2023 PRC Gold User Survey Results

Thanks for this very informative and timely information! I found it interesting that the majority of folks chose a 3% general inflation rate while many folks anticipate healthcare inflation to only be 2 - 3%. I have always assume healthcare inflation to be a couple of percentages higher than the general rate of inflation.

Since the question was What REAL healthcare inflation rate do you use, I assume it means what % above and beyond general inflation. So if you said general inflation was 3% and your answer to the health care question was 2%, then the overall inflation for health care would be 5%.

@patton525 You are correct. The healthcare inflation rates expressed in the survey are in addition to the general rate, as Pizzaman describes above.

I found the results of the survey interesting in that the most common responses were close to historical averages 😉.

The historical inflation average is now 3.27%, majority of responses was 3%. Most people assumes it would stay at 3%.

The historical real health care inflation is 5.2%. Many people chose 5.0%, many also did chose less (assuming peoples responses was truly real changes).

Please note I am assuming the historical rate is real https://ycharts.com/indicators/us_health_care_inflation_rate

The historical average for real return on stocks (dividends reinvested) is 6.68%. Most common response was 5%.

The historical average for nominal bond returns is 5.6% (subtract 3.275) real return is 2.33%. Common response was 2%.

The historical nominal for 1-year US Treasures (cash equivalent) is 2.86% (subtract 3.275) real return is -0.41%. Common response was 0%.

Most talked about asset allocation on the web is 60/40 (stock/bonds). Common response was 60/30/10.

Is it safe to assume that most respondents used the default standard deviations in Pralana?

@patton525 Without having asked that as a question there's no way to be certain, but based on other responses I don't get the sense many users customize it to that degree, so I'd say yes.

@pizzaman One clarification regarding stock ROR -- the responses were almost evenly divided across 3,4,5, and 6%. So even though 5% had the most responses (by a very slight margin), many users (~43% or approaching half of all respondents) use 3, 4 or 6% compared to 5% (~19%).

BTW on ROR - these charts were in an article in the WSJ today "Markets History 101: It’s Time to Buy Bonds". One of the few which shows real return, not nominal

@nc-cpl Good point on the stock ROR. However, if you take the 4 most common responses and average them you get 4.65% 🧐. Close to 5% but still below the historic 6.68%. Given that about half of the respondents indicated that they use more than one time frame for asset classes, I assume that means we are playing around with mostly stock ROR. Talk on this forum is to use a lower stock ROR for the first 10 years and something close to historical averages for the remaining years of retirement. So I am wondering if the stock ROR response in the survey is for the first 10 year period or an average over 30 years or so? Thoughts??

I am also hearten 😍 by the trust that forum members place in the Federal Government to fix Social Security. (joke alert)

Problem with averages is often they obfuscate meaningful differences by lumping everyone together and then drawing a conclusion. In this case, each respondent had their choice of any number to enter. 26 people chose 5% ROR, but that means 105 did not, so to take an average and draw a conclusion around 4.65% would be inaccurate. 5% was the most cited percentage, but by a small margin (only 5% more specified 5% ROR than did 3%, 4% or 6%), and that's not counting all the responses in between those numbers. So since almost 80% of respondents expect stock ROR to be between 3% and 6%, and if I'm going with <3% or >6%, I may want to revisit my thinking and look at more data...or not 😉

As to your question, there's no way to know if responses to that question were based on the persons first 10 years or not because that's not how the question was framed. If I had to assume, it would be based on the respondents entire retirement time horizon (i.e., 25-30 years).

@nc-cpl Thanks again for doing the survey. The results are interesting but somewhat difficult to interpret. However, I agree that is useful if a user's inputs are outside of what 80% of respondents expect, then it may be worth rethinking. I have attached a table of the survey results for stocks and bonds showing the Min, Max, 10% (P10), 90% (P90), 50% (P50) and average. I include data from Horizon and Fidelity as a comparison. I made some assumptions to try and mimic a US Large Cap stock and US Investment Grade Corporate Bond to try making it as apples to apples and comparable to the US Large Cap historical data.

FYI, It turns out that for stocks the P10 is 2.5% and P90 is 6% so your 80% takeaway is spot on. The average and median results for both stocks and bonds were remarkably close which surprised me. Using mode (or most common) as a measure of central tendency is difficult given the results because the mode was not dominant (i.e. similar counts for other estimates).

I am not sure comparing the survey results to a historical average based on US Large Caps is very meaningful because we don't know what sub asset classes (US Large Caps, Small Caps, Value, International etc.) users have in their portfolio. For example, I calculate a weighted average ROR based on my mix of US Total Stock Market and Non-US Total Stock Market before I put it into Pralana. I also want to be conservative, so I weight my inputs based more on 10 year estimates than longer term estimates. Most providers of market assumptions provide a range of uncertainty that should be considered as well since the probability of the expected return to match the realized return is low if not approaching zero.

Thanks for this additional work Greg. It's important to recognize that this first survey was only intended to get a broad, general sense and "feel" for how Gold users configure the tool, so users could compare and contrast their own inputs. To maximize a response rate we needed to keep it short and did not dig into input assumptions or get too granular. That said, we could always add some new questions to the next iteration, cautious of length.

Curious if you are only planning out 10 years for the reason you state instead of entire retirement period (whatever that may be for you). Appreciate your insight and stats background (I had to take advanced stats and quant. methods courses in grad school for a Ph.D. in Clinical Psychology but have become a bit rusty over the years!)

It's interesting how folks plan. Some just want to know if they're at risk of running out of money, others want to get a specific number for spending, net worth, etc. at the end of 30 years. I look at it like parachuting from a space capsule. Is my goal to land on Earth, or have more precision and land in North America, the U.S., Nebraska, or Omaha? When I first started using Gold, I was obsessed with landing in Omaha, but have since realized that with all the uncertainties of the market, inflation and anything else I can't control, that the U.S. (ok, maybe the Midwest) is likely sufficient for my purposes. Previous generations didn't have anything like this level of insight and they , for the most part, did fine. I still really like having the specific numbers to get a good handle on things like spending, taxes, growth and what I'll possibly have left over (I personally tend to obsess over taxes and spending), but as long as I'm feeling good about the "big picture" and landing in the U.S., I'm going to try enjoy retirement and obsess less 😉

@nc-cpl have you read The Psychology of Money by Morgan Housel, 2020? Sounds like it would be right up your ally 🤓

@pizzaman Will certainly check it out!!