Bogleheads,
A lot of retirement calculator sites that deal with historical data, usually have data going back to 1871 for general market (stock/bond) and maybe 1927 for more diversified asset classes. That means if you simulate every 30 year period, you get 113 "cycles". Or, if you simulate a "longer" retirement of say 55 years, you only get 88 "cycles".
For trying to simulate "longer" retirements, at least for evaluating the worst-case scenarios, would it be worth it to simulate 10yr increments, the choose one of the lower portfolio values to start the next 10 yr increment, and so on? This would yield more "cycles", but I suppose it would start to look monte-carlo-ish.
Is this sort of analysis worth it, or is current historical data analysis and monte carlo simulations just fine?
Simulating "long" retirements vs. shorter ones.
- lauren_knows
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Simulating "long" retirements vs. shorter ones.
41 - Married - 2 kids - Aiming for FI/ER in early 40s - Creator of cFIREsim
Re: Simulating "long" retirements vs. shorter ones.
I'd start with spreadsheets.
Estimate your expenses, choose an inflation rate, interest rate, and investment return, start with your retirement assets, and move the data forward a year until to get the length of time you wish to estimate. By varying the unknowns, you can get a good idea of how robust your plan is.
I used spreadsheet when I was working, but wrote my own full-blown financial package that includes a Monte Carlo simulation of my withdrawals.
While a spreadsheet isn't firecalc, the future can't be predicted from the past, either.
Estimate your expenses, choose an inflation rate, interest rate, and investment return, start with your retirement assets, and move the data forward a year until to get the length of time you wish to estimate. By varying the unknowns, you can get a good idea of how robust your plan is.
I used spreadsheet when I was working, but wrote my own full-blown financial package that includes a Monte Carlo simulation of my withdrawals.
While a spreadsheet isn't firecalc, the future can't be predicted from the past, either.
No matter how long the hill, if you keep pedaling you'll eventually get up to the top.
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Re: Simulating "long" retirements vs. shorter ones.
Don't think it makes sense to randomly pick starting and end dates that don't roll.Raybo wrote:I'd start with spreadsheets.
Estimate your expenses, choose an inflation rate, interest rate, and investment return, start with your retirement assets, and move the data forward a year until to get the length of time you wish to estimate. By varying the unknowns, you can get a good idea of how robust your plan is.
I used spreadsheet when I was working, but wrote my own full-blown financial package that includes a Monte Carlo simulation of my withdrawals.
While a spreadsheet isn't firecalc, the future can't be predicted from the past, either.
In the end there is no assurance ANY portfolio will last. If we have hyperinflation as in Germany or Argentina no numbers are safe.
Good luck.
"The stock market [fluctuation], therefore, is noise. A giant distraction from the business of investing.” |
-Jack Bogle
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Re: Simulating "long" retirements vs. shorter ones.
No, but there are investments that are likely to survive even those "tail-risk" events.staythecourse wrote:Don't think it makes sense to randomly pick starting and end dates that don't roll.Raybo wrote:I'd start with spreadsheets.
Estimate your expenses, choose an inflation rate, interest rate, and investment return, start with your retirement assets, and move the data forward a year until to get the length of time you wish to estimate. By varying the unknowns, you can get a good idea of how robust your plan is.
I used spreadsheet when I was working, but wrote my own full-blown financial package that includes a Monte Carlo simulation of my withdrawals.
While a spreadsheet isn't firecalc, the future can't be predicted from the past, either.
In the end there is no assurance ANY portfolio will last. If we have hyperinflation as in Germany or Argentina no numbers are safe.
Good luck.
In theory, theory and practice are identical. In practice, they often differ.
- lauren_knows
- Posts: 193
- Joined: Mon Jan 28, 2013 2:11 pm
- Location: NoVA, USA
- Contact:
Re: Simulating "long" retirements vs. shorter ones.
Obviously this is true, however if we're talking about looking at a situation that will be "no worse than any time in America", then it can be useful to simulate things like this to get a warm and fuzzy feeling.staythecourse wrote: In the end there is no assurance ANY portfolio will last. If we have hyperinflation as in Germany or Argentina no numbers are safe.
Good luck.
41 - Married - 2 kids - Aiming for FI/ER in early 40s - Creator of cFIREsim