These Tips are based on frequent questions that we get. We can’t give you advice, so can’t tell you what you should do. We can help you get the most from Guiide by understanding how to use our tools better.
For Income Wanted you have three things to think about in the Wants page:
1. Shape of Income
You can have a choice of three shapes. Here are the pros and cons of each:
Flat for life
- Pros – Highest sustainable starting amount with same size pots.
- Cons – Inflation will reduce your spending power over time which is a big risk.
Increasing for life
- Pros – 2.5% increases for life will help maintain your spending power over the long term
- Cons – lowest sustainable starting income with same size pots.
Increasing to 75 only
- Pros – Halfway house. 2.5% increases to 75 will help maintain your spending power until then. Most people spend less in later life anyway ignoring any care costs.
- Cons – Inflation will reduce your spending power after age 75.
2. Initial Starting Lifetime Income
We use the well known Retirement Living Standards to show the amount of starting income needed for different types of lifestyle. The figure which appears in the box is automatically increased by 2.5% a year from today to the date you want to retire. The lifestyles are:
- Minimum – covers all your needs, with some left over for fun
- Moderate – more financial security and flexibility
- Comfortable – more financial freedom and some luxuries
The gap between Minimum and Moderate is now quite large, so we will add another one in between soon. This gives you a good idea, but feel free to overwrite the number if you think you need more, or can manage on less.
Two really key points to remember:
- These figures are after income tax amounts (we take off any tax payable in our calcs)
- They do not include housing costs. So if you need to rent in retirement you should add an annual rent figure. If you still have some term left on your mortgage, we deal with that below.
3. Added Temporary Income
You can add extra income for up to 10 years from retirement. Why? Well you may need to continue to pay the mortgage for a while yet after retirement, or…
You may just want to spend more for a while on nice holidays each year, while you are still young enough to enjoy them.
The Chart
Everything you see initially in the Chart is in actual money. It is not shown in today’s money.
To see it in today’s money, just click the switch in the chart. If you’ve chosen increases for life the chart will go flat as we assume inflation will be 2.5% a year on average, same as the increases.
If you have all flat or some flat income, it will fall over the time its flat, as inflation reduces it’s spending power.
If you want to change individual years, just click Including increases and remove them. The charts go blue and you can change any year. We then add any increases back in.
Making changes
After you leave the page the amounts wanted are stored for the calcs. So when you return you won’t see all the questions again. You can change the standards, but these don’t flow into the charts.
So we get asked a lot – How do I change this? Sorry it should be clearer. Just click Set all in the chart to get a pop up to change all your income.
This is your total income aimed for. We combine everything you have to see if you can get it with no shortfalls, if you can’t we show you have you may be able to solve this.
This is the first in a series of Top Tips, more are on the way!
If you have any question at all as always just contact us at contact@guiide.co.uk.
