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Minimum starting portfolio to achieve success
Old 08-10-2006, 03:04 AM   #1
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Minimum starting portfolio to achieve success

I have 2 questions about the feature of FireCalc which gives the minimum starting portfolio needed to achieve success with a certain terminal value left in the portfolio.

1) Is the "terminal value" amount one enters in the "options" tab a value which is based on "today's dollars" (ie 2006 dollars), or is this amount in "future dollars" at every year of the simulation?

2) I do not understand the following behavior of the calculation: when I enter progressively higher amounts for this terminal value in various runs (for example, starting with $100000, then $200000, and so on), up to amount of about $800000, the results show indeed a minimul portfolio value which is close to this entered amount. However, as of certain amounts, with my data set as of about $1000000, the resulting minimum portfolio value jumps to much higher than this minimal limit I entered, ie. for $1000000 value I set, the portfolio result shows about $2200000 terminal value at all times. How come that there is such a big gap between these values?

Dorus Bell
Belgium, Europe
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Re: Minimum starting portfolio to achieve success
Old 08-10-2006, 04:03 AM   #2 Founder
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Re: Minimum starting portfolio to achieve success

1) Unless it specifically says otherwise, all of the dollar values are expressed and entered in terms of what the retiree knows at the time the decisions are made. So basically, yes -- they are in 2006 dollars.

2) When the desired ending balance is a large percentage of the starting portfolio,
then odd results will seem to occur, as the long term inflation effects of that large balance start to overwhelm whatever effect is occuring due to withdrawals.

Often uninformed, seldom undecided.

Twenty years from now you will be more disappointed by the things you didn't do than by the ones you did do. So throw off the bowlines. Sail away from the safe harbor. Catch the trade winds in your sails. Explore. Dream. Discover. Mark Twain
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