Trustnet Direct Retirement Programme | Page 60

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 Page 60 Age 30 Age 40 Age 50 Age 60 Age 70 Age 80 Age 90 Age 100