minimum % of expenses to fund

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Cincy_1988
Posts: 11
Joined: Sun Jun 02, 2024 12:13 am

minimum % of expenses to fund

Post by Cincy_1988 »

Hello

Something does't make sense to me. If "minimum percent of expenses to fund" is set to 75%, the simulation is yellow; however, it becomes green when "minimum percent of expenses to fund" is set to 90%. As far as I know, 75% means up to 25% of my expenses can't be funded and 90% means up to 10% of my expenses can't be funded. Isn't 10% of expenses not funded less conservative than 25% of expenses not funded? If this is correct, why the simulation becomes green by selecting "minimum percent of expenses to fund = 75%"?

Thanks in advance for your help!
Bahram
jimr
Posts: 839
Joined: Thu Feb 28, 2008 6:48 pm

Re: minimum % of expenses to fund

Post by jimr »

Yeah, this is admittedly confusing. The answer has to do with the logic that controls the color of the stop light:

From the documentation: https://www.flexibleretirementplanner.c ... ner-output
In order to get a green light, the simulation must end with a positive portfolio balance over 90% of the time, and it must (more often than not) give the retiree 90% of their requested annual spending amount over the life of the plan. (Note: a spending policy “floor” is configurable in the settings window)
So basically, if the spending floor is lower than 90% and the spending policy causes spending to be reduced to conserve the portfolio, it's very likely the stoplight will end up being yellow, even with a relatively high probability of success.
Cincy_1988
Posts: 11
Joined: Sun Jun 02, 2024 12:13 am

Re: minimum % of expenses to fund

Post by Cincy_1988 »

Thank you for your prompt and clear explanation. I really appreciate your help!
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