RetireJapan

banders wrote: ↑Mon Feb 19, 2024 6:03 am So you maintain your allocation outside pensions. The other POV is that the pensions are guaranteed and could counter the risk of a large stock market position so should be included. Difficult one.

northSaver wrote: ↑Mon Feb 19, 2024 6:15 am What I do is calculate when and how much we'll get from our pensions, assuming we continue to pay into them until we can stop. The actual amounts are unknown so I use this year's pension payments as a safety net. In truth we'll probably get more by the time we retire, unless something breaks horribly in the pension systems.

Then I guess how much we'll need to live on each year at today's prices. Actually I guess three numbers: minimum, comfortable and luxury lifestyles.

Then I calculate how much money we've got now (actually end of previous quarter) across all investments. And for simplicity, I assume four ludicrous ideas:
1. The investments won't increase at all from now.
2. There is no inflation going forward.
3. We won't earn any more income from now.
4. GBP.JPY stays at 150 forever.

The first two should hopefully cancel each other out if our portfolio is constructed well enough. The third one is highly unlikely but I suppose could theoretically happen if we suffer horrendous injuries that would prevent us from working. The fourth one might work on average, who knows.

Then the fun starts. Based on the above, I work out how much we'll need right now to live until at least 100. At some point the pensions should cover everything, so it's a matter of drawing down our savings until that point, and taking into account the fact that the various pensions will kick in at different times. This will produce three figures: minimum, comfortable and luxury.

I compare these results with how much we actually have, and either jump with joy or sigh with despair depending on the outcome (it changes each year). I'm pleased to report that currently we have enough to live a comfortable life, but not a luxury one (with no extra income). But I'm less than a decade from my first pension payment so it's not such a great achievement. If you're still in your 20s it will probably feel like an impossible chasm to bridge... unless you're someone like Mr Money Mustache.

As well as that, I use online retirement simulators to get a different (and more realistic) picture. I find cFIREsim to be particularly powerful, even though the data is for US markets and doesn't take into account exchange rates.

goodandbadjapan wrote: ↑Mon Feb 19, 2024 7:14 am Ha - I pretty much do this. Assume no growth and no income or inflation from now but also assume no pension or inflation! Then I see how much I could spend monthly for 30 years (I figure if I haven't calculated pension and live this far then the accumulated pension I do actually get would get me easily through the rest of my days if I live longer. - I'll be 84 in 30 years!) I figure this is probably quite a pessimistic scenario but I think it gives me a rough idea of whether I am FI or not.

northSaver wrote: ↑Mon Feb 19, 2024 10:13 am

goodandbadjapan wrote: ↑Mon Feb 19, 2024 7:14 am Ha - I pretty much do this. Assume no growth and no income or inflation from now but also assume no pension or inflation! Then I see how much I could spend monthly for 30 years (I figure if I haven't calculated pension and live this far then the accumulated pension I do actually get would get me easily through the rest of my days if I live longer. - I'll be 84 in 30 years!) I figure this is probably quite a pessimistic scenario but I think it gives me a rough idea of whether I am FI or not.

Wow, I'd be crying every time if I didn't include pensions. You must have a sizeable stash to make it last 30 years with no future income! Our lives would be pretty basic until age 84 without pension income, and nothing left after that. So I hope we get it

goodandbadjapan wrote: ↑Mon Feb 19, 2024 10:51 am

northSaver wrote: ↑Mon Feb 19, 2024 10:13 am

goodandbadjapan wrote: ↑Mon Feb 19, 2024 7:14 am Ha - I pretty much do this. Assume no growth and no income or inflation from now but also assume no pension or inflation! Then I see how much I could spend monthly for 30 years (I figure if I haven't calculated pension and live this far then the accumulated pension I do actually get would get me easily through the rest of my days if I live longer. - I'll be 84 in 30 years!) I figure this is probably quite a pessimistic scenario but I think it gives me a rough idea of whether I am FI or not.

Wow, I'd be crying every time if I didn't include pensions. You must have a sizeable stash to make it last 30 years with no future income! Our lives would be pretty basic until age 84 without pension income, and nothing left after that. So I hope we get it

I didn't say that it doesn't make me cry! But this is just a worst case scenario kind of take (I hope)!