Pension drawdown calculator example - Can I retire at 55 with £300K?
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- Опубликовано: 21 май 2020
- ➜ Try our Pension Drawdown Calculator: www.2020financial.co.uk/pensi...
We show you how to use our Pension Drawdown Calculator to find out if you can afford to retire at 55 with £300K.
Our Pension Drawdown Calculator uses historical UK stock market data to show you how likely it is that your money will run out based on how much you plan to take, how long you want your pension pot to last and also based on your investment strategy.
The calculator is designed a tool to help with your retirement planning but it shouldn't be relied upon solely since past performance doesn't guarantee future returns.
Try our Pension Drawdown Calculator for yourself here- www.2020financial.co.uk/pensi...
Want to know if you can retire at 55 with £300K?
Read the full blog post here ➜ www.2020financial.co.uk/can-i...
2020 Financial are a boutique Independent Financial Advisor based in Southampton UK who specialise in all aspects of retirement and pension planning.
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My original retirement plan was to retire at 62, work part-time, and save money. However, high prices for everything have severely affected my plan. I'm concerned if people who went through the 2008 financial crisis had an easier time than I am having now. The stock market is worrying me as my income has decreased, and I fear I won't have enough savings for retirement since I can't contribute as much as before.
It's recommended to save at least 20% of your income in a 401k. You can use online calculators to estimate how much you should save based on your age and income. Saving at least 20% of your income in a 401(k) can help ensure that you have enough money to retire comfortably. By saving this much, you can take advantage of investing in the stock market and potentially grow your retirement savings over time.
Considering the increased complexity since the 2008 crash and COVID, I suggest diversifying your financial portfolio. I hired an advisor and successfully grew my portfolio by over $150K during this turbulent market using defensive strategies that protect and profit from market fluctuations.
@@maryHenokNft Kindly share the details for reaching your advisor. With inflation negatively affecting my funds, I'm in search of a more lucrative investment strategy to optimize their performance.
I've shuffled through a few advisors in the past, but settled with *Camille Alicia Garcia* her service is exemplary and she's a genius in portfolio diversification. I'd suggest you research her further on your browser, sure you'll find her basic info.
Appreciate this recommendation, hopefully I can get some insight to where the economy is headed and strategies to beat inflation with when I hear back from Camille .
that looks really good. well explained.
Great video
9k a year won't even pay for my household bills and food.And I have no mortgage.At 55 you'd probably need a million pounds in your pot to be comfortable
What an awesome bit of software. Great job
Can you add a function for guard rails withdrawal? I.e., on a year the plan performs badly, you take less out (to a minimum you need to live), on a year the plan performs well, you take a bit more out (to a maximum, extra goes back onto the plan). Obviously part of the overall retirement plan needs to include a safe low-risk (cash) buffer amount that you need to use on the bad years, and rebuild on the good years.
Clever. Highlights the lottery of retirement, really, but also helps guide what’s sensible vs out and out gambling with your pot.
At the moment Vanguard lifestrategy 60 would accumulate £38520 pa. Enough for a decent retirement if no large borrowing.
So hard to find nice content like this. I don't know who, but someone actually needs to hear this, you've got to stop saving all your money. Venture into investing some, if you really want financial stability
Invest globally in bitcoin, gold, silver, forex market, commodities. Just don't be left out and save yourself
Beautifully said, I tell my folks these words everyday. It's good to save money but most people don't understand the market moves and tend to be misled in facts like this and always depend on money in the bank.
I understand the fact that tomorrow isn't promised to anyone, but investing today is a hard thing to do because i have no idea of how and where to invest in these?
@@investwithqueenie5491 Hey, this is a computer age. Peeps who aren't even traders make money from the crypto and forex markets ,how many millionaires do you know who have become wealthy by investing in savings accounts?
@@petekelvin2736 yea. You’re right. The fact is I have not done this bitcoin before but have been hearing about it. Do you know any professional broker you could refer me to?
i had a lil play with the calculator and a 3.5% drawdown seems almost 100% guarantee you wont run out of money during retirement. 4% jumps failure rate to almost 10% which isnt that bad but id probably lose sleep over it if there was a market downturn or high inflation rates. this was 15% bonds and 85% stocks tho, ive seen a lot of videos recommending that you're almost always better going more int stocks even in retirement.
