Retirement Income Plan for The Miggins

John and Jo Miggins have worked hard all their lives. They saved as much as they could and now they’re ready to retire.

They've paid off their mortgage and their home is worth £260k. Between them, they have £300k in their pension pots. And that’s it! 

They expect to receive £14,000 in State Pensions.  They reckon they need a minimum of £20k a year to get by. Of course, any additional income would be great for holidays and occasional treats for the grandkids. The Miggins are expecting a relatively laid back retirement spent volunteering at their local dog trust and spending time with their grandkids. But before they settle down into retirement, the Miggins want £25k of their savings for the holiday of a lifetime. 

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Justin King: I'm an investor, get me out of here! Help clients survive the jungle with the power of five.

In this final of our three part series, financial planner Justin King APFS, CFP  talks about how he uses cash buffer within a retirement income portfolio to help client stay the course during a market down turn.

Justin uses Timeline to illustrate how he keeps adequate cash buffer alongside the heavy allocations to equity. The goal is to avoid being forced to sell down on equities during a market downturn. This cash buffer also doubles as a great way to managing client behaviour. By assuring the client that they have ample cash to support their withdrawals during a possible market downturn, they client is far less likely to bail on the plan.

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Battle plans, cashflow projections and retirement income planning

Retirement planning is in some respects similar to preparing for battle. While in retirement planning, lives may not be in danger, both do have in common the goal of seeking to maintain independence and dignity. And in retirement the enemy isn’t military aggression, but aggressive inflation, poor sequences of returns and outliving your money.

Our previous story illustrates the problem with focusing on a single-line projection in retirement planning. The fundamental problem is that using straight-line projection creates an illusion of precision, and gives an impression that there is only one plausible outcome. In reality, the exact future outcome is unknown and unknowable. So it’s important that we consider a wide range of plausible scenarios.

In this article, we consider the reasons why straight-line-projections are woefully inadequate when illustrating sustainability of income in retirement.

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Illustrating Sustainable Withdrawal For Different Phases of Retirement

We're delighted to announce a new feature on Timeline which enables planners to illustrate the benefits of scaling up/down withdrawals at different phases of retirement 

The traditional assumption for sustainable withdrawal rate is that a client will spend the same amount of inflation adjusted income throughout their retirement. This assumption is not supported by cold hard data on spending pattern of retirees.

Research in the UK shows spending in retirement declines progressively in real terms. From age 65, spending typically declines progressively and is about 35% lower at age 80.

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