One of the most frequent, and important, questions clients approaching retirement ask is ‘how long does my pension need to last?’
In essence you are asking how long you are expected to live and, in the absence of a crystal ball this is impossible to predict. What is certain however is that people are living much longer compared to only 30 or 40 years ago – and that, in most cases, people will underestimate how long they are going to live.
The Office of National Statistics (ONS) provides research on this topic, including this handy tool below; which allows you to calculate your life expectancy – including your chances of reaching 100 not out!
This provides a rough and ready reckoner but we feel that a much more powerful tool is cash flow modelling – which allows us to build on the ‘how long’ with the ‘how much’ and the how ‘sustainable’.
Since the pension freedoms in April 2015, we feel that a higher number of retirees are choosing drawdown income rather than purchasing an annuity and in these cases cashflow modelling is crucial – allowing us to turn the complex numbers into visual charts which can show you the sustainability of your income throughout retirement.
Plans can be stress-tested to account for longer than average life expectancy, and also the impact of adverse market conditions. We can also look at potential changes which allow you to make decisions, on an informed basis, to more loosely meet your needs and suit your priorities.
We know that a long and happy retirement is what most people target but feel strongly that a life without a plan is just a wish – so let’s get planning!