£500k at 65 is what you'll probably need with no mortgage imo
Useful info, see you are local in southampton. Can I ask if financial advisors like yourselves are regulated under UK law? I ask as my late father was ripped off and so I've very sceptical now at 58 (and thinking about retiring) in seeking any advice from anybody involved in finance. thanks
It's sad to hear that your late Father had a bad experience, unfortunately not all firms are regulated and there are lots of scammers out there. We are fully authorised and regulated as Financial Advisors by the Financial Conduct Authority - the governing body for Financial advice in the UK. I'd also recommend you speak to Money Helper the free government guidance service - they don't offer advice but they do offer a free pension wise call for over 55s - they will be able to explain your options and hopefully help you feel more informed and confident in making any decisions relating to your money www.moneyhelper.org.uk/en/pensions-and-retirement/pension-wise/book-a-free-pension-wise-appointment
I have played with this and the sweet spot ends up around 75% equities / 25% cash. Which is odd as other models I have used would have bonds beating cash. Are UK bonds historically really that bad? or is the model switched?
It would be good if calculator allowed you to exclude the 1975 outlier.
Agreed, that one keeps turning me into a multi millionaire! haha
Agree, seems a simple solution to apply standard deviation, or to cut out the top and bottom 2% of scenarios to give something more realistic.
But does that add in the gov pension at 67
This is a fantastic calculator but it’s important to understand the nuances.
For eg. What’s the appreciation rate at the best and worse simulated years? Also the drawdown is calculated as a % which means in bad years, the amount that you can withdraw reduces as the total pot value reduces.
I think that’s a “given” that it behaves in that way.
How do I get this calculator
Have a look at spend spend spend a couple who won 100k in the late 1960s when earning £2 a week. i.e. they thought they had won 50,000 weeks wages or 1,000 years wages. They retired but found that 100k was worth very little within 10-15 years.
Yes, if you're money isn't managed or invested correctly your pot could very quickly reduce in value. Inflation can quickly erode the value of your cash - especially at today's levels
Works for me, very cool.
Looks really great! When you say "Average return", am I correct in assuming you are taking the mean? Might it be more informative to take the median return?
It’s all about the expenses. That said under $500k US for a 55 year old is going to be tight
Much more doable in the UK as healthcare is not even a consideration. Once a house is paid for the typical household/bills expenses are around £500 per month. As in the example in the video leaving £500 per month disposable. Not a huge amount of money but it beats the alternative of working until 68 lol. That is even if you are lucky and make it to 68 in good health etc.
Also one would likely have some other sort of income source + state pension at 67/68 is about another £9,000 per year not factored into her estimates.
@@Sean-tn5nv £500 is highly unlikely now with cost of living rises. Should be factoring in a lot more than that. That's borderline penniless.
The biggest challenge I have with pension drawdown calculators is that they do not seem to factor in for the fact that I retire at 55 so 100% of my retirement income has to come from my pension pot until I am 67 when I get the benefit of my state pension; and - if I am married - two years later my wife's too. So I might need £20K per annum from my pension pot between 55 and 67, but only £11K per annum thereafter once my state pension kicks in, and maybe only £2K per annum if I have a partner who also gets the state pension. If I want an annual spend of around £30K, the vast bulk of my retirement years will require £12K per annum from my pension pot, but a short period (around 13 years on average if my wife is two years younger than I am) at the full £30K. So that would be £30K x 13 years = £390K from my pot. That's one heck of a lot if you only have a £300K pot (a £300K pension pot is very high relative to the UK average, but clearly not enough to retire at 55 on? I could be wrong.). My pot grows over that time (I hope), but I then need it to generate £12K per annum from when I am 69 (that is, from when my wife gets her full state pension).
And what if one or both of us will not be qualifying for the full state pension?
These calculators are frequently too blunt a tool to make these calculations, I find.
Spot on Tom, exactly what I was thinking. I think the key is to try and build up a big cash reserve in addition to your pension, that would enable you to draw down off the cash reserve (obviously tax free). Meaning you are taking less out of your pension during those years prior to the state pension kicking in. Not easy to do I suppose unless you get a windfall or inheritance. But there again I know bugger all.
@@michaelnash9644 Hi Michael. Indeed. I believe that you could take about £17K per annum from your pension tax-free (because of personal allowance at £12,500 and 25% tax-free from pension each time). That would then require a cash reserve as you say to top-up the rest until state pensions kick in. Whichever way you calculate it, you need to be lucky enough to have a big pension pot and decent cash reserve, so the idea of retiring at 55 with a pension of £300K is probably unrealistic for an awful lot of people. Mind you, I read of one person who said they spent about £6,500 per annum. I'd like to know how that was possible too! :-)
Aviva's drawdown calculator uses the state pension. So extends the period your savings last.
@@jstoner9029 Cheers - I'll give it a look!
I think you've worked out that you cannot retire at 55 (soon to be 57 then 58) on a £300k pension pot, and get £30k a year to live on until state pension age. That's a 10% drawdown, plus you need to factor in inflation (you'll need to increase what you take out each year), and the plan simply isn't going to gain ~12% in value each year reliably to offset that, never mind the bad years when it loses 10%... now many people might downsize their house at this time once the children are moved out, which may unlock some money to live on for a few of those years, preserving the pension pot (or use that money as a buffer for a guard-rails adaptive drawdown which preserves pot value better).
