Share this page:
Stay connected:
Welcome to the Citywire Money Forums, where members share investment ideas and discuss everything to do with their money.

You'll need to log in or set up an account to start new discussions or reply to existing ones. See you inside!

Notification

Icon
Error

Will my pot run out before I die?
Laurie George
Posted: 19 January 2018 11:32:49(UTC)
#1

Joined: 10/07/2016(UTC)
Posts: 25

Thanks: 54 times
Was thanked: 15 time(s) in 12 post(s)
Mrs W and myself are 59 and 60 respectively and will soon be thinking about starting to raid our savings/SIPP as we settle into a life without salaries.
The problem is knowing how soon we can pack up work and start to plunder our nest egg(s) and how much we can realistically take. By the time we factor in private and state pensions kicking in in some years time, it's a pretty complex calculation even before growth assumptions and the effects of inflation are taken into account - though for simplicity, maybe it can be assumed these will cancel each other out.

I would imagine this won't be an uncommon dilemma among other self-invested soon-to-be-pensioners.

Does anyone happen to know of a freely available tool that can perform this sort of calculation and show the effects of different scenarios? I know one or two companies offer something fairly rudimentary on their websites that shows how long a given pot size will last given x income and y growth, but I'm looking for something a little more sophisticated without having to go down the IFA route!
Mr Helpful
Posted: 19 January 2018 11:59:28(UTC)
#2

Joined: 04/11/2016(UTC)
Posts: 476

Thanks: 531 times
Was thanked: 593 time(s) in 286 post(s)
At somewhat of a tangent; maybe read chapter 18 of Frank Armstrong's book 'The Informed Investor' concerning retirement finance strategy. (cheap used copies usually available).

Retirement financial outcomes will depend very much on the 'Sequence of Returns' produced by future markets, see :-

https://www.investopedia...erms/s/sequence-risk.asp
1 user thanked Mr Helpful for this post.
Laurie George on 19/01/2018(UTC)
Tug Boat
Posted: 19 January 2018 11:59:48(UTC)
#3

Joined: 16/12/2014(UTC)
Posts: 152

Thanks: 1 times
Was thanked: 206 time(s) in 87 post(s)
I couldn't find anything, went thru the same process two years ago.

I did have the pleasure of two IFAs free of charge. One gave me the formulae used thinking it would baffle me. When I looked at the contributing factors it almost all came down to compounded growth.

So the less you take out the longer it lasts - blindingly obvious and of not much use to you.

I take 4% out of my SIPP and the divi from the rest of my investments. This means it's now Merlot rather than Gevry Chambertain. Heyho.
4 users thanked Tug Boat for this post.
Laurie George on 19/01/2018(UTC), Tim D on 19/01/2018(UTC), Don Revie on 19/01/2018(UTC), william Westlake on 22/01/2018(UTC)
Chris Howland
Posted: 19 January 2018 12:02:03(UTC)
#4

Joined: 19/08/2017(UTC)
Posts: 24

Thanks: 60 times
Was thanked: 34 time(s) in 13 post(s)
I used retireeasy.co.uk for a while. It asks the right questions and is very simple to use.

Your results can be exported to a spreadsheet if you wish, however the format of that left a little to be desired.

Once you know that you have enough to retire, and that your founding assumptions are robust, then the need for an advisory tool reduces and it was at this point that I stopped using it and switched to my own simple spreadsheet.

They charge a nominal £2 a month or so for the cheapest subscription, which does seem very reasonable to me. Not sure of there is a free trial period available.

Chris

2 users thanked Chris Howland for this post.
Laurie George on 19/01/2018(UTC), dlp6666 on 19/01/2018(UTC)
Laurie George
Posted: 19 January 2018 12:38:34(UTC)
#5

Joined: 10/07/2016(UTC)
Posts: 25

Thanks: 54 times
Was thanked: 15 time(s) in 12 post(s)
Thanks to everyone...
Mr Helpful raises a good point which is a further complication I'm not even trying to factor in, but I think the best way of avoiding sequence risk is to have a cash buffer covering 2 or 3 years that can be raided when stock market returns are bad.
Tugboat - Merlot? We dream of Merlot! Trying hard to avoid Ribena!
Chris - it will be interesting to see if retireeasy offers a tool that can handle the effect of other pension income kicking in, thereby reducing the amount needed from the SIPP...
1 user thanked Laurie George for this post.
gillyann on 20/01/2018(UTC)
Tim D
Posted: 19 January 2018 12:46:18(UTC)
#7

Joined: 07/06/2017(UTC)
Posts: 317

Thanks: 1177 times
Was thanked: 475 time(s) in 206 post(s)
Monevator has a good collection of links to various calculators at http://monevator.com/fin...-calculators-and-tools/

(Retirement themed ones start 2/3 of the way down the page. I particularly like the Monte-Carlo ones, which emphasize that anything could happen... all you can really do is try and be aware of the probabilities).
1 user thanked Tim D for this post.
Laurie George on 19/01/2018(UTC)
Catch The Pigeon
Posted: 19 January 2018 12:51:48(UTC)
#8

Joined: 09/12/2015(UTC)
Posts: 64

Thanks: 30 times
Was thanked: 91 time(s) in 28 post(s)
This is a a free Financial Adviser tool and I use the professional version (CashCalc) with my clients.

