I'm sure I'm missing the obvious -- Sorry for the Super-Newb question
I started my projection a couple months ago, based on my starting conditions in Dec 2023. Now it is nearly Dec 2024 and I want to update the projection to today's actual data. How do I do it ? If I'm understanding correctly, I do not add a 'layer' update, but instead restart the plan projection from the new date with the starting conditions now present.
Correct ?
@abq-goldgmail-com Yes, that's correct. Both Pralana Gold and Pralana Online begin their modeling periods on January 1 of the specified starting year, so you need to provide your starting balances as of that date and then the model goes forward from there. Every year, around the first of the year, we recommend reviewing and updating all of your numbers (account balances, income and expenses, and assumptions regarding inflation and so on) based on the best information you have at that time. So, if you do this in December, you'll need to do a little estimating of how your account balances will change between now and the start of the year.
Stuart
@smatthews51 When updating to the new year, does one change the plan start date to 1/1/2025, or does one leave it at 1/1/2024?
You would update the date. You know the past, you don't need Pralana projecting an approximation of it.
You can of course update things at any time during the year if you are willing to make allowances for the fact that Pralana assumes growth from the initial values you enter. So if you put in the values you see in your accounts on December 10 as 2024 starting data, then Pralana would be assuming a full year of growth on top of that, which is unrealistic. So you would have to manually decide what you would like Pralana to do with whatever portfolio values you see. For instance, if my account grew from $800K to $1M and I hadn't put any money in or taken any money out and I were updating now, I might say that I don't expect more growth through year end. If I have told Pralana a 5% real growth and 3% inflation and see a $1M balance in my portfolio now, I would multiply my balance by 1/(1-Real Return-Inflation) = 1/(1.08), so I would enter $926,000 as the starting balance. That slightly messes up dividends and taxes, but it might be more reasonable than projecting average growth when it was an excellent return year.
Looking at all the corrections that have to be made to current balances to have meaningful results - money in, money out, what to assume for the return the rest of the year, slightly messing with your dividend and tax calculations - you can see why the general advice is once per year. But there are reasons to update your plan during the year - if there is a big market move or you have an unexpected life event, windfall or expense, it's worth it to make some estimates and do updates as needed. Since my income varies year to year, so I always tune up the Roth Conversion plan this time of year so I have to do adjustments like this to have it make sense.
All good advice already, so I'd just add that each January, while you're entering in your precise start-of-year balances and the plan start date to the new year, just take a spin through all the input pages to check that everything still makes sense. Do you still have all those vehicles? Kids still dependents? Spending still in line with reality? Also by then you may have gamed out your prior year taxes. It might be good to print off Pralana's projected taxes for the prior year and check them against reality. They won't be exact, as they're based on projections/assumptions, but may disclose some things that were missing.
Fill in asset values at the start of the year. Got it.
Please provide the option to choose the base date, rather than back to Jan 1.
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Build / Financial Assets / Management / Account Growth Settings provides the answer 😥 😥
Note: Mid-Year Growth is not yet implemented in Pralana Online. Currently, the only option is 'Start of Year'.
