PRISM: Prioritizing Your Goals

communities_1.jpg
 View Only

  • 1.  Lesson 6: Wealth Required to Fulfill Each Goal

    Posted 11-04-2021 14:18
      |   view attached

    Happy Thursday everyone!

    Congratulations on completing Lessons 1-5. For Lesson 6, we are writing down the cost of the goal gives you a target to reach for. It also helps you assess whether the goal is realistic. If it isn't realistic, what can you reasonably change to meet the goal? Alternatively, is the goal aspirational? We'll help you work through some of the numbers to answer these questions.     Watch the Lesson 6 video to learn more.

    Reflect 

    During this lesson, we are asking you to think about your goals in an aspirational vs. realistic way. After watching the video for Lesson 6, we ask that you consider why your goal may be aspirational rather than realistic. Is the answer because you are not able to reach that financial marker quite yet? If so, then we want you to reflect on a few changes you could make to your current lifestyle that would make a difference in your overall investment goals. 

    Engage 

    In the comments, we encourage our members to list one aspirational and one realistic goal. What sacrifices or changes will you need to make in your life to make this aspirational goal a realistic one?  

    Remember to watch the Lesson 6 video, fill out the attached worksheet, and participate in the below activity. 


    Response example:      

    Aspirational goal: Be able to donate $5,000 every year freely to the Alzheimer foundation to get a nameplate on their contributor's wall and create a legacy. 

    Realistic goal: Volunteer 100 hours of my time and donate $1500 every year to the Alzheimer foundation so I can lessen the financial load on myself but still contribute to a cause I care about and want to be my legacy. 

    Change: Instead of donating a certain amount of funds that I may not be able to realistically budget for, I am doing a combination of volunteer work and monetary donation so I am building my charity legacy and feel good about helping a worthy cause. 

     



    ------------------------------
    Jenna Brashear
    AAII Community Manager
    Chicago, IL
    ------------------------------

    Attachment(s)

    xlsx
    Lesson 6-Wealth Required Exercise AAII.xlsx   28 KB 1 version


  • 2.  RE: Lesson 6: Wealth Required to Fulfill Each Goal

    Posted 12-28-2021 19:23
    Hmm, I am a little surprised no one commented on this lesson so far. First, want to complement the spreadsheet designer that it did not "break" for my use case of starting retirement - big money up front and see what withdrawal rate to last 35 years. Conclusion is consistent with other articles that 4 - 5% withdrawal rate gets to the goal. In the first couple years applying this exercise to real life, I've been spending from tactical savings and pension and haven't done the early extractions. This is consistent with the video comments that a good way to hedge against shortfall is to go lean initially, preserving principal against later adverse years.

    As a discussion item, how do you consider timing the withdrawals from the spreadsheet schedule. As an annual number, it suggest taking the money out each January. But then, it doesn't really all get spent that month. So do you you park it in a checking account for the rest of the year?  Or just take withdrawals throughout the year as-needed?  Perhaps someone recalls and AAII article on this topic?

    I also recall there is an AAII article that presents an advanced version of this spreadsheet that adds inflation to withdrawal rates and possibly variable market returns over time. That would be nice to get in a later PRISM lesson.

    ------------------------------
    Hugh POLING
    amateur radio station KC7HP
    ------------------------------

    Original Message


  • 3.  RE: Lesson 6: Wealth Required to Fulfill Each Goal

    Posted 12-29-2021 10:29
    Hi Hugh,

    Thanks for sharing your experience using the Wealth Required for Goals Worksheet!

    Those are excellent questions, I'd love to bring them both up at our next PRISM webinar event. As far as an article, here is one that discusses utilizing the Level 3 strategy (building long-term wealth) to optimize withdrawals: https://www.aaii.com/journal/article/10681-optimizing-retirement-withdrawals-using-the-level3-strategy

    Let me look into where that spreadsheet is, I will ask our PRISM Academy Creator, Charles Rotblut, if he can shed some light on that.

    Thanks again, Hugh for participating! When you're ready, here is a link to the final lesson of Step 1 and the first lesson of Step 2. I definitely think Step 2 will be interesting for you, especially the Risk Assessment Questionnaire we've put together.

    ------------------------------
    Jenna Brashear
    AAII Community Manager
    Chicago, IL
    ------------------------------

    Original Message


  • 4.  RE: Lesson 6: Wealth Required to Fulfill Each Goal

    Posted 04-24-2022 13:22
    I'm looking at the Lesson 6-Wealth Required Exercise AAII.xlsx, and am assuming, since the withdrawal amounts are constant, that all calculations are in current dollars, and since there is no inflation rate parameter, that both of the annual rates of return are inflation-adjusted.  The obvious question is "How do I come up with a reasonable inflation-adjusted rate of return for my investment mix, particularly since I am going to determine my risk tolerance and investment mix in a later lesson and expect my risk tolerance and investment mix to change with time?".  Note the time left before reaching the goal declines as the goal approaches and changes your assessed risk tolerance in the PRISM process.

    ------------------------------
    HARRY
    ------------------------------

    Original Message


  • 5.  RE: Lesson 6: Wealth Required to Fulfill Each Goal

    Posted 05-17-2022 13:04
    I really appreciate your differentiating between aspirational and regular goals. It seems my #1 is aspirational (giving to church building program), especially since I have not shared it yet with anyone except AAII.  I can proceed with the goal, realizing that if it is not met, I can still contribute a smaller amount that is available.

    One of my other goals is certainly realistic, since I have 5 to 15 years to accomplish it, with no firm commitment amount​ (to help grandchildren). Now I can start on that plan, being sure I will be positioned to do something significant at that time.

    ------------------------------
    Robert M
    ------------------------------

    Original Message


  • 6.  RE: Lesson 6: Wealth Required to Fulfill Each Goal

    Posted 02-10-2023 15:30

    My situation is very much like Hugh's.  I am retired so my biggest goal is to not outlive our money.  So I took my current portfolio balance, plugged in a 5% return on just the balance (no additional contributions), and looked at the annual withdrawal rate and withdrawal amount.  Both of them are higher than I actually expect to withdraw so I feel good about how the results compare to other tools I use.

    Maybe I don't think big enough.  We don't really have any Aspirational goals.  They've been met.  The kids are grown and on their own and college is behind them.  We did have an aspirational goal of retiring relatively early and that has been met for me and my wife next year.  Perhaps we'll sit down then and dream a little...



    ------------------------------
    RICHARD
    ------------------------------

    Original Message