Feature Request: Spending in Foreign Currency

[SlowMoto]

It would be very handy for people retiring abroad to have historical exchange rates of their desired retirement currency factored into the calculation.
Perhaps the Spending total on page 1 could allow foreign currencies to be specified. For example, if I need 50,000 Canadian Dollars this year, and the current exchange rate is 1.265, I need only 39,500 USD.
For me, with the majority of my portfolio in USD-based funds, exchange rates are one of my biggest risks. I assume historical USD exchange rate data is available for major currencies.

 

[MichaelB]

Having expenses in one currency and income / assets in another is a challenge, but it can’t be solved by a retirement calculator. There are a couple of reasons for this.

First, and most importantly, it is not possible to project future exchange rates. They depend not only on the relative difference in performance between two economies, they also are influenced by monetary and fiscal policies carried out independently. Looking at historical exchange rates gives no indication what future rates will be.

Second, retirement finance is based on projecting into the future one known and quantifiable low volatility variable, which is expense level or standard of living, then testing that against a combination of pensions, savings and portfolio levels and assumptions of inflation and rate of return. Adding exchange rate to the expense side would make it too volatile, meaning both sets of variables (expenses, pension/savings) would be highly volatile. The outcome would be a range so broad as to be meaningless.

Having assets in one geography while living in another adds a level of complexity to retirement finance, and there’s no simple solution. Starting off with a currency neutral approach and taking measures to avoid fat tail currency risks, while reflecting those additional costs, is (IMO) a more effective approach.