Need Better Understanding of PERCENTILE DISTRIBUTION OF REGULAR ASSETS
I must admit after using ESPlannerPlus for several years now, I still don't have a really good understanding of all the Monte Carlo reports. Some of my more recent simulations have shown some results that I just cannot comprehend at all.
Perhaps someone can help me understand the significance of the PERCENTILE DISTRIBUTION OF REGULAR ASSETS report and how to read it.
The confusing situation is this:
I am already retired and each scenario below is the same except as noted.
1) In one scenario, I use a Special Expenditure to "hide" $30,000 for a cash reserve. (I know; this isn't quite right since the amount never shows up again in my estate or net worth.)
In this case ESPP can smooth my living standard and the Percentile Distribution of Regular Assets report shows that for the most part the projection lies between the 50th and 5th percentiles.
2) In a different scenario, I put the $30,000 into a Reserve Fund and then allow it to be removed in the last two years of life. (The Reserve Fund is set to only keep pace with inflation.)
In this instance, ESPP cannot smooth my living standard unless I allow a Maximum Indebtedness of at least $25,000. (I don't mind that too much, though, as I still have a small reserve of net cash overall since the reserve fund is there.)
In this case, the Percentile Distribution of Regular Asset report shows that for the most part the projection still lies between the 50th and 5th percentiles.
3) In the last scenario, I set up the Reserve Fund as in case #2. (The Reserve Fund is again set to only keep pace with inflation.) In addition, to prevent the Regular Assets from going negative, I added some Retirement Account Special Withdrawals between now and when I start to receive Social Security. With the added income up front, ESPP is able to smooth my living standard without "going into debt" (for regular assets).
The Percentile Distribution of Regular Assets report now shows some rather bizarre plots. The projected Regular Assets start out in the 5th to 25th percentiles and then quickly go above the 95th percentile. The projected curve is still rather flat showing my actual regular asset values but the percentile curves go way negative. In fact, the 5th percentile curve ends up at -$2,700,000.
So, my question is: How should one read the Percentile Distribution of Regular Assets report? What is the significance of the $30,000 reserve fund and a few years of Special Retirement Withdrawals causing the Assets to go to negative $2.7 million dollars in some of the Monte Carlo simulations?
In all cases, the Projected Standard Of Living is in the same ballpark.
Any help in understanding this in down-to-earth terms is much appreciated.