Input Current or Future Portfolio Value?

[Godzilla]

I searched around and couldn't find the answer to this... Sorry if this is already covered somewhere!

I am playing with scenarios in which I retire in the future. So, on the "Not Retired?" tab, I'm entering a date that's 10+ away.

I have been entering my current portfolio value on the "Start Here" tab. But, I'm now wondering if I should input what I estimate my portfolio value to be when I actually retire. The reason I think it may be this case is that, on the results graph, my Year 1 portfolio balance always seems to be right around what I'm entering on the "Start Here" tab. Even when I tell FIRECalc that I will retire 50 years from now, on that graph I see my portfolio balance as being right around my current portfolio value in Year 1 of retirement.

Hopefully that question makes sense... I just want to know if I should always input my current portfolio value on the "Start Here" tab, or if I need to put in my best estimate for its future value if I'm not already retired.

Thank you!

[REWahoo]

Input your current portfolio value.

[rodi]

Yep - what REWahoo said.
Under the not retired yet tab you can input what your expected annual savings will be - it assumes you'll invest in the same asset allocation you input on the portfolio tab.

[Godzilla]

Thanks everyone. I guess I'm still a little confused because the tool seems to put my starting balance at approximately the same amount at the start of retirement, even in two scenarios when I start retirement 30 years apart:

1) Retire in 2016, with a portfolio balance of $1,000,000 entered on the "Start Here" tab

2) Same as #1, but with the retirement year set to 2046.

In Scenario #2, if my present-day $1 million grew at just 3% and I didn't add another dollar to it, by 2046 it would be worth over $2.4 million.

But, in the output chart, the starting balance in Scenario #2 doesn't seem to be that much greater at the start of retirement than in Scenario #1:



In my Scenario #2 above, I didn't mention inflation. Is the key here that the tool assumes only modest growth above the level of inflation while the money is growing pre-retirement?

[donheff]

Why not just run 2016 two ways both starting today: 1) using today's figures; 2) using estimates of 2046 portfolio based on a few guesstimates of performance adjusted to today's dollar using estimates of inflation. If FC actually ran multiple scenarios for the next 30 years potential growth it would have to set hundreds of new starting points for 2046 - that would be mindbogglingly complex. Any fixed starting point will also be pure guesswork. Might as well run a few to explore your assumptions of best, average, and worst case expectations.

[Godzilla]

Quote:

Originally Posted by donheff Why not just run 2016 two ways both starting today: 1) using today's figures; 2) using estimates of 2046 portfolio based on a few guesstimates of performance adjusted to today's dollar using estimates of inflation.

I guess that gets back to my original question: If I'm calculated future scenarios in which I retire in the future, should I input my present-day portfolio value, or my future portfolio value?

I have been inputting my present-day value, but it seems like FC is starting my portfolio value at the start of retirement much lower than I would start it. I'm correcting for FC's behavior by saying I'm retiring starting now and by setting my present-day portfolio value to my best guess about what it will be when I actually do retire (in 2016 dollars). But, this band-aid may be working against me if I don't fully understand what the tool is doing...

[RetireAge50]

I thought the inputs and also the results are shown in today's dollars. But I do not know for sure.

[REWahoo]

RA50, here's how you can see what the calculator is doing with your portfolio value at the time of your retirement - input your current portfolio value, spending of zero and the number of years equal to your planned retirement date. That run will show the historical range of values the calculator is using as the start points for your retirement without future contributions.

While you have your own projections for the future value of your portfolio, history says that value may not be accurate.

[Godzilla]

Ahhh... I think I finally realized the source of my confusion.

On the "Start Here" screen in FC, I was entering the number of years that I assumed I'll be retired, but I should have been entering the number of years I'll be retired PLUS the number of years from today until I retire. In my case, in the most recent scenario I ran, I assumed I'll retire in 11 years, and I'll live for 40 years after that. I had only been entering 40 on the "Start Here" page, but it should have been 51.

While reviewing the results page, I just noticed this text (for when I entered 40 for the no. of years):

"The tested period is 14 years of preretirement plus 26 years of retirement, or 40 years."

So that's why FC's starting value for my portfolio was always right around what it is today.