Preserving regular asset balance when calculating smooth consumption?
I think I’m in the fortunate position of being happy to live off just the real return on my regular assets. Stated in an economist’s terms I get a higher utility from saving dollars earned in the inflation component of my regular asset nominal return that I do spending those dollars. But I want to model this in ESP to see if I’m, in fact, correct. In other words, I want to see what my consumption could be without spending down my regular assets.
Since ESP reports everything in real dollars, I believe the above scenario would be reflected in ESP output by having regular assets maintain a constant value. What is the best way to have ESP do that?
Thanks, Greg
RSS
Larry or others might correct me here, but I don't believe you can take regular assets per se out of the calculations because other parts of your economy might need it for consumption smoothing. However, you can tell ESPlanner that you want to leave an estate of an amount equal to your regular assets, or you could tell ESPlanner you have a special expenditure in the last year of your life in the amount of your regular assets.
Dan
Or you could create a reserve fund in the amount of your regular assets... Although the reserve fund doesn't participate in monte carlo if you're using that.
Best,
Dick Munroe