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Most financial advisers put lifetime cash flow modelling at the heart of their business. In fact, some say this is their most valuable service.
Tech firms deliver powerful tools that advisers use with clients. But now companies are providing similar tools online that you can use yourself — finding out how long your money will last under different scenarios. And these tools are often free.
Cash flow modelling takes the complexities of money in, money out, the growth variables and adjusts for different inflation scenarios. You can input different expenditures and incomes, and big lump sums out or in (for example, if you buy a caravan or if granny leaves you an inheritance).
The best tools distil all this into a graphic of your lifetime cash flow, showing — helpfully — when your money might run out.
You may say what’s the point? Most people already have some sort of list or even a spreadsheet. Cliff Weight, a member of ShareSoc, says: “Excel should be good enough.”
Unfortunately, it isn’t. Sure, if you’re happy in Excel, an online search will throw up free retirement planning spreadsheets and relevant YouTube tutorials.
But If the thought of Excel gives you headaches, you might struggle. And you won’t get fancy visuals.
So how to find the right online planner? With providers competing for your attention, it’s hard to sort the good from the also-rans. But fear not, I’ve compared seven different dashboards, giving them a score out of five. No science is involved — just my personal opinion.
My research threw up a few “retirement calculators” that simply grab your age, address and size of pension as leads for their advice business. Be wary of these.
With the tools below, you don’t need to give specific investments or pension company details — a comfort to those worried about data sharing. The better ones allow you to simulate an unexpected event, such as a premium bond win or a market crash.
Remember, the results are only as good as the data you enter. Be careful not to underestimate life expectancy, overestimate returns, ignore inflation or be unrealistic about spending. And do repeat the exercise as you, well, grow older.
Money Helper Pension Calculator: 2/5
Designed for people retiring at age 55 or older, this government-backed tool helps estimate whether your likely retirement income will meet your needs. It can combine private and state pensions and add other income sources. But there are no visuals. Plus, some rigid assumptions let it down — annual investment growth is set at 5 per cent, charges at 0.75 per cent. Granted you may be OK with these, but inflation at 2.5 per cent feels unreal.
Pension Buddy: 2/5
This retirement health check provided by financial services provider Just Group is similar to Moneyhelper’s, It also comes with fixed growth and charges assumptions, and no visuals.
Truth about Money: 2/5
This is powered by Prestwood, a tech firm that has long provided life-long cash flow modelling for advisers. You input your savings and pensions and list your income needs and expenditures and get a simple graph that tells you when you will run out of money. But with no details about the growth rates or inflation assumptions used, I found it lacking.
My Netwealth: 3/5
This is a new service launched by wealth manager Netwealth in February, with well-designed visuals. You can adjust your plan to see how changing investment risk levels or retirement income will have on the time your money will last. The downside is that the tool makes assumptions on investment growth and inflation, which it does not explain. But improvements are scheduled; planned updates include a link to accounts outside Netwealth (which sets it apart from other tested sites).
Invidion Pension Calculator: 3/5
An effective free retirement calculator from an online financial tool provider that is not promoting any products. You input your current pension status, plus future contributions, and play around with the effects of growth and inflation. There are no design frills or visuals but it’s a very clear projection.
Guiide: 4/5
Designed by actuaries, this free tool analysing retirement outcomes for those using drawdown shows how much you need to pay in before you retire, and how much to take from your pension and savings pots each month when you retire, to get what you want tax efficiently and avoid running out of money. It also shows how much you can save in tax and in charges. I’ve given a bonus point for stress tests that illustrate, for example, what happens if you need to pay for long term care.
Financial Mentor Ultimate Retirement Calculator: 4/5
If you can cope with entering dollar amounts as proxies for pounds (which means it doesn’t get 5/5), this US site founded. by serial entrepreneur Todd Tresidder is very useful. It does all the usual calculations to forecast savings needs, retirement income estimates, and inflation adjustments. You can also add estimated tax rates. You can plan a modern retirement with phased income, part-time business income, alternative assets, varied savings patterns, and more. You can adjust spending needs during retirement (not everyone wants a flat income). The nice graphs can be downloaded alongside detailed numbers on to a spreadsheet.
Moira O’Neill is a freelance money and investment writer. Twitter: @MoiraONeill, Instagram @MoiraOnMoney, email: moira.o’neill@ft.com
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