01/07/2026

How a cashflow model could provide clarity about your retirement income

Having a reliable income in retirement could give you the freedom to create a lifestyle you enjoy and achieve those bucket-list goals you’ve dreamed about for years.

In a 2023 survey by Legal & General, 94% of UK adults said their most important retirement dream is to feel financially secure for the rest of their lives.

However, working out what your income might look like many years from now can be complex. As such, you may feel in the dark about how your pensions, savings, and investments might support you in later life.

Indeed, research findings published by IFA Magazine reveal that just one in five people with a defined contribution (DC) pension understand what retirement income they can expect.

This uncertainty could leave you worried about your long-term financial security and unprepared for what lies ahead. That’s where financial advice comes in.

Keep reading to find out how a financial planner can use cashflow modelling to give you a clear picture of your retirement income and help you plan for the future you want.

The challenges of planning a sustainable retirement income

Calculating what your retirement income might be is challenging because you’re often trying to project decades ahead.

What’s more, your income could be affected by various external factors that are unpredictable and out of your control, such as investment returns and inflation.

Longer life expectancies add another layer of complexity. According to the Office for National Statistics’ (ONS) life expectancy calculator, a 45-year-old woman has an average life expectancy of 87 years, and a man of the same age could expect to live to 84.

This means that your retirement funds may need to cover about 30 years or more, depending on when you retire and your longevity. Of course, no one can predict exactly how long they’ll live, which makes it difficult to know how far your wealth will stretch.

These uncertainties could make retirement planning feel overwhelming.

A cashflow model could remove uncertainty and provide peace of mind

A financial planner can use smart software called cashflow modelling to help you plan your retirement income.

This is how it works in simple terms:

• Input data – Your financial planner enters information about your current financial position, such as your income, expenses, assets, and liabilities.
• Layer variables – They can then factor in variables such as investment performance, inflation, and your projected future income.
• Generate a cashflow forecast – The software will create a long-term projection of your finances based on your desired retirement age and life expectancy.

By tweaking the data entered, your financial planner can show you how a range of possible scenarios might affect your income. For example, you might want to see how a dip in the market or retiring earlier could affect your finances.

The power of cashflow modelling is that it removes the guesswork from retirement planning. You can clearly see how a change in your circumstances might affect your income and identify any potential shortfalls. This puts you in a strong position to adapt your strategy so that you stay on track to achieve your goals.

Your financial planner can ensure you get the most out of cashflow modelling

While there are many advantages of using a cashflow model to inform your retirement planning decisions, there are some potential drawbacks to consider too, including:

• It’s only as good as the data that’s input – Incorrect or incomplete information could result in a misleading forecast.
• It needs regular updating to be a useful planning tool – A cashflow model provides projections based on your current finances and assumptions about the future, such as the rate of inflation. This means that your model could quickly become outdated if your circumstances or external factors change.
• It requires oversight by a professional to be used effectively – A cashflow model can support retirement planning, but it can’t replace the expertise and guidance offered by a human professional.
• It could provide a false sense of security – A model can’t guarantee what your retirement income will be. It must be carefully stress-tested by a financial planner to ensure that projections are realistic and don’t appear more definite than they are. This involves exploring “what-if?” scenarios that might affect your retirement income, such as dips in the market and serious illness.

A financial planner can make sure you get the most out of your cashflow model by:

• Tailoring it to your needs and goals
• Regularly reviewing and updating it
• Stress-testing it against different scenarios
• Embedding it in your broader financial plan.

In other words, they’ll make sure your model is a valuable retirement planning tool that helps you make informed decisions with confidence.

Get in touch

If you have any questions about cashflow modelling and how it could help you gain clarity on your retirement income, we’d love to hear from you.

Please note: This article is for general information only and does not constitute advice. The information is aimed at individuals only.

All information is correct at the time of writing and is subject to change in the future.

The Financial Conduct Authority does not regulate cashflow modelling.