My Finance

The main simulator gives users a choice of portfolio: US stocks, international stocks, and bonds. Moreover, the main choice in the portfolio is the proportion of stocks and bonds. In the newest version, we allowed this proportion to vary and not to be fixed throughout these simulated years. For example, at the start of 30 years, the stock/bond split can be 80/20, and at the end, 50/50. This is done to make room for retirement planning. Usually, people choose to invest more in risky assets at the start of their savings journey, and to make it less risky when they become closer to retirement. Within retirement, it is wise to do the converse: Invest in bonds less and less as you progress through the retirement.

Some users might be confused by this variability. In addition to options for withdrawals/contributions, this can be challenging to navigate. In practice, most users care about only a few modes: saving before retirement and living in retirement. To this end, I created a simplified version with the following options:

Risk Tolerance: High (Assertive), Mid (Moderate), Low (Conservative)

Your Goal:

• Lump-Sum Investing: invest initial wealth, amount provided by user, and do not contribute annually
• Regular Savings: start with zero wealth, contribute annually a fixed nominal amount, provided by user, which grows 3% annually
• Retirement Spending: invest initial wealth, amount provided by user, and withdraw annually fixed nominal amount, initially it is 4% of the initial wealth, according to the celebrated 4% retirement rule, and grows 4% annually

Why choose 3% annual increase for annual contributions and 4% annual increase for annual withdrawals? Historically, inflation was running around 3% annually in 1928-2024. We consider only nominal (not inflation-adjusted) returns, because we could not model inflation-adjusted version of corporate bond returns. Thus we need some compensation for inflation.

Below, we provide the split between stocks and bonds: stocks/bonds. Stocks include both USA and international.

Lump-Sum Investing and Regular Savings:

• Conservative: 60/40 constant during simulation
• Moderate: 90/10 at the start, 60/40 at the end, linear during simulation
• Assertive: 90/10 constant during simulation

Retirement Spending:

• Conservative: 60/40 constant during simulation
• Moderate: 60/40 at the start, 90/10 at the end, linear during simulation
• Assertive: 90/10 constant during simulation

Other than that, in this simulator the user can choose the number of years, wealth (initial investment in case of lump-sum investing or retirement spending, or annual investment in case of regular savings), but not growth rate.