I'd be glad for any advice on how to model a UK pension. Similar to a US IRA, in the UK this account type is called a SIPP, or "Self-Invested Personal Pension". It combines a few characteristics, in keeping with to the US/UK tax treaty:
- Funded with pre-tax dollars, like a US IRA
- Grows tax free, like a US IRA
- Withdrawals are taxed as Ordinary Income, like a US IRA
- BUT - unlike an IRA, it is not subject to RMDs.
- Also unlike an IRA it can be accessed at age 55.
So, setting it up in Pralana as a Retirement Account - which doesn't allow access until 59 1/2 and then mandates RMDs at 72 - isn't ideal.
For now as a back of the envelope I have just set it up as an Income item, of 4% of the total amount, starting at age 55 and running until demise, growing at my 3% inflation assumption.
But I would rather have Pralana be able to decide only to pull as much income from it each year as is necessary, and to have it model out in line with other stock/bond growth assumptions, Monte Carlo analysis etc.
Maybe there's a way to hack it with other account types (HSA/529/Inherited IRA), or even a new Asset Class? But I couldn't quite figure it out myself.
So, any advice or ideas would be gratefully received.
@cabecabe Pralana cannot fully model this UK pension perfectly but you might consider including this in your tax-deferred account and then specifying scheduled withdrawals with no penalties from that account (one of the Source Account options in the pull down menu). I can't think of a way to have the withdrawals match your spending need automatically or to avoid RMDs, but this will allow withdrawals at any age with no penalities. Your current thought of setting this up as an Income stream might indeed be the best you can do. The biggest downside to that is probably that the account balance is not included in your net worth.
Stuart
Thank you, I appreciate the quick view on this. Glad at least to know that I haven't missed an obvious way to model it. Now I just need to be a little more creative and self-directed as to what exact decisions I'd be looking to make if the product did this, and find manual ways to do those things... vs just adding accounts and pushing buttons to see pretty charts. No bad thing to be forced to think a little!