You used the mean for the average final balance....? Yeah, you don't want to do that. I'm not a financial advisor, but I am a data analyst. You don't want outliers to skew the results, so in this case the median should be used. Surely you should know this better than me? This is seriously questionable
It’s completely pointless.
Yup
Question: WHY have you left out the very significant contribution of the state pension...?...!!!!
This calculator shows how a private pension pot is affected at varying drawdown levels. If you plan to take less from your pension because you're in receipt of a state pension you can simply input a lower drawdown amount. Our Retirement Cost calculator allows you to add in the state pension to work out how much you might need in retirement www.2020financial.co.uk/retirement-cost-calculator/
Expected future returns - inflation = no chance
I haven’t found a calculator that adds in yet fact you will get a state pension at 66 and therefore can reduce the amount you draw down - can you adjust your calculator to reflect that
Indeed seems a big oversight. I bodged it by seeing how much I had left at 67 then starting a new calculation with that pot and the new revised (reduced) income level.
Aviva has one that does that. It's a tool called retirement planner.
Tideway drawdown calculator does this.
I made my own in apple numbers … it certainly takes account of that.
The calculator site has a retirement planner which adds your state pension click FINANCE click Retirement Planning and your started.
good video . i shall try your calculator . thankyou
How have you taken into account the effects of inflation?
In short, no that's about a tenth of what you really need.
What about inflation. No state pension taken into account. No account of variation in money required for such things as long term care. Really very basic and would be a little misleading. Better than nothing and does show that you need a fair sized pot to retire but come on surely you don't use this for real clients surely?
Fact, in the UK the average pension pot stands at £61,897, this would buy you an average retirement income of only around £3,000 extra per year from 67
Doesn't sound alot and it's quite scary
That's skewed though because that's including all age ranges of contributors not those pulling from their pension
Average pot at age of first withdrawal was over 100k? Still seems very low but certainly not 60k
Ever heard of inflation?
i did
This is incredibly helpful. Thank you for this upload.
The answer is yes, quite easily as long as you don’t expect to have the same amount left in your pot at the end of 30 years. If you want to leave some money then take 4%, if you want to run it out take 7%. You’ll still have plenty left, just not £300k. Inflation is a red herring when you are retired.also this makes no allowance for your possibly £10k pa state pension in 12 years time. Take this and then cut back on your drawdown.
Did you actually watch the video? If you take 4% there is nearly a 21% you will run out of money. But yes it does not take into account the state pension. The model should allow you to have two drawdown percentages, one up to state pension age and a lower rate after state pension age. Why is inflation a red herring? If you get hyper inflation and the returns on your investments don't keep up you will have a problem.
@@rodneyfungus8249 I'm intrigued by the 21% bottoming out scenario at just 4% when most funds are higher than this percentage on average. Those must have been some serious crashes, as the Credit Crunch and COVID's March 2020 drops didn't create this scenario. For example the 12 months to date (Feb to Feb) for my pension fund with COVID running throughout it has averaged over 4% growth ignoring contrbutions. I would imagine that during the scenarios where the fund drops low through whatever those catastrophes are, you put yourself on a very low spend so as not to kill the fund through withdrawals. 3% withdrawal saw the fund go from £300K to £2M in just 30 years.
I agree though about inflation. My current model factors in 2% increased take each year at the moment for a never ending pot. Though common understanding is that you spend less and less the older you get.
@@Dunk1970 It is because her portfolio model was 45% bonds lol. Nobody would do that, at least not today. It is common to go 100% stocks or maybe 10% bonds 20% at a push.
Look to save a years worth of pension, prior to retirement or during the good years, so you can leave your pot untouched during a downturn.
@@slayerrocks2 some people said to have more if you can help it, if there is a market crash like 2008 you want living expenses, because if you draw out when the market is very low you can lose a fair bit.
Did you say starting with 300k over 30 years you have 2 million? If so how did you get 300k to start with
Or to put it another way you retire at 55 with 300k for 30 yrs I have a bigger pot circa 2 million.
If you had retired in 1975 with 300k and withdrew 9k a year you would have had 2 million by 2019. That’s because 1975 was the nadir of global equities markets with the FTSE closing at only 146 on January 6 1975.
@@markdougan2278 thanks for reply, but I guess you can only use past performance 45 years, but the headline is misleading unless you can use predictor tools for future
This seems like an exercise in trying to baffle the client. It is typical of someone fresh out of university who is asked to come up with such a " tool ". What this fails to mention is how long a pension will last and what growth rates you might expect is simple arithmetic easily understood by the average person. Also , as is the case with so many other " advisors " the client will be asked to sign a disclaimer which states- " the value of your investment could go DOWN as well as up and you might not get back the money you have invested " ......I am always surprised at how many people are willing to sign such a document. Caveat Emptor !!
