Portfolio Balance with Early/late Social Security Payments

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paul_13
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Joined: Sun Dec 15, 2013 7:42 am

Portfolio Balance with Early/late Social Security Payments

Post by paul_13 » Sun Dec 15, 2013 8:08 am

I'm running 2 scenarios which are identical except for when Social Security payments start. The 'early' scenario has them starting at 62(me) and 63(my wife) and the 'late' scenario has them starting at 66 and 67 respectively. This effectively means that in order to cover expenses, there are larger initial withdrawals from the portfolio in the 'late' scenario. Both scenarios start at age 62 and extends out to 95. All other settings and entries are identical.

The results I'm having trouble understanding are in the time period between age 62 to 67. At age 67, the portfolio in the 'late' scenario is larger than the 'early' scenario. So both scenarios have the same starting point, one requires less withdrawals from the portfolio, the other larger withdrawals (175K over 5 years) , but after 5 years the portfolio that had more money taken out is worth $20K more. The distortion in the portfolio values get worst over time.

Shouldn't the portfolio values after 5 years be reversed? The portfolio that had less money taken out be larger? What would cause the other portfolio to grow faster?

I'm sure I'm missing something here. Any and all help is very much appreciated.

Thanks!

Paul

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admin
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Joined: Thu Feb 28, 2008 5:27 pm

Re: Portfolio Balance with Early/late Social Security Paymen

Post by admin » Sun Dec 15, 2013 8:49 am

Paul,

What you've described certainly seems counter-intuitive. I assume you've verified that the simulation is doing what you expect in terms of withdrawals by looking at the year-by-year detailed results.

You might try setting the spending policy to Stable, just to make sure that this setting isn't having an impact on the results. Before you do, it might be worth comparing the 'percent of expenses funded' output in the detailed results in the two cases. If the withdrawal rate is high enough in the late case, the 'percent of expenses funded' could get reduced in an attempt to preserve portfolio value.

If none of this helps, you could change the inputs in a way that removes personal information, but still preserves the anomalous results and email the .frp file to me (assuming you're using the standalone version). My email is info@flexibleRetirementPlanner.com

Jim

paul_13
Posts: 2
Joined: Sun Dec 15, 2013 7:42 am

Re: Portfolio Balance with Early/late Social Security Paymen

Post by paul_13 » Sun Dec 15, 2013 12:13 pm

Jim,

First many thanks for the fast reply. As you indicated, I did not have both scenarios set to the same return rate. Note to other users: when verifying data focus on the line item not the data on the left side of the window. :D The planner is fantastic!

Thanks again,

Paul

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