Hi Everyone,
Several announcements for the beginning of October.
1. Guardrails.
To stress-test your scenario, the 100 Monte Carlo simulation results show you the percentage of runs that did not have a cash-flow problem.
You want that success rate to be high. If it is low, then your plan is at risk, and a common strategy to mitigate that risk is to reduce spending. Of course, you can adjust your EXPENSES entries to modify the amounts or the dates they apply.
The new Guardrails feature allows you to explore, without changing your EXPENSE entries yourself, if a dynamic strategy to adapt your account withdrawals in years following years where the market returns have been lower than your expected returns, will help to not run out of money and thus your success rate in the simulations.
It works this way:
After 100 simulations, the success rate is calculated. If it is less than 90% then another 100 simulations are run, but these also reduce your EXPENSE entries by 10% for any years following a year where market returns were lower than the expected return of your entire portfolio at that time.
Reducing expenses will reduce the required income from your accounts, thus reducing withdrawals, and that will lead to a higher success rate.
If still not over 90%, it runs another 100 simulations the same way, this time reducing the expenses by 20%, then again by 30% if it has to.
Be patient, as although the 100 simulations are parallelised so that they complete faster, each set of 100 must be run sequentially, so it might take some time to run up to 4 sets. You’ll be able to see the results of each of the sets.
What this analysis shows is that you may need to be vigilant with your spending, and you may need to monitor your actual returns in the market and adapt your spending to it.
2. New Chart in the TIME MACHINE results
The guardrails feature requires the calculation of your overall average expected returns in every year of the TIME MACHINE.
I thought this would be useful information, and it has been added as a new Chart in the TIME MACHINE results (new runs only).
You might be surprised at first that your overall average expected return can vary over time. This will happen when you have different expected rates of return for different accounts.
The overall rate will change as some accounts are depleted or others increase in value.
The new chart is right above the overall asset allocation charts, as that also varies with time for the same reason.
3. Last resort withdrawals.
The simulations showed us an issue if you set some Withdrawal Priorities limits to 0%.
The TIME MACHINE follows your orders and refuses to withdraw from those accounts.
That is fine in cases you actually want to make sure those accounts are never withdrawn from, but often in simulations, where the market can go really bad on you, you may need to access that money or run into a cash-flow problem.
For that reason, in years there is a cash-flow problem the TIME MACHINE could not resolve (even if there's a spouse it can try to get money from), the TIME MACHINE will go through another round of your Withdrawal Priorities, ignoring any limits on withdrawals (except for CRA-imposed ones that are never ignored).
So as a last resort, you can always access all of your accounts. When that happens, a Warning is shown in the Timetable for the years it did so you know that happened.
4. Lots of styling changes on the web pages.
The left menu is now collapsible, which gives you more room to see things on smaller screens.
A new bottom menu is now visible on all the various reports of the TIME MACHINE, so you can navigate within and between the reports quickly and easily.
In comparison reports, the scrolling of side-by-side TIME TABLE comparisons is synced both horizontally and vertically.
Let me know if you have any questions or suggestions,
Happy Thanksgiving!
