Variable Rate of Return Capability
It appears that the rate of return in the Economic Assumptions/Economic Variables is fixed for the life of the plan. I would think that it would be allowable to change the rate of return as one's risk-aversion increases approaching and once in retirement.
In the tutorial, the economic variables screen is shown, but there is no text to clarify how one might have varying rates of return associated with different years of the plan. Varying the rate of return by even a fraction of a percent can have a dramatic impact on expected results. Does this capability exist in ESPlanner? (I have the ESPlannerPlus).
RSS
You need to be using the Monte Carlo features of ESPlanner Plus to get this capability. It's a little complex, but basically you set up two user defined assets with the differing rates of return and variability. Create two portfolios, one using your high return asset, the other your low return asset or you can use a mix of the predefined assets that give you an appropriate rate of return/variability in each portfolio. For the "risk prone" part of your life implement the high rate of return portfolio. For the "risk averse" part of your life implement the low rate of return portfolio.
When Monte Carlo is on, ESPlanner uses the rates of returns specified in the portfolios for the years in which the portfolios are active rather than the fixed rate of return specified in the Economic Assumptions screen.
As I said, not simple, but the capability is there.
A simpler one time change mechanism might be appropriate and we will toss that on the list of possible enhancements for later versions of the product.
Best,
Dick Munroe
We'll be adding in the near future the option to run the basic version of ESPlanner and specify time-varying portfolio returns and inflation rates.
best, Larry
Hi,
I just started (10/2007) with version 2.9.74, and this is an option I'd find helpful. Any chance the "near future" is almost here?
Thanks,