I realized that the secret to making a million is making better investment. I always tell myself you don't need that new Car or that vacation just yet and that mindset helps me make more money invest:ng. For example last year I invested 70k in blue chip stocks and crypt0 s (with the help of my advisor of course) and made about 380k, but guess what? I put it back and traded with her again and now I'm rounding up close to a million. Delayed gratification always pays off
I'm no longer waiting for GRANT LOAN because I now earn $30,000 every weekend
Wow James. I am so happy for you. That ix incredible. Would you be able to mentor me and help me? I would be grateful. Thank you.
Your graphics are too small to see
I’d suggest making your own calculator rather than using theirs. 🔝
Why ?
Well, inflation (thanks to socialists like Boris Johnson, printing massive sums ££££) is likely to be the key problem facing us in retirement.
Their calculator outputs are not inflation adjusted, they are nominal values.
My own has a factor added in the end column so you can tweak and examine the effects of inflation.
Pension payouts rise with inflation automatically. Have you heard of the triple lock?
@@zorrodm I have , but I think you need to be wary of expecting a state pension. It may not even be available for many.
@@maxflight777 it is and will continue to be available to the vast majority of UK citizens.
Inflation is already factored in on the models- The chart adjusts the annual withdraw amount for inflation based on the CPI (consumer price index) for that year. The calculator is provided as a guide only
So theres no min amount that the government wants their cut?
In the UK you have your state pension which for this year is less than your personal tax allowance, about £3K less so there is a small amount you can get still tax free. Once over your personal allowance it is taxed at applicable tax rate.
No intake of inflation.........sorry not valid for me.
Inflation is factored in to the results - The calculator runs simulated data based on data from 1928 - 2021 - it adjusts the annual withdraw amount for inflation based on the CPI (consumer price index) for that year.
Just shows how bad the stock market is. What a horrible way to plan for retirement.
Why? What do you expect if you only have a £300k pot and decide to retire at 55?
I would say if looking to retire at 55 with £300K you would have to be very careful how you spend as you are 12 years away from your state pension and the boost that gives you.
the stock market is the reason most can retire early or even at all.
The calculator must have a lolly stick jammed in its logic if it confirms that you can retire on £300K !
Maybe if you delay retirement to age 77 you could ….
But otherwise, you will need four or five times that sum.
How did you decide that Max?
FFS.....you'll be lucky to reach the age of 77!
Not true for the average person and this doesn't factor in state pension or possible part time working throughout retirement. If you've paid off your mortgage then you should be able to live on £1500 comfortably, £9k is very low, but £9k plus married state pension is close to £28k at today's prices, that should be enough for most.
Pulp is spot on with this. If we needed £1million to retire on then the average Briton would be a penniless pauper and out on his a**e. If you've paid the mortgage, paid off the car, no debts then £9k(state) + drawdown to give you £1500/month will work. Why the hell do you need all that saved money? You'll spend most of the time sitting in your garden and going on some nice holidays. You're going to look like a twat if you peg it at 70.
What figures do you for anticipate for inflation % ?
Investment returns % ?
Adviser and investing charges % ?
, oh and how much do you want for foreign holidays, new cars and living expenses? Pray tell….
I’m really struggling to understand how this is helpful in any way . It’s pointless.
But of course, it tells the user what they want to see so long as they ‘play around with it’… Jesus Christ.
How the hell do you live on £9000 per year and how do you know when you die? The calculator is not any use
The simple answer to this is......No, you can’t retire on 300k at 55 😂😂😂
Scary & true....
Yep, 55 is a bit too early unless you have some other passive income. At 65 then this becomes do-able as long as you have no mortgage, own the car and no other debts to deal with. Most people won't do much anyway, they all have these 'doing loads of things' scenarios cos they'll have the time. Well if you couldn't manage it at 40 then physically you might not manage it at nearly 70 if you haven't stayed in shape. Download £8000 per year + state pension of £9000 per year and you'll be fine. As long as you don't plan on going into your 90's.
Retiring at 55 is just stupid - and lazy. At 60 you are much more likely to have a decent pot and also five years less to live, so fewer years to cater for. 60 is a realistic target for retirement, 55 is not.
But if you are stupid and lazy?
Depends what your plans are for retirement. Lot's of people here are talking about retirement but staying in the UK. That's going to be tough if you don't have good savings. I'm thinking as soon as I repay mortgage I'll probably move abroad. Vietnam is the cheapest option so far.
@@pavolkocis7456 Thanks but no thanks!
Good luck then 👍
For some of our clients retiring at 55 is an achieveable life goal and for some professions early retirement is madatory. If you've managed to save enough through your working life early retirement can be a fantastic new chapter to enjoy
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