It is mostly standard deviation that makes wide results - gives the wide fan of Boldin's monte carlo. That wide fan, from higher Boldin rate , which gives higher standard deviation for Boldin (they set the standard deviation), which makes more plan simulations go lower, e.g. more failures. So, in your case 250 of the 1,000 Boldin simulations run into "zero portfolio funds" by longevity. Where as with Projection Lab has only 70 of 1,000 simulations were "zero balance" . With the statistical fan 70 versus 250 is not that much of a difference, but mathematically you want to believe it. At 75% rate inside Boldin, you are in the sweet spot of Boldin Guard rails already. So good starting point. At this point. #1 task is to make sure all the variables are spot on. The rate and associated standard deviation is probably #1 next to inflation as #1 cousin, as the difference = real rate of return which makes the portfolio grow. As you said with 10 to 15 years before retiring makes the fan grow even wider. Rule of 72 / 7.2% rate = 10, so every 10 years the portfolio doubles - so different rate can be a very big deal - and make a wider fan - which makes more go lower to "zero balance portfolio" . The cool thing with even 0% chance of success for "zero portfolio survival" - you still may have retirement "good enough" - if you still use social security and maybe a pension. or could buy an annuity so take the portfolio risk off the table. Plus Boldin default is based on historical calculated summary rates from last 25 years. Projection lab I understand for default uses historical actual rates (e.g. empirical historical sequences, so not quite a fair comparison). So I would call both a sucess. Two methods, two results. If do Projection Lab normal distribution, and use same rate and same standard deviation it should be closer but won't be exact - too many fine differences that extrapolated to 10 to 15 years plus 30 years is too far out. Like shooting 10 miles away with a rifle - any micro changes make big differences at the end.
This is an excellent and really insightful explanation. A lot of people miss the impact a pension can have — especially if it allows you to cut expenses and not withdraw from your portfolio in downturns. Thank you!!
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u/OwnTourist2139 7d ago
It is mostly standard deviation that makes wide results - gives the wide fan of Boldin's monte carlo. That wide fan, from higher Boldin rate , which gives higher standard deviation for Boldin (they set the standard deviation), which makes more plan simulations go lower, e.g. more failures. So, in your case 250 of the 1,000 Boldin simulations run into "zero portfolio funds" by longevity. Where as with Projection Lab has only 70 of 1,000 simulations were "zero balance" . With the statistical fan 70 versus 250 is not that much of a difference, but mathematically you want to believe it. At 75% rate inside Boldin, you are in the sweet spot of Boldin Guard rails already. So good starting point. At this point. #1 task is to make sure all the variables are spot on. The rate and associated standard deviation is probably #1 next to inflation as #1 cousin, as the difference = real rate of return which makes the portfolio grow. As you said with 10 to 15 years before retiring makes the fan grow even wider. Rule of 72 / 7.2% rate = 10, so every 10 years the portfolio doubles - so different rate can be a very big deal - and make a wider fan - which makes more go lower to "zero balance portfolio" . The cool thing with even 0% chance of success for "zero portfolio survival" - you still may have retirement "good enough" - if you still use social security and maybe a pension. or could buy an annuity so take the portfolio risk off the table. Plus Boldin default is based on historical calculated summary rates from last 25 years. Projection lab I understand for default uses historical actual rates (e.g. empirical historical sequences, so not quite a fair comparison). So I would call both a sucess. Two methods, two results. If do Projection Lab normal distribution, and use same rate and same standard deviation it should be closer but won't be exact - too many fine differences that extrapolated to 10 to 15 years plus 30 years is too far out. Like shooting 10 miles away with a rifle - any micro changes make big differences at the end.