Retirement Planning
You have an infinite number of potential paths... but how many of them allow you to achieve your goals?
SIMULATION-based planning techniques
We utilize simulation-based financial planning software to help determine how to position client portfolios. After we input variables such as age, income, spending, intended retirement date, investment asset allocation (split between stocks and bonds), investment return assumptions, social security and pensions, and dozens of other factors, this software runs thousands of simulations. The computer is solving for the percentage of times the client achieves their goals, and we try to steer this percentage to between 80 and 90%.
For example, we may tell the model that:
- Client is 63 and is making $100,000 a year
- Would like to retire at 66
- Has $1,200,000 saved
- Would like to spend $80,000 a year in retirement
- Wants to have 40% of assets in stocks and 60% in fixed income
- Would like to leave at least $250,000 to heirs when he/she passes
If the computer concludes that just 72% of the time, the client achieves this goal, we conclude that we need to make some adjustments to their plan - either by working longer, spending less, investing more aggressively, or leaving less to their kids.
Conversely, if the client achieves their goals 95% of the time, we conclude that their retirement is are over-funded and they can afford to spend more, take less risk, retire earlier, or leave more to their kids.
We believe this web-based software should be an interactive experience. After we have established a baseline scenario, our clients frequently enjoy throwing alternative scenarios at the software to see the impact on their overall score.