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Planning for retirement – how cash flow modelling can help

Many workers look forward to their retirement date and even dream of retiring early. However, most people are unaware about how far their existing arrangements will go towards their financial objectives and aspirations in retirement.

Cash flow modelling puts a spotlight on this and provides you with a way to understand when the time is right for you to retire and what you need to do to achieve your financial retirement goals.

How will cash flow modelling help?

Having a cash flow model gives you more confidence in your plans. Cash flow modelling is a process that can give you the certainty that you’ll be able to overcome life’s financial obstacles and fulfil your financial aspirations after you retire. It gives you a representation of how your finances will be affected, from early retirement through to the later years. With this in mind, it’s far easier to grasp how your wealth will be affected over time and the level of income you can afford to take.

It will help you to gain a clear perspective of what your income is likely to be depending on when you choose to take retirement and will give you a clearer indication of how your future income might be affected by inflation. This information will give you a better understanding of what level of income you will be able to take at different rates of investment return.

Cash flow modelling is also a valuable tool for tax planning, enabling you to minimise the amount of inheritance tax (IHT) which might otherwise be payable on your estate.

Further, by forecasting your future cash flow, you will be in a far better position to plan for other later-life expenditures for example receiving an inheritance or requiring residential or nursing care.

Cash flow modelling can also help you to make plans decisions about your future financial circumstances after you retire. For example your financial outlook may be best served by downsizing and moving to a smaller property help to release extra capital.

Being financially prepared for retirement, whether early or at the state pension age is crucial and understanding how much income you can expect from your retirement provisions is essential, whether you hope to retire now or 10 years from now.

Regular reviews

Life is rarely linear and retirement plans can go off course. This may mean your income forecast will be different from reality. For your cash flow model to remain effective before and throughout your retirement years, you’ll need to update the information regularly and frequently reviewing cash flow modelling keeps it on track.

Your financial situation may have changed thanks to an inheritance perhaps or your aspirations may have changed meaning you want to take a greater level of income now. Perhaps during your retirement years, you’ve discovered you can live on less income but want to leave a greater legacy for your family. Whatever your circumstances, keeping your data up to date is important.

Take specialist advice

Deciding when to give up work is not a straightforward decision for many. You don’t want to find yourself in the scenario where you retire a few years early to discover that it was detrimental to your financial security in later life. On the other hand, if you would like to retire and are able to support yourself comfortably financially, you may have the attitude ‘why wait’?

Having a bespoke cash flow model when you are approaching retirement gives you a clearer picture of what your future income and capital needs are likely to be in later years. Cash flow modelling is also a useful tool in helping you to make an informed decision about when is the best time to retire – it could sooner than you think with the right advice.

Having a cash flow model during retirement can give you the confidence to move forward with your plans and adapt and amend them according to changing aspirations and circumstances.

Cowgills Wealth offer independent financial advice and can provide you with a bespoke cash flow model whether you are thinking about early retirement as a long time goal, are close to retirement or even retired already. With our specialist knowledge and experience, our team will analyse your financial circumstances in totality and help you to see the potential for your future being mindful of what you want to achieve.


The Financial Conduct Authority does not regulate Cash Flow Modelling or Estate Planning

Wealth Management
Posted by Chris Harrington
5th August, 2019
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