I was wondering if the mid-year account growth timing option for Pralana Online (under the Financial Assets/Management/Account Growth Settings tab) is being implemented in the near future? I don't recall seeing it on the most wanted features list within the notes section of the tool.
However, given that in retirement, funds are typically being withdrawn on a regular basis from various accounts, I believe the mid-year account growth timing option would generate a more accurate picture of future account growth.
@racing-fan I'm wondering the same - I was hoping we'd get it by July, but it's almost July. Yikes!
Stuart replied in a recent thread that the errors this introduces (did you already do a Roth Conversion?, buy a car? pay taxes? get a bonus? sell property? receive a dividend? sell stock for cash? remodel? do major home repair?) makes it really hard to implement with the accuracy that they want in Online. I think they would have to build additional input screens for every account, income and expense where you input the ins and outs for the year, which sounds like a huge task.
The Gold (spreadsheet version) nominally has a mid-year adjustment, but like all products that have the feature, ignores all those complexities. Ignoring those issues can easily introduce more error than the intended accuracy improvement.
It's possible they are missing an opportunity to make playing with Pralana an addiction though!
Thanks Richard. I understood that this particular feature had been implemented in prior versions of Pralana Gold (although I had not actually used them). I guess I assumed that if this was possible within the excel version then it would be relatively easy to produce in the online version. Given the requirements for a more accurate future prediction, perhaps not. 🙂
@racing-fan I think maybe two separate topics are being confused here. One topic (the one originally asked about, I think) is the mid-year (as opposed to the start-of-year) growth option, and the other is the ability to specify account balances somewhere during the year. We are not going to be implementing the ability to specify account balances mid-year due to the related complexities but we WILL be doing the mid-year GROWTH option. It is partially implemented now but completion has been delayed by competing enhancements. We don't have a good estimate on the release date as of now.
Stuart
@smatthews51 Building on your reply, I have a couple of related questions as the mid-year is upon us-
1) For one who is choosing- this year- to update account balances mid-year- perhaps due to an upcoming change in work status, would it make sense to save the current data file in case it was desired to revert to it for some reason? If so, how is this accomplished (I don't currently have my Pralana Online file open and it's probably a quite easy task accomplished via a menu item)?
2) Going forward, when it's ready and implemented, will the mid-year growth option be a recommended step? I ask as currently the counsel has been to only update annually- ideally during the second half of December.
Thanks.
@hh22 Just to reiterate, Pralana always assumes that initial account balances are as of January 1 in the starting year, and we currently have no plans to implement support for non-January 1 starting dates. It still sounds like there's some confusion between that concept and the mid-year growth option on the Build > Management page. The mid-year growth option is unrelated to starting balances. Rather, it relates to whether you want Pralana to calculate account growth by multiplying each account's ROR by its balances at the start of each year or its estimated balance in the middle of each year. These options are discussed in the user manual, but the mid-year option is probably the best option, in general. The downside is that a user cannot readily verify the tool's growth calculations because determination on that mid-year account balance is complex and not shown.
With that said, it's easy to save your data and you do that via the More > Manage My Data page.
Stuart
@smatthews51 As I'm a Pralana Online customer, apparently the mid-year growth option is not yet implemented?
I'd like to suggest a simple solution for making mid-year account balance adjustments. Provide a way to specify, modify, or override the investment return rate assumptions for the starting year so that investors can reflect their actual year-to-date rate of investment returns for the current year without modifying the long term investment rate of return assumptions. Allowing changes to the first year rate of return would provide an easy way to modify first year ending account balances without having to enter any $ changes to the account balances themselves.
@morlock103 I do this by allocating the first Portfolio Time Period (under Advanced Portfolio Modeling) to just the current year. This lets me do exactly what you're suggesting.
Unless I'm misunderstanding the first-year-period-definition approach (always a possibility!), this doesn't change the behavior of historical simulations. For me, they are the ones that matter.
@hunterfox My understanding is that the "Base" and "Current" lines result from applying your specified return rates (including all the Portfolio time periods) to your starting balances and specified expenses, and the historical distributions result from applying various historical return rates to your starting balances and specified expenses. So portfolio time periods never affect the distributions, only where you fall with respect to them (and, based on a prior exchange, this comparison makes the most sense when done in future dollars).
@hunterfox i think we don’t want any estimation of current year to affect historical simulations? They are historical after all.
@jkandell I have another point of view. Lets suppose one starts the current year 1 with $1 Million portfolio which is followed by a 25% stock market correction resulting in an estimated portfolio value of $750K at year end. I would prefer PRC to estimate future values based on the adjusted value of $750 at the end of year 1(the start of year 2). This would be consistent with changing the starting portfolio value to $750K at the start of the following year.
@morlock103 Right. My concern is that historical analyses should be based on history—that is waiting till the end of the year to reflect the 25% drop, not anticipating it mid year.
@jkandell I have to admit that I'm confused. The historical analyses use actual sequences of returns for the various asset classes starting from different years. Your hypothetical 25% drop didn't happen in any of them. If you want to analyze the impact of historical return sequences following such a drop, just include the drop in your (hypothetical) starting balances.
@plaut You're talking to Mr Morlock, not me, right? You're confused about the same thing I am. Maybe we misunderstood James's suggestion?
Thank you. Good suggestion.
