What are your recommendations for tracking progress vs plan?

I have established a detailed plan and I am now starting into retirement. I am not sure how to easily review my plan against actual results when the plan is based on current dollars and real return but a year or 6 months from now my account balances reflect inflation and the nominal rate of return. I basically want to track and adjust my spending / consumption if market conditions fall short of my nominal rate of return (5% pa).


Use an online inflation calculator to compare your baseline at the starting year to your actuals?

I agree. I think that is the only way to do it
Thanks Chris

dan royer's picture

An interesting question; here's how I think about it I suppose:

ESPlanner/MaxiFi work in annual units, not monthly. The model is showing annual available discretionary spending based on your assumed nominal rate of return.

And it's important to note that at the end of each year, you reset your model so that the new year going forward accounts for the gains or losses per the 5% assumption are thus adjusted up or down. If you are invested aggressively, you'd expect there to be a lot of adjustment to do each year, for better or worse. If you are invested conservatively, i.e., in a way that does not entail much volatility, then you'd expect to see little adjustment in the discretionary spending from year to year since your assumptions hover around the return assumed in the model. I've often been puzzled by users that assume 4% or 5% but invest like they are reaching for 8%.

For the record, a 60/40 s&p/total bond fund has recent annual returns of 21.72%, 11.87%, 1.31%, and 13.59% for 2017, 16, 15, and 2014 respectively.

But monthly returns since Jan 2018 are 5.71%, -3.71, -2.54, .37 And that said, who knows what we'll see for the year looking back at the end of the year? -10%? +10% Nobody knows.

YTD on that portfolio--not as of today--is -.42. I don't think I'd want to start adjusting my annual withdraw based on this negative YTD number would you? Or maybe you would? I mean that cuts both ways? It could be up 9% YTD and end up -9% at the end of the year.

I'm more inclined to look at 3-year rolling returns I think. I'm also of the mind that I want to invest as conservatively as I can to create a happy model with adequate discretionary spending. So I model 4% and invest in a 20/80 portfolio that has 3 and 5 year rolling returns almost always above 4%.

So I don't know if that really answers your question though. I'm raising the question of the validity of adjusting your spending in the middle of the year regardless of whether the market is up or down--either one could be a head fake. And if you wait til the end of the year, you will adjusting or recalibrating anyway because you'll be entering new balances for regular and retirement assets.

My thought is to see how conservative you can set your asset allocation and still be happy with the results. Also, make sure there's not a disconnect between your assumption in the model and your asset allocation in practice.


Thanks for your many comments Dan. You re-stimulated the mental juices and I realize it makes no sense to adjust throughout the year. The idea of starting to draw income and having an income that will last a lifetime is something I need to get comfortable with. I'll review things annually and will also use a 3 year rolling average to keep things in perspective. I feel that I have a fairly conservative portfolio generating over 4% in dividends with an overall annual objective of a 5% nominal return with a 2.5% rate of inflation.
Thanks for the ideas and raising good questions for me to ponder

dan royer's picture

Oh, good Jeff. I was interested in your question because I've been thinking about it myself. But those are my thoughts I guess. I guess I find some reassurance in that each year we readjust each year, or recalibrate, showing the new annual discretionary spending--so there's this sort of built in spending behavior adjustment each year. And the -.42% YTD on a 60/40 portfolio this year may turn out to be a +6% by the end of the year. :) Or not.

I've been living off ESP results since I retired 5 years ago. Once I fully understood how to enter all my data and situations, I ran Monte Carlo for Conservative, Cautious, and Aggressive spending. I budget using the Cautious discretionary spending scenario and rerun each year using EOY numbers. Given market returns over the past 5 years, the numbers have mostly gone up each year and are way ahead of the original 2013 plan. I've stuck with the Boglehead 3-Fund portfolio at 60/40 asset allocation. VTSAX (40), VBTLX (40), and VTIAX (20).

BTW, I started with 2 years spending in an Ally Savings account which automatically transfers a monthly "paycheck" to my checking account at a different bank. All our spending is via this checking account. After a year, I transfer another years spending to the Ally account to replenish it to a 2 year starting point. It's been very easy to manage these past 5 years.

dan royer's picture

Ah, nice. Very good ideas there.

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