Personal Investments • effect of inflation rates vs real rate of return

I used Portfolio Visualizer to run some simulations on an assumed portfolio with the following inputs:

Portfolio Type: Tickers
Initial Amount: 1200995
Withdrawal Amount: Different amounts
Inflation Adjusted: Yes
Withdrawal Frequency: Annually
Simulation Period in Years: 30
Tax Treatment: Pre-tax returns
Simulation Model: Statistical returns
Time Series Model: Normal returns
Use Full History: Yes
Sequence of Returns Risk: worst 5 years first or worst 4 years first
Inflation Model: Historical inflation
Rebalancing: Rebalance annually
Intervals: Defaults

You can see the results from the following link:

https://drive.google.com/file/d/1fgpEQf ... share_link

You see the "real rate of return" for similar percentiles are fairly close regardless of the amount withdrawn or whether the worst years occur in the first 4 years or first 5 years. However, the real balance at the end of period is noticeably different, which I think it's the byproduct of inflation rate.

I think these results suggest using nominal rate of return + inflation and not just real rate of return when we do our own calculations with, for example, Excel.

I like to hear what others think.

Thanks!

Statistics: Posted by Cincy_1988 — Wed Dec 25, 2024 12:36 pm — Replies 0 — Views 50

---