### Returns in detailed view don't match expected values

Posted:

**Wed Jun 26, 2019 2:25 pm**Hi,

Thanks for developing such a flexible tool. I'm a bit stuck at the moment because my expected values in the detailed view aren't matching what I would expect.

In my early years of retirement, I am not withdrawing from the tax deferred or tax free accounts, so I would expect them to grow at the rate of approximately Return - Average minus Inflation - Average. For me that would be 5.2% - 2.5%, i.e. a real return of 2.7%. I am getting close to that in my first year of retirement, but the years after that it is significantly lower. Here are the numbers.

Sorry about the formatting being hard to read when this is pasted in....

Year Tax Def. Portfolio Value Real Tax Def Return Tax Free Portfolio Value Approx Tax Free Return

2019 (Age: 55-R) $2,247,286 2.62% $43,098 2.61%

2020 (Age: 56) $2,288,474 1.83% $43,888 1.83%

2021 (Age: 57) $2,329,608 1.80% $44,677 1.80%

2022 (Age: 58) $2,353,821 1.04% $45,141 1.04%

2023 (Age: 59) $2,397,197 1.84% $45,973 1.84%

The first, second, and fourth columns are directly from an export of the detailed view.

The third and fifth are columns I added to a sheet to calculate the approximate real return. i.e. end of year value minus start of year value divided by start of year value, shown as a percentage.

In the first year, the starting balance for tax deferred is $2,190,000 and tax free $42,000. i.e. these are the numbers entered in the summary view of the tool (my year 0 is the year I retire) and are not shown in the detailed view, the detailed view starts with one year later. As you can see, there are returns of around 2.6%, which is close to what is expected.

The years after that, the real returns decrease to 1.83%, then 1.80%, etc.

I even ran the numbers for a few more years than are shown above (being careful not to use a year where money is withdrawn from these accounts) and it never went above something like 2.02% real return.

Am I missing something about how these values are calculated?

I realize the tool is used as more than a calculator and actual returns are never average and the tool tries to account for that. I could see if the return was varying based on the standard deviation (mine are 15% on returns and 1% on inflation) but in that case I would expect returns to sometimes be higher than the average of 5.2% average return minus 2.5% average inflation i.e. 2.7%.

Thanks for any clarification you can provide.

Best regards.

Thanks for developing such a flexible tool. I'm a bit stuck at the moment because my expected values in the detailed view aren't matching what I would expect.

In my early years of retirement, I am not withdrawing from the tax deferred or tax free accounts, so I would expect them to grow at the rate of approximately Return - Average minus Inflation - Average. For me that would be 5.2% - 2.5%, i.e. a real return of 2.7%. I am getting close to that in my first year of retirement, but the years after that it is significantly lower. Here are the numbers.

Sorry about the formatting being hard to read when this is pasted in....

Year Tax Def. Portfolio Value Real Tax Def Return Tax Free Portfolio Value Approx Tax Free Return

2019 (Age: 55-R) $2,247,286 2.62% $43,098 2.61%

2020 (Age: 56) $2,288,474 1.83% $43,888 1.83%

2021 (Age: 57) $2,329,608 1.80% $44,677 1.80%

2022 (Age: 58) $2,353,821 1.04% $45,141 1.04%

2023 (Age: 59) $2,397,197 1.84% $45,973 1.84%

The first, second, and fourth columns are directly from an export of the detailed view.

The third and fifth are columns I added to a sheet to calculate the approximate real return. i.e. end of year value minus start of year value divided by start of year value, shown as a percentage.

In the first year, the starting balance for tax deferred is $2,190,000 and tax free $42,000. i.e. these are the numbers entered in the summary view of the tool (my year 0 is the year I retire) and are not shown in the detailed view, the detailed view starts with one year later. As you can see, there are returns of around 2.6%, which is close to what is expected.

The years after that, the real returns decrease to 1.83%, then 1.80%, etc.

I even ran the numbers for a few more years than are shown above (being careful not to use a year where money is withdrawn from these accounts) and it never went above something like 2.02% real return.

Am I missing something about how these values are calculated?

I realize the tool is used as more than a calculator and actual returns are never average and the tool tries to account for that. I could see if the return was varying based on the standard deviation (mine are 15% on returns and 1% on inflation) but in that case I would expect returns to sometimes be higher than the average of 5.2% average return minus 2.5% average inflation i.e. 2.7%.

Thanks for any clarification you can provide.

Best regards.