Retirement Modeller
2 users thanked Catch The Pigeon for this post.
Laurie George on 19/01/2018(UTC), Mike L on 21/01/2018(UTC)
Keith Cobby
Posted: 19 January 2018 13:33:48(UTC)
#11

Joined: 07/03/2012(UTC)
Posts: 466

Thanks: 277 times
Was thanked: 722 time(s) in 289 post(s)
When it comes to mine I shall be taking about 4% from my SIPP with a minimum of the personal allowance. I think the best advice is to hold 2/3 years in cash and then whenever there is a market uplift to replenish the cash fund.

I shall take out the dividends from my ISA and lump sums as required as this is completely tax free.
1 user thanked Keith Cobby for this post.
Laurie George on 19/01/2018(UTC)
DJLW
Posted: 19 January 2018 14:58:35(UTC)
#13

Joined: 06/01/2014(UTC)
Posts: 24

Thanks: 22 times
Was thanked: 27 time(s) in 15 post(s)
I have done quite a bit of modelling in excel, nice and flexible but does tend to be limited by your excel skills. My base case simplifies things by assuming growth and inflation cancel each other out.

I think there can be a tendency to never quite think you have enough - especially if you are the type of prudent and conservative person who invests and plans.

That said I would personally prefer (subject to reasonable health) to be gettting a bit short and having to scale down my 100th Birthday Bash as opposed to departing with an enormous SIPP still intact 40 years earlier.
4 users thanked DJLW for this post.
Laurie George on 19/01/2018(UTC), Chris Howland on 19/01/2018(UTC), Alex Peard on 19/01/2018(UTC), gillyann on 20/01/2018(UTC)
Laurie George
Posted: 19 January 2018 15:05:30(UTC)
#14

Joined: 10/07/2016(UTC)
Posts: 25

Thanks: 54 times
Was thanked: 15 time(s) in 12 post(s)
Thanks Keith - very much my thinking too, though I'm nervous about taking as much as 4%.
At the same time I think DJLW is right about being over-cautious.
What a conundrum!
Catch The Pigeon
Posted: 19 January 2018 15:39:37(UTC)
#12

Joined: 09/12/2015(UTC)
Posts: 64

Thanks: 30 times
Was thanked: 91 time(s) in 28 post(s)
Keith Cobby;55644 wrote:
When it comes to mine I shall be taking about 4% from my SIPP with a minimum of the personal allowance. I think the best advice is to hold 2/3 years in cash and then whenever there is a market uplift to replenish the cash fund.

I shall take out the dividends from my ISA and lump sums as required as this is completely tax free.


I think this is a very sensible approach. If your SIPP provider allows access to cash deposit accounts, it can work really well.
Chris Howland
Posted: 19 January 2018 16:43:42(UTC)
#6

Joined: 19/08/2017(UTC)
Posts: 24

Thanks: 60 times
Was thanked: 34 time(s) in 13 post(s)
Laurie George;55638 wrote:

Chris - it will be interesting to see if retireeasy offers a tool that can handle the effect of other pension income kicking in, thereby reducing the amount needed from the SIPP...


If I recall correctly, it does allow for "timing" on each pensions potential income stream. It also catered for the tax free element.

Chris
Money Spider
Posted: 19 January 2018 18:07:26(UTC)
#15

Joined: 11/01/2013(UTC)
Posts: 104

Thanks: 44 times
Was thanked: 183 time(s) in 70 post(s)
@Laurie George
I and others, have contributed to several postings on here regarding this subject. It would be worth you searching for 'SIPP' and 'SIPP tax-free cash' and similar terms.

Whilst it may seem attractive to have access to an 'off-the-shelf' package to model retirement income/costs/drawdown/funds depletion personally, I would STRONGLY encourage you to build your own spreadsheet to model your own situation. Providing that you can understand usual arithmetic operators (+, -, *,/) plus % then it really is no more complicated than that. You will need to breakdown your model into many simple steps, but it really is not hard. The MOST IMPORTANT thing is that you will UNDERSTAND the model that you create and you can extend and re-model it at your leisure. I have described my spreadsheet in a posting here (although I don't have the exact link to hand). You will need to do some work yourself, but frankly, if you are looking for a 'no-effort' solution (and that is a valid, personal choice) then you should employ the services of an IFA and/or Financial Planner.

Try starting your model with just 5 years:

Year 1

(in rows)
Starting Pension Fund
Minus tax-free cash on crystallisation
Net Drawdown Fund
Assumed Growth (depends upon investments, but probably 3.5% p.a.)
Drawdown (Pension)Income (amount taken out)
Closing Drawdown Fund -> this becomes Net Drawdown (Opening) Fund for Year 2

Repeat for each year. (columns to the right)

Figure out your costs/required income and enter on a separate row
increase by your chosen inflation figure compounded for each column to the right.
The ONS website gives all the numbers that you need (updated monthly). Choose the measure that you think is most relevant:
RPI for 2017 was 3.6%, mean RPI for the past 20 years is 2.8%

Don't be frightened - so-called 'experts' don't have any divine gifts, generally they just have more familiarity and most information is available if you look for it (most of the useful stuff is on this site!)

