I don't think I am doing anything wrong.. but perhaps I am? Why would there be a (multi million $) reduction in final effective savings when switching between mode 1 and mode 2? Is there something I should check?
For the setup, I am using the same allocations at the account level for both with the only difference is that I set mode 2 overall to be 65/35. I am much poorer now because of mode 2. What gives?
Thanks!!
The only thing I can think of is that when you have multiple time periods, you must enter an asset allocation in each time period.
I just tried an experiment in reverse and went from Mode 2 to Mode 1, but when I didn't enter an asset allocation in each time period, it seemed to assume no return on investment in those time periods without an entry.
Pralana is exciting, better than a casino, you can win or lose millions in a second with a small change. It is not a boring tool.
But more seriously, Pralana should consider removing mode-1. This is a retirement tool. Most retirees have stocks and Bonds. The overall ratio between Stocks and Bonds (Asset Allocation) is key in retirements planning. People that use Mode-1 have no Asset Allocation feature and may not know their plan’s risk.
Richard-
You are a gem. Once again, you solved my problem. Thank you. I did not see the time period piece and, as you correctly stated, I only had an asset allocation for 2025! I will go about fixing that this morning.
Gaby- Haha. Yes, given that the Roth conversion results can so easily skew in Mode 1 if you are not aware, you have a point. The one thing I believe I can do with mode 1 though, is, if I keep all my allocations constant in each account (same risk in each account but less tax efficient) vs the more tax efficient mode 2, what are the differences in final $$ and likelihoods of successful outcomes. I have been a Boglehead for quite a long time (how I found Pralana) and I am intrigued by the mirrored vs more tax efficient portfolios. Many on the site hold all stocks in taxable and all stocks in roth, with bonds in tax deferred. However, when the market tanks, which it does every so often, you lose the most in the more valuable accounts. Psychologically, that kind of stings. So, in the interest of not getting any more verbose, I will likely stick with somewhere 'in between'.
Come to think of it, I can achieve the mode 1 setup above in mode 2, so... yeah, I'm not sure of the argument for keeping mode 1. I believe you are correct sir. Hmm.
Chris
It is not just saving taxes it also increases Roth, decreases RMD and has less asset slices. But I agree, mirroring assets is simpler. I used to mirror until I understood the cost. Pralana is an excellent tool to compare these two options and see how much money the simplicity option will cost you. But psychology (sleeping well at night) is more important than money.
This issue will continue confusing users and others (see Rob/Bill/Grady discussion: https://www.youtube.com/live/vUuiVzvwdVc ). Mode-1 and Mode-2 are not equal alternatives. The overall ratio between Stocks and Bonds (real Asset Allocation) is key in retirements planning. People that use Mode-1 have no tool control for their Asset Allocation and may not know if their plan is at risk.
The only thing I can think of is that when you have multiple time periods, you must enter an asset allocation in each time period.
I had the same thing happen to me when adding a time period before I caught it. @cstone, I wonder if a little user caution should take place if any returns box is left blank in only a few time periods (a "gap")? Or maybe just if any time period has no returns at all then a caution.
I have been a Boglehead for quite a long time (how I found Pralana) and I am intrigued by the mirrored vs more tax efficient portfolios. Many on the site hold all stocks in taxable and all stocks in roth, with bonds in tax deferred. However, when the market tanks, which it does every so often, you lose the most in the more valuable accounts. Psychologically, that kind of stings. So, in the interest of not getting any more verbose, I will likely stick with somewhere 'in between'.
It's not just psychological: Theoretical tax efficiency doesn't always translate to real life tax efficiency. if your roth or taxable contains all your risky assets it can remove flexibility during times when things get out of whack (low or high returns), and in taxable can have tax consequences of its own in rebalancing.
@jkandell Good idea, thanks for the suggestion. I will create an alert for this condition: all RORs in a time period are 0% which will be the case when a new portfolio time period is added.
So taking a look at my time periods, I only had 1 - for 2025. I assume "time period", which suggest a start and end, is Jan1-Dec 31 2025 in that case? I don't see a mechanism to enter, say, 2025 -2031, which is what I would consider a time period.
I have no other time periods. Shouldn't the 2025 allocations carry forward ad infinitum, similar to the how the Roth tool works? Or am I supposed to add a 2026, 2027, etc?
I am still poorer with mode 2. I apologize for my confusion.
I assume "time period", which suggest a start and end, is Jan1-Dec 31 2025. I don't see a mechanism to enter, say, 2025 -2031, which is what I would consider a time period.
The portfolio time periods extend until the next time period starts....or the end of the plan if there is not a later time period defined. That works the same as the Roth Conversion time periods. I see you added a new time period starting in 2031. So starting in 2031 until the end of your plan, the rates of return and allocations you define for the 2031 time period are used.
Rates of return and asset allocations are defined separately for Advanced Portfolio Modeling Mode 1 and 2 (which was inherited from PRC Excel Gold and is sometimes a point of confusion).
Your Mode 2 rates of return (all scenarios) and asset allocations (except for scenario 3) for the 2031 time period are all 0%.
Please go to Review > Tabular Projections > Portfolio and explore the tables which show the impact of this.
@cstone Thanks so much Charlie. Happy to report my future possible wealth has been restored! Really eye opening how rates of return can really impact those final values. I already knew that, but just seeing how a percent here or there over a long enough time period is quite impactful. I suppose this is what also drives the historical and monte carlo analyses. Historical will give me the yearly rates of return that actually happened over a given time period and monte carlo will give me a random yearly ROR with standard deviation used to reduce 'how random' those numbers can be. My yearly entries are my own predictions in that regard. Pretty cool.
