at https://secure.coventrybuildingsociety.co.uk/savings-and-investments/application/SpecificTermsAndConds.aspx?prodCode=6AIO — which I'd guess are for the right account — say:

7. Flexible ISA

7.1 This ISA is a flexible ISA. This means if you withdraw money (including interest) from this account, as outlined in Condition 9, you are entitled to replace it without it counting further towards your annual ISA subscription limit. You must make any Flexible ISA Replacement Subscriptions to this account and they must be made in the same Tax Year as the withdrawal is made.