Good luck.

Here's the location I referred to earlier (Post No. 55):
http://moneyforums.cityw...ing-off-investments.aspx
2 users thanked Money Spider for this post.
gillyann on 20/01/2018(UTC), Laurie George on 20/01/2018(UTC)
Keith Thomas
Posted: 19 January 2018 18:32:49(UTC)
#16

Joined: 22/12/2011(UTC)
Posts: 3

Thanks: 14 times
Was thanked: 9 time(s) in 1 post(s)
The biggest conundrum is: How long will I live for? Without that certainty nobody can say how much they will need. On the flip side of your coin: When do I stop investing and start spending? There are no pockets in a shroud. My hope is that that the last cheque written on my account is to pay for my funeral - and it bounces. . .
9 users thanked Keith Thomas for this post.
Mickey on 19/01/2018(UTC), Captain Slugwash on 19/01/2018(UTC), Tim D on 19/01/2018(UTC), Chris Howland on 19/01/2018(UTC), gillyann on 20/01/2018(UTC), Laurie George on 20/01/2018(UTC), T.M on 21/01/2018(UTC), Alan M on 22/01/2018(UTC), huudi on 22/01/2018(UTC)
Money Spider
Posted: 19 January 2018 18:40:36(UTC)
#18

Joined: 11/01/2013(UTC)
Posts: 104

Thanks: 44 times
Was thanked: 183 time(s) in 70 post(s)
@Keith Thomas
The 'year' columns in my spreadsheet run to my 100th birthday, but I can easily extend it......... ;-)
Joe 90
Posted: 19 January 2018 18:53:32(UTC)
#19

Joined: 14/01/2018(UTC)
Posts: 11

Thanks: 13 times
Was thanked: 4 time(s) in 4 post(s)
Learn how to do spreadsheet in Google Sheets. It’s fun and free. In particular make use of functions. These are very powerful and can work out all sorts of things including how much you will have left after drawing certain amounts yet with growth and inflation incorporated.

I have 4 years to go before I retire and my home made spreadsheet takes me all the way there and then all the way to state pension age and beyond. You can adjust the obvious variables as you wish. Eg amount saved per month, growth rate, inflation, drawdown amounts, tax etc.
1 user thanked Joe 90 for this post.
gillyann on 20/01/2018(UTC)
kWIKSAVE
Posted: 19 January 2018 20:34:07(UTC)
#20

Joined: 14/08/2013(UTC)
Posts: 378

Thanks: 97 times
Was thanked: 312 time(s) in 201 post(s)

I always recommended to clients who were in drawdown to have about 25% of the fund in cash for living expenses, if needed, for 2-3 years to see how they go.

When your state and private pensions kick in, you will be surprised at how much
they will buy, so Ribena can be substituted occasionally for the odd bottle of Morgon.

As mentioned elsewhere, paramount to use as much of your personal income tax allowances as possible, by each drawing off "income".
3 users thanked kWIKSAVE for this post.
Tim D on 19/01/2018(UTC), Laurie George on 20/01/2018(UTC), Mike L on 21/01/2018(UTC)
Joe Soap
Posted: 20 January 2018 04:09:03(UTC)
#9

Joined: 24/01/2010(UTC)
Posts: 541

Thanks: 84 times
Was thanked: 165 time(s) in 107 post(s)
Catch The Pigeon;55640 wrote:
This is a a free Financial Adviser tool and I use the professional version (CashCalc) with my clients.

Retirement Modeller

How do you get into that page? It has a pop up covering the content asking if you are a UK financial adviser but if you "accept and continue" nothing happens. Thanks.
Laurie George
Posted: 20 January 2018 11:32:34(UTC)
#21

Joined: 10/07/2016(UTC)
Posts: 25

Thanks: 54 times
Was thanked: 15 time(s) in 12 post(s)
Very helpful responses, thank you all.
Money Spider - I'm more than happy to put some effort in - digging out data etc and I appreciate the detailed explanation of your spreadsheet along with the link which I have printed out and will have a go, but Excel is not my strong suit, hence my search for a tool to do that bit for me.
At £24 p.a.the RetireEasy tool (thanks Chris), or possibly the Cash Calc(thanks Joe) may be options.
chubby bunny
Posted: 20 January 2018 11:54:29(UTC)
#10

Joined: 31/10/2016(UTC)
Posts: 209

Thanks: 65 times
Was thanked: 277 time(s) in 134 post(s)
Joe Soap;55677 wrote:
Catch The Pigeon;55640 wrote:
This is a a free Financial Adviser tool and I use the professional version (CashCalc) with my clients.

Retirement Modeller

How do you get into that page? It has a pop up covering the content asking if you are a UK financial adviser but if you "accept and continue" nothing happens. Thanks.


Disable your ad blocker.
2 Pages12Next page
+ Reply to discussion

Markets

Other markets