You don’t need Cashflow analysis

We sometimes have a client ask us for help with Cashflow Analysis they have set-up using a spreadsheet. He was having problems with the formulas and was coming up with some unusual outcomes.

We pointed out where data was going wrong, but also told him that he does not need Cashflow Analysis. What he needed was assurance that he can afford to retire when he wants to.

We suggested that a Cashflow modelling tool might be an excellent way to get there, but that Cashflow analysis alone will solve nothing. More important are the many assumptions and ‘What If…’ scenarios used to ‘stress test’ the sustainability of a plan.

For example, a stress test might show the outcome of:

  • a drop in investment returns,
  • an unexpected expense,
  • a planned holiday of a lifetime

A stress test will help measure the long term impact.

No predictions carry guarantees. They can only illuminate possible outcomes, rather like asking your Sat Nav to predict when you will arrive at a destination. Of course, it becomes more accurate the closer you get to the destination, and you might want to add some diversions on the way, your preferred route/waypoint, and include a few comfort breaks.

Gaining confidence in your retirement income being enough to support your lifestyle involves accounting for inflation, investment performance, costs and increases in benefits. At the same time, you might want to value your estate and break down your assets for a potential plan B or plan C.

And remember, tax regimes have a habit of changing. Therefore regular recalculations should be run to keep up with circumstances and changes in legislation. A simple spreadsheet cannot do this without a great deal of re-setting formulas.

A good Independent Financial Adviser will have access to sophisticated software that will present potential outcomes in a clear and coherent manner. This is especially required when pensions are in Drawdown (taking taxable income from a Defined Contribution pension).

This sort of guidance can help you decide when to stop work and start enjoying retirement without the worry of money running out.

For more details on our savings and investments plans and pensions, please call 01733 314553 or email us at