understanding % of expenses funded

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FRPJunkie
Posts: 33
Joined: Wed Feb 24, 2016 8:17 am

understanding % of expenses funded

Post by FRPJunkie »

Hi Jim,

In many of my runs, the planner returns a "Probability of Success 100%" report. But, then, under that, it reports an "Average Spending Shortfall" of, for example, 47%. This number will vary, going slightly up and slightly down.

When I look at "Detailed View" I see that virtually every year shows 100% of expenses funded, and under "Probability of Success (# of Failures)" "100%(0)"

On the very few years where the planner says that % of expenses funded is 98 or 99%, under Probability of Success it says "100(1)" which I take to mean there is some sort of failure with the spending level (?).

If the probability of success is 100%, how can there be a failure of this magnitude (47%, or more, as above).

I did notice that if I reduce my retirement expenses by $20,000, this discrepancy still occurs, though less frequently. IOW the planner reports 100% Success with Average Spending Shortfall of 0% most times, but sometimes with 42% shortfall.

jimr
Posts: 596
Joined: Thu Feb 28, 2008 6:48 pm

Re: understanding % of expenses funded

Post by jimr »

I think what you're seeing is do to rounding. The number in parenthesis () in that column of the detailed view is the number of failures. If it's not zero, it means there were cases in which the simulation ran out of money that year.

So even though it's showing a probability of success of 100%, it's probably more like 99.99 or 99.98

Also, the average spending shortfall only applies to the failures cases. It's the average amount of spending that couldn't be funded in the cases where the plan failed.

FRPJunkie
Posts: 33
Joined: Wed Feb 24, 2016 8:17 am

Re: understanding % of expenses funded

Post by FRPJunkie »

jimr wrote:
Sat Feb 29, 2020 11:51 am
I think what you're seeing is do to rounding. The number in parenthesis () in that column of the detailed view is the number of failures. If it's not zero, it means there were cases in which the simulation ran out of money that year.

So even though it's showing a probability of success of 100%, it's probably more like 99.99 or 99.98

Also, the average spending shortfall only applies to the failures cases. It's the average amount of spending that couldn't be funded in the cases where the plan failed.
Understood. Thank you.

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