You may consider this a strange analogy but there are a number of similarities. When planning a journey or a day of meetings we all like to know in advance how long it is likely to take, what traffic black spots we might like to avoid and the knowledge that we will not get lost.
Similarly, whilst we all know it is a good idea to save for our retirement it is sometimes difficult to know how much to save and by what age we could actually afford to stop working. In today’s challenging global economic environment of low interest rates, low growth and volatile markets, making long term predictions is a tricky business, but the sooner you start to plan, the more options you will have along the way.
We all go to work to earn money to fund our daily lives and whilst it might seem obvious, we need to consider how much of that money we need to put aside for when we are not working. Over the last 30 years the length of time in retirement has increased significantly and arguably we should be investing more or as will be more common, work for longer.
To help our clients we have increasingly been preparing Cash Flow Forecasts to illustrate how their retirement goals can be achieved. The forecast will be expressed in ‘today’s’ money terms and will take account of your overall financial position both with regards to existing investments, the ability to invest and potential inheritances. This will also include retained pension benefits and entitlement to state pensions. For many clients this has proved reassurance and provides a useful track to follow and keep under review at subsequent meetings. The assumptions we make concerning inflation and growth will err on the side of caution so that the outcomes forecast should be comfortably achieved. Naturally, such forecasts are prepared for guidance only hence the importance of keeping the matter under review.