Proposito December 20: How to Avoid Running Out of Money in Retirement

The clock is ticking

We’ve written in Ciren Scene about the challenge faced when you’ve just retired to ensure you have enough money to last the rest of your life. This time, we’ll give you some strategies.

And here’s one thing we’d advise you not to do: use a calculator. More specifically, avoid using one of the commonly available retirement calculators, which are usually based on cashflow projections. As expert Dr William Bernstein says, “these calculators all make the same erroneous assumption – that your expected rate of return is the same each and every year”. The real world doesn’t work that way.

So how much money can you spend without running out? Our answer here at Proposito is to look at historical data to explore how well a withdrawal approach might fare under a wide range of market conditions – from the worse to the best. We look at data going back over 100 years, that covers two World Wars. Going forwards, it will also cover the pandemic.

Then we will help you create a Withdrawal Policy Statement, to guide the ongoing withdrawal strategy. It will take into account factors such as how much income you need, your investment plans, how long you are likely to live, fees and taxes you will need to pay, and any legacies you’d like to leave.

One of the biggest challenges is not knowing how long you will need money for (i.e. how long you will live). In retirement planning, it’s best to think in terms of survival probability. This gives us an idea of the chances you’ll live to a certain age.

Creating a strategy is one thing, but regular monitoring is essential to help keep it on track. And that’s where we come in.

To find out more about financial planning if you are approaching retirement or would like some expertise to help you navigate your way after retirement, email hello@proposito.co.uk or call our Cirencester office on 01285 708444.


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