REQUEST: spending level metrics

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Joined: Wed Jul 31, 2013 9:24 pm

REQUEST: spending level metrics

Postby Siamond » Thu Oct 17, 2013 12:27 pm

One strength of cFIREsim is its choice of variable spending methods. Now this means that the spending level will... er... vary! :D

With variable methods, the portfolio survivability is no longer the main thing (you typically get 100% as it adjusts itself to survive!). The main thing becomes the trajectory of your (potential) spending level.

So it would be very useful to have synthetic metrics about the spending level resulting from a given simulation, in addition to the metrics related to the portfolio value. Let me suggest the usual: lowest, average, median, highest, std deviation. This would be a really great start, and be very useful.

====== More advanced

Personally, in my Excel sheet, I do something a bit more subtle, I break down the numbers per slice of 10 years of retirement. This is handy, as:
1. some methods allow to skew the spending level (higher to begin with, lower when you get older - or the reverse way around)
2. some methods naturally display an increase over time (e.g. RA&A), so it's a tad misleading to average over 40 years
3. there are typically significant discontinuities over time (e.g. inheritance, SS kicking in), so again, metrics related to the entire time period are a tad misleading

The breakdown reasoning applies to both the spending level and the portfolio value, by the way.

Overall, I would suggest to start simple, just providing metrics for the entire retirement period.

And maybe in the future, could you add a button "Extended Analysis", and this would display various tables along the lines of what I just described. The BH experts also have various financial ratios (e.g. Sharpe, Sortino) in the Simba worksheet that I don't quite understand, but are undoubtedly useful.

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