Retirement year is now but initial and retirement portfolio values differ

Post questions about how to use the planner, user inputs, how the planner works, and comments and suggestions.
Post Reply
pjddjp
Posts: 18
Joined: Thu Dec 21, 2017 10:40 am

Retirement year is now but initial and retirement portfolio values differ

Post by pjddjp »

Dear All,
Thank you for this software tool and this nice community.
I have set the retirement age to my current age.
I would expect the "initial portfolio value" to be the same as the "portfolio value at retirement," but they differ by about $50k (with the latter being higher).
Even if I set the retirement age to a year in the past (like 3 years ago), the "portfolio value at retirement" remains a good bit higher than the "initial portfolio value."
Any idea why this would be?
Thanks!

jimr
Posts: 634
Joined: Thu Feb 28, 2008 6:48 pm

Re: Retirement year is now but initial and retirement portfolio values differ

Post by jimr »

The planner records the "portfolio value at retirement" at the end of the year that retirement happens rather than the beginning of the year. It would be more accurate if the label was "portfolio value at end of retirement year."

The initial portfolio value is recorded at the start of the year at the start of the plan.

pjddjp
Posts: 18
Joined: Thu Dec 21, 2017 10:40 am

Re: Retirement year is now but initial and retirement portfolio values differ

Post by pjddjp »

Thank you!

pjddjp
Posts: 18
Joined: Thu Dec 21, 2017 10:40 am

Re: Retirement year is now but initial and retirement portfolio values differ

Post by pjddjp »

Addendum - On thinking about this more, I realize that I do not understand. If I set my current age to 65 and the retirement age to 63, the "portfolio value at retirement" is still higher than the "initial portfolio value." How can we understand that?!

jimr
Posts: 634
Joined: Thu Feb 28, 2008 6:48 pm

Re: Retirement year is now but initial and retirement portfolio values differ

Post by jimr »

The simulation logic iterates through each of the years of your plan starting at current age. If you set "current age" to 65, that's the first year that the simulation logic deals with. If you set the retirement age to 63, but the start age to 65, the planner still "starts" the simulation at age 65, not age 63.

The logic that sets "portfolio value at retirement age" runs after portfolio returns are calculated for any given year (eg at the end of the year). The way it works is that after portfolio returns are computed for each year, the logic checks to see if the current age is greater than or equal to the retirement age and also whether the "portfolio value at retirement" variable has been filled in yet. If it hasn't been filled in, it gets set to the current portfolio value.

pjddjp
Posts: 18
Joined: Thu Dec 21, 2017 10:40 am

Re: Retirement year is now but initial and retirement portfolio values differ

Post by pjddjp »

Thanks so much. Appreciate your expertise!

cobson
Posts: 7
Joined: Fri Jul 28, 2017 5:52 am

Re: Retirement year is now but initial and retirement portfolio values differ

Post by cobson »

Sorry to drag up this old thread, but can I check your statement below:

"The planner records the "portfolio value at retirement" at the end of the year that retirement happens rather than the beginning of the year. It would be more accurate if the label was "portfolio value at end of retirement year."

as it doesn't seem to agree with what I see, unless the software has changed since then ?

When I run the software I see the 'portfolio value at retirement' figure as being the median portfolio value at the end of the year before retirement, not the year in which retirement happens, i.e. on the detailed view it is the line above the one marked -R, not the line marked -R itself.

jimr
Posts: 634
Joined: Thu Feb 28, 2008 6:48 pm

Re: Retirement year is now but initial and retirement portfolio values differ

Post by jimr »

Wow. Very good catch. I made this change recently to avoid confusion since the original behavior was somewhat counter-intuitive.

Thanks for pointing this out so this thread stays current.

From the release notes (Program Menu bar, Help->Release Notes...)

01/14/2020 04.03.02 Updated embedded jave runtime to use 32bit vesion instead of 64bit version.
01/07/2020 04.03.01
- Changed RMD start age default to 72 based on SECURE ACT legislation.
- Support for Java versions 12-13 including dpi-aware display scaling.
- Changed calculation used for portfolio value at retirement when retirement is at start of plan.
- Added right-mouse export option to additional inputs tables.
- Adjusted formatting for right-hand text panel in sensitivity analysis window.
- Misc minor gui adjustments to improve support for high resolution displays.
- Improved performance of sensitivity analysis feature.

cobson
Posts: 7
Joined: Fri Jul 28, 2017 5:52 am

Re: Retirement year is now but initial and retirement portfolio values differ

Post by cobson »

Thanks for the clarification - I agree that the current approach makes better sense - you start your first year of retirement with what was in the pot at the end of the previous year.

Post Reply

Who is online

Users browsing this forum: No registered users and 3 guests