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Mapping my retirement income is bad for my nerves
Knowing how much you’ll have in retirement – based on what you have and are saving today – is very tricky to figure out. This tool might help, editor Edmund Greaves writes.
Is your retirement plan on track? How would you even know?
I have only the vaguest idea of what my retirement looks like in pure financial terms – or even if its going to be enough.
I know roughly how much is in my pension pots. And I know how much I (and my employer) contribute each month.
This is a good starting point, but extrapolating what this means when you want to retire is the hardest part.
The good news is we’ve found rather a good tool for it!
This was the subject of this week’s Mouthy Money podcast. We were joined by Kevin Hollister, founder of www.guiide.co.uk to talk about how not to run out of money in retirement.
Kevin has developed Guiide as a nifty tool to help create a plan for your retirement income.
Inputting the variables of what you want (such as retirement age, if you want a tax-free lump sum etc) and what you currently have and contribute – and it will give you an indication of whether you’re on track.
It is modelled on the Pensions and Lifetime Savings Association (PLSA) Retirement Living Standards benchmarks.
Those benchmarks map out three variable retirement lifestyles and the consequent income needs to meet those ambitions. It is very interesting and worth a look.
Pension shock and horror
For the purposes of the podcast episode with Kevin, I went through the Guiide process. The results made me nervous.
It showed me that with my ambitions as they stood, I would start running out of money after about five years.
The good news is the tool helps you to map what you can do in order to ensure you meet your goals.
Broadly though you’ll need to do one (or more) of the following:
- Lower your expectations
- Take more risk
- Find other assets (such as home equity)
- Contribute more to your pension
With minor tweaks to the first three – I was able to make my plans work, hurrah!
But the process really unlined for me the fact that my plan although it appears to work, is fragile.
A big market fall, a loss of income, stagnation in the housing market – or any other kind of risk – could seriously hamper these plans.
I recommend having a go at the tool – it is quite enlightening.
As we say time and again now – have a plan, make a plan! Don’t stick your head in the sand!
