One Simulation Year
In each simulation year, three things occur (in this order):
- a withdrawal is made
- market returns and fees are applied to your assets
- the portfolio is rebalanced (should you choose to rebalance)
This guide outlines these events in more detail.
It is not currently possible to configure the order of these events.
The Year
A simulation year begins on January 1st and lasts through December 31st.
Mathematically, the retirement is modeled as closely as possible to span from 12:00 AM on January 1st to 12:00 AM on the following January 1st with an inclusive start and exclusive end.
Much of Shiller's monthly data represents averages or linearly interpolated data, so keep in mind that each data point does not, in general, represent any specific day in history.
Order of Operations
1. Withdrawals
Withdrawals are annual, and they are made on the first day of the year. The withdrawal is the very first thing to occur in each simulation year.
If income or extra withdrawals are specified, then they are factored in on the first day of the year alongside the "base" withdrawal.
2. Market Returns and Fees
On the final day of the year, FI Calc applies each asset's annual return and then subtracts its fees. Both occur after the year's withdrawals. Stock returns use historical total returns, which include both price changes and dividends. Bond returns also use historical total returns. Cash uses the fixed annual growth rate that you configure.
3. Portfolio Rebalancing
Portfolio rebalancing, when specified, is the final step of each simulation year. It takes place on the final day of the year.