MonteCarlo Calculation

Question:

I have a dilemma. Hopefully you can help. My investment advisor recently provided me with a retirement plan using Naviplan. Income, future assets etc were comparable to what I calculate using RetireWare.

However, for same scenario Retireware is indicating 100% prob of success. He is indicating 14% failures. - He targets 10% max as acceptable.

I am not sure what he is using for Retirement Goal Tolerance - rest of the variables look comparable.
 Based on what it has taken to get to this point, I don't have a lot of confidence in his results and I would not bet my life on my results.

I assume that both Naviplan and RetireWare should yield generally comparable Monte Carlo results?

Answer:

Please note that there is a setting in the Options page that counts small shortfalls as a success, so by setting the threshold to $0, the probability may go down.

Also note that Naviplan probably uses a different approach for their simulations. For example, they may use only one expected return and volatility, or maybe only fixed income and equities for the asset classes. In any case, with such calculations resting heavily on assumptions and methodologies, one may view a 14% failure as equivalent to a 10% failure. Also, an advisor will tend to err on the conservative side since your success is at stake, so he may be extra careful to recommend higher spending.

One way to assess your plan is to look at the various results produced by the software. You have the odds of success, a deterministic projection based on your selected expected returns (or RetireWare's standard, which is fairly conservative). You also have a projection assuming you earn poor investment returns in the future. Then there is the risk analysis that "stress tests" the plan against the main risks under various economic conditions.

Our idea in making decisions when facing an uncertain future is to take a "holistic" approach. If you see that most indicators are favorable, then you probably are OK.

One last thought. If you find you experience lower than expected returns or higher expenses after a year or two, you are able to correct the course by monitoring your plan and adapting your
spending going forward to set you back on solid footing to meet your expenses throughout retirement.

By: RetireWare / Equisoft On 8:12 PM

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Mac Compatibility

Question:

 Please confirm that your software will run on a Mac book Pro laptop Space running the latest Apple software.

Answer:

This is a Web-based application that runs from any of the main Internet browsers, including Safari running on a Mac.

By: RetireWare / Equisoft On 8:11 PM

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Cash Flow Forecast

Question:

In the Cash Flow Forecast Detailed Data Table, there is a column of data called "Retirement Objective Net". From what I can see it includes the Post retirement expenses that I setup along with
special expenses according to the parameters that I setup in the "Retirement Income Target" in the Forecast page.

However I can't seem to reconcile the data in that column against the budget...it is always higher. Can you tell me what data is included in that Retirement objective Net column

Answer:

The expenses you entered are in "today's dollars". So if it's payable in. say, 10 years, the annual expenses are increased by the rate of inflation applicable during that period.

This is to ensure that your assets can pay for the expenses when they are incurred in the future. Look in the Help file, under Forecast Menu | Retirement Income Target |  Adjustments to Retirement Income.

There is more information and an example about the impact of inflation in the Help section.

By: RetireWare / Equisoft On 8:10 PM

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Asset Allocation Used for the Calculations

Question:

Under Asset Allocation it states “The Investor Profile Questionnaire established that the following portfolio: Security might be the most …”

Do I assume that RetireWare used a “Security” mix for my investments?

Answer:

The calculations use the asset allocation basis selected on the Asset Mix for Projections tab on the Options page. You can select an asset allocation based on one of the profiles, the current asset mix, or your own custom allocation.

By: RetireWare / Equisoft On 8:09 PM

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Use of Personal Residence for Retirement Income

Question:

Under Sources of Retirement Income it has “yes” next to Personal Residence even though I indicated for both my wife and me “Never” under “Financial Information – Principal Residence – Sell Principal Residence.”  Are the income projections using the value of our personal residence or not?

Answer:

Since you selected 'Never', there will be no sales taking place. If you had selected a year for the sale but left the personal residence unselected in Sources of Retirement Income, then the funds would not be used for retirement.

By: RetireWare / Equisoft On 8:07 PM

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Collaborative vs. Professional Version

Questions:

My understanding of RetireWare is that the Professional Version is used by the financial professional to prepare a retirement plan for the client. The client is then not able to access the plan to update its progress. Is that correct?

My understanding of the Collaborative Professional Version is used by the financial professional to prepare a retirement plan for the client, but the client is then able to access the plan via the web to update its progress and view the information. Is that correct?

In your experience, given that my above understanding is correct, which of the above approaches is the one that has met with the most success?

Answers:

Your understanding of the difference between the Professional and Collaborative versions is correct.

With RetireWare, you will get a financial plan for retirement that includes a cash flow forecast, odds of success, assessment of the exposure to each of the main post-retirement risks. The output is the same regardless of the product between the Pro and Collaborative version.

Note that with the Collaborative version your users get a simplified version and reports in order not to overwhelm them with too much complexity and details.

For a recommendation, the Pro version is more suitable if you want only to create reports and transmit a PDF to your clients. If you want to build a user base from online referrals, then the Collaborative version is the way to go.

By: RetireWare / Equisoft On 8:05 PM

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Education Savings

Question:

I'm not sure where I enter my RESP contributions.. Can you please help?

Answer:

You can enter RESP contributions on the Budget Information tab on the Pre-retirement Budget page. There is also a stand-alone RESP planning tool on the Applications tab on the main page.

By: RetireWare / Equisoft On 8:02 PM

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