My new magic number is a ratio derived from the zero-point model.
It is the estimated average monthly dividend income that the zero-point model predicts that my ISA plus my SIPP will be generating when I reach zero point divided by the monthly income that I currently draw but excluding from my currently drawn income any ISA contributions (since once I reach zero-point there will be no funds left for ISA contributions) and assuming no HMRC tax liabilities (my SIPP is small and not getting new contributions so I am assuming anything drawn from my SIPP after zero-point will fit within the nil-rate band; that's perhaps overly optimistic since it would be sharing that nil-rate band with my state pension so I might refine that calculation in a future iteration of my spreadsheet).
It's this ratio that currently sits at 2.63 and that is extremely healthy. If it was exactly 1.0 my magic number would be indicating that, if things go as per my model, I would seamlessly sail through zero point such that, in the year when my non-tax-sheltered funds are depleted, the annual divi income being generated within my ISA and SIPP would be exactly enough to continue to pay the same monthly amount into my account each year minus any provision for ISA contributions or tax liabilities (those two exclusions as previously explained).
Any figure above 1.0 indicates that my zero-point income could afford me a bigger monthly draw than I was taking prior to zero-point (happiness) and a figure below 1.0 indicates that I would have to reduce my monthly draw once I reach zero-point (misery).
Interesting methodology Julian - thanks for detailing that out, as I'm always very interested in this side things when it comes to income-investing.
I'm still in the 'growing' stage of my HYP, as I'm still working, and whilst I collate quite a lot of interesting data for my HYP (which is all automatic, and not at all onerous, I should add...), the only two numbers I've really been interested for a number of years now are -
1. The 'Forecast Income' figure from my spreadsheet, which is collated by using the ShareCast (ex Digital Look) 'Forecast Yield' figures for each of my holdings, and then aggregated up to give an overall 'Forecast Income' figure for my whole HYP portfolio.
2. A rolling '12-month real income' figure that's been generated from real-life income from my HYP in the past 12-months, re-calculated at the end of each month.
Whilst I'm happy that generally over the years, the 'Forecast Income' figures obtained via the ShareCast 'Forecast Yield' data has been close enough to the actually-delivered income each following year to probably be good enough to get away with only using that first single metric
whilst I'm still working, I do also like to collate the second figure so that I can hopefully see in hard 'real-cash evidence' that on an ongoing monthly basis, all things being equal, my rolling '12-month real income' figure will always be gravitating slowly towards the 'Forecast Income' figure each time I calculate it at month end, and also I will hopefully see a steady creep upwards of both figures
over time too, as my investment-dividends increase going forwards in real time as well, over the months and years...
Tracking the above really doesn't take much time at all, and I find it to be very rewarding personally when I hopefully see two things happening over time -
1. There is the sort 'steadiness' to my '12-month rolling income' figures that will enable me to build up what will hopefully continue to be a real sense of confidence that when the actual time comes to make use of this income, I've got the long-term data available to help make any transition decisions much easier to make...
2. There is a regular 'upgrade' to both my 'Forecast Income' and also my '12-month rolling income' too, that helps me see and confirm that my long-term plans and hoped-for income-levels can be achieved in the sorts of time-frames that I'm aiming for.
Some people might see this as a level of 'work' that's not required, but I liken it to watching a long marathon on TV, as I well remember watching many of them during my younger years, and the commentators would often refer to the 'lap-time clock
' to check if the current race was being run in a way that was likely to get anywhere near any previous record-times. Without those lap-times, no-one would really have known until really close to the end of the race if there was any chance of seeing a really good finish time, and I see the above income-tracking processes as doing much the same job....
I don't want to get to the 'end' and only then work out where I am - I want to see where I am 'now', and I also, importantly, want a good idea if keeping at the same 'pace' might get me the sort of 'income lap-times' that I'm hoping for, so as to achieve the final-lap 'income-goal' that I desire, and the above calculations really do help deliver that sense of ongoing achievement, round out many investment laps, and on towards that final finishing line...