Unfortunately, I am stuck at square one and do not understand the output. I have read the documentation as well as this forum, but am obviously misinterpreting something and could use your help.
I tried to create something I could easily duplicate with a hand calculation. Below are the inputs I used:
Investing style is set to custom with a 10% return and a standard deviation of 0. Inflation is set to 0 as well. My taxable portfolio is $1,000,000 with zero entered for all other other portfolios or income. Annual retirement spending is $50,000 and the investment tax rate is set at 15%. Income tax rate is 20%, but I do not believe it matters since retirement income is zero. (changing this parameter yielded no change, confirming my expectation).
Using the above inputs yields a portfolio value at retirement of $1,030,750.
What I expected to see was $1,035,000. i.e. the result of $1,000,000 + 10% return ($1,100,000), less the 15% investment tax on the 10% of growth ($15,000), less $50,000 of annual retirement spending, giving a final total of $1,035,000.
What am I missing? I tried a number of variations on he above, but try as I may, cannot come up with $1,030,750 as a result.
Thanks for any and all help.
I tried setting retirement spending to zero, and the portfolio value at retirement then shows $1,085,000, which is what I expected. Guess that narrows my question down to how the $50,000 annual retirement spending is handled. If I "tax" my $50,000 withdrawal at 8.5%, I can make my result match the FRP number, but feel that now I'm just forcing things. Hoping someone can set me straight.
Some quick calcs show 10% of $950,000 is $95k. 15% taxes on $95k is $14,250, which leaves $80,750 for portfolio growth. Add that to the $950k and if I did the math right, you end up with $1,030,750.
Thanks so much for your help, and the wonderful tool. Will proceed more deliberately from this point forward.
My question is what is the discount rate that the program uses to calculate the Present Value for the ending value each year.
Using the example in this thread; $1,000,000 balance at retirement; a $50,000 / year spend (0% inflation;0% Standard Dev) and a 8.5% net investment income ( 0% Standard Deviation) simulates to an ending value after 20 years to $2,487,593. How was this Present Value (and all the years in between calculated)?
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