Spending Behavior Cautious Agressive Conservative
In the “Planning Method | Monte Carlo | Spending Behavior” window, the options to specify aggressive, cautious, or conservative spending behavior exist. Although I have read the case "Spend Defensively If You Invest Aggressively," I am still unclear about these three spending behaviors options.
Aggressive spending is described as spending “based on the assumption that they’ll earn average returns each year in the future on their investments.” How can ESPlanner assume “average returns each year” when the point of the Monte Carlo analysis is to consider a set of randomly generated returns for each year?
In a similar vein, how can conservative spending, in which a fixed zero real return (i.e., equal to inflation) is assumed, coexist with a Monte Carlo analysis in which each year’s annual return is randomly generated?
And, cautious spending is described in the help manual as spending “in a way that assumes you’ll earn a real return (i.e., inflation adjusted) that is half way between the mean and zero.” What “mean” is being referenced in this statement?