regular assest earnings predicted using Monte Carlo
When using ESplanner with Monte Carlo selected the program predicts income derived from my regular assets that is unduly large. The program is predicting a >11% yearly return from dividends and capital gains distributions. This ballons my yearly income, which results in the recommendations that seem unreasonable. Typically, the divident income on the regular assets is >2% and capital gains distributions are around 2-3%.
It is unclear why the program is predicting such a large return. Have I done someting incorrectly? Is there a way to restrict the regular asset income while still operating with Monte Carlo selected?
RSS
With Monte Carlo turned on the default portfolio is used for all assets (regular assets, retirement accounts, etc). I forget what the mean rate of return for the default portfolio is, but it's higher than the 6% assumption used when Monte Carlo is turned off.
Try defining a portfolio (or more than one) to use with your retirement accounts and modify the default portfolio to more accurately reflect the rate of return of your regular assets.
Best,
Dick Munroe
We're using historic mean returns for the different equity classes that you can choose among in building your portfolios.
My guess is you are thinking only about realized capital gains and ignoring unrealized capital gains. Our program is treating all gains as realized on an annual basis. Your actual mutual funds may be realizing some, but not all gains, so you may be used to having lower returns reported to you than you are actually receiving/earnings once you take into account unrealized gains.
best, Larry