Why are annual discretionary spending recommendations so much lower than the average standard of living forecast from the monte carlo simulations?

Why are annual discretionary spending recommendations so much lower than the average standard of living forecast from the monte carlo simulations?

For example, from the same report. Monte Carlo set with spend cautiously. All assets invested in Vanguard LifeStrategy Growth Fund (80% equities, 20% bonds)

- Annual discretionary spending recommendation (for all years): $102,187
- Monte Carlo result, Low Trajectory Average Standard of Living: $130,054
- Monte Carlo result, Median Trajectory Average Standard of Living: $160,998

Thanks

Comments

dan royer's picture

Sorry someone overlooked this. A support ticket is a sure way to make sure you get a quick response. Is your setting for "spending behavior" affecting these numbers perhaps? I'll hit someone up for help on this.

dan royer's picture

If you create a ticket and upload your database, I can take a better look maybe. But set your spending to aggressive and see if that creates more intuitive results.

Not sure if you are running the new or old Monte Carlo. We are revising the new Monte and will have an update shortly. We're not happy with our method of classifying returns into very high, high, median, low, and very low. We're just going to show trajectories of living standard instead. Please call me at 617 834 2148 for more discussion starting after the 22nd of Feb, but another issue is that you may be running the program with Monte turned off using a lower average return than is implied by your portfolio. In addition, portfolio returns are skewed, so the mean of your living standard based on randomly drawn returns will be higher than the living standard based on always getting the mean real return.

Thank you for your replies. I am using monte carlo in the latest version of ESPlanner Plus. I've created a support ticket which includes an upload of the database. I will call you to discuss further