Summary
The Legacy value is a critical factor affecting the Success Rate in Timeline Planning.
Timeline runs various simulations based on historical data to project retirement outcomes.
The default Legacy value is £1, which serves as a minimum balance for a successful plan.
The Legacy value is shown in Real terms
Introduction
The concept of "Legacy" in Timeline Planning plays a pivotal role in determining the Success Rate of a retirement plan. This article aims to shed light on how the Legacy value impacts the simulations run by Timeline and, consequently, the Success Rate of a retirement plan.
How Timeline Uses Legacy
Timeline Planning employs a robust simulation model that runs various monthly rolling scenarios. These scenarios start from January 1915 and go up to December 2022. The duration of each simulation is determined by the retirement age set up in the plan. For instance, if a client is currently 65 years old and the plan is set to last until they are 99, then each simulation will span 34 years.
The Importance of the Legacy Value
The Legacy value is generally set to default at £1. This means that for a plan to be considered successful, it must end with a minimum balance of at least £1. If a simulation fails to reach this £1 threshold, it is deemed unsuccessful. Conversely, if the simulation lasts the entire duration and maintains a minimum balance of £1, it is considered a success. This is the crux of how the Legacy value impacts the Success Rate in Timeline Planning.
Real-World Implications
The Legacy value serves as a benchmark for the financial viability of a retirement plan. By setting this value, advisors and clients can better understand the likelihood of a plan's success or failure. For instance, if a client has a Legacy goal of £1,000,000, simulations with an end balance below that threshold will be marked as unsuccessful. It provides a tangible goal to aim for, ensuring that the retirement plan is not just about spending but also about maintaining a minimum balance for the future.
Conclusion
Understanding the role of Legacy in Timeline Planning is crucial for both advisors and clients. It serves as a key parameter that influences the Success Rate of a retirement plan. By setting an appropriate Legacy value, one can more accurately gauge the effectiveness and reliability of a retirement strategy.