DURING & POST
When will you run out
of money?
Mathematically, it should be straightforward to work out when your money
will run out if you are relying on your investments.
Unfortunately, investment performance is hard to
accurately predict, both in how much your holdings
will grow when you are saving and how quickly they
will decline when you are drawing down your pension.
As a result, we have to make assumptions about
growth rates and the prescribed figures are 2 per
cent for the lower rate, 5 per cent for the mid rate
and 8 per cent for the upper rate.
This wide spread of growth rates provides a broad
set of outcomes. Someone investing £300 per month
for 30 years and drawing down £4,000 in retirement
could run out of money anywhere between the ages
of 70 and 95, using these assumptions.
Bad luck can also befall the unwary investor. A
market crash or recession can depress the value of
your investments at the time you want to retire,
often devastating your income.
However, in the new world of drawdown, there is no
key retirement date when you have to cash in your
chips and therefore you can afford to take the ups
and downs of the stock market over the period you
actually retire if you leave your money invested.
£350k
With an annuity, you are a slave to the markets as
to when you buy an annuity, but you will know that
your money will last until you die.
When you are in drawdown, your money will only
last a finite amount of time, but you can adjust
your expenditure accordingly.
Try our planner, which allows you to adjust
growth levels and monthly withdrawals to give you
an idea of how long your funds will last.
www.trustnetdirect.com/retirement/
during-retirement
Key points
The less you have saved for your retirement,
the less income you will have each month
We are living well into our 80s and 90s, so
your money has to last longer
Plan to have accrued enough money to last
until you are at least 90
Upper rate 8%
Middle rate 5%
Lower rate 2%
£300k
£250k
£200k
£150k
£100k
£50k
£0
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Age 30
Age 40
Age 50
Age 60
Age 70
Age 80
Age 90
Age 100