Is investment growth one year premature?
Posted: Fri Jun 09, 2017 12:54 am
First -- thanks for developing this tool! Truly a great tool and I've used lots of them.
Question: I've noticed in the detailed output the in the first year of my plan, that the investment growth is advanced by a year already. I expected that would be year zero of the plan, and that my inputs in the input fields for investment values would simply be echoed back for the first year of the detailed output.
Only one year's premature growth can increase probability of success substantially and give a person the idea that they are better prepared financially than they are. But let me know if my conclusion is wrong -- perhaps I'm simply confused by the data I'm seeing.
Example: plan start age is 60. Retirement age is 61. Life expectancy is 92. Growth input is 5%. After entering $1,000,000 for total investments as of birthday at age 60, the detailed output shows $1,000,000 + 5% growth at age 60 -- not just $1,000,000. Seems like the tool has initialized on the value of investments at age 61, not 60. Should I then presume that the computed probability of success is for age 93, not 92?
I have used the additional inputs page to force growth in the first plan year (e.g. 60) to 0% to avoid what I see as an issue. But am I just misunderstanding what the tool is doing?
Thank you and again than you for building this tool!
Gene
Question: I've noticed in the detailed output the in the first year of my plan, that the investment growth is advanced by a year already. I expected that would be year zero of the plan, and that my inputs in the input fields for investment values would simply be echoed back for the first year of the detailed output.
Only one year's premature growth can increase probability of success substantially and give a person the idea that they are better prepared financially than they are. But let me know if my conclusion is wrong -- perhaps I'm simply confused by the data I'm seeing.
Example: plan start age is 60. Retirement age is 61. Life expectancy is 92. Growth input is 5%. After entering $1,000,000 for total investments as of birthday at age 60, the detailed output shows $1,000,000 + 5% growth at age 60 -- not just $1,000,000. Seems like the tool has initialized on the value of investments at age 61, not 60. Should I then presume that the computed probability of success is for age 93, not 92?
I have used the additional inputs page to force growth in the first plan year (e.g. 60) to 0% to avoid what I see as an issue. But am I just misunderstanding what the tool is doing?
Thank you and again than you for building this tool!
Gene