Lifetime planner portfolio gains calculation question
How does the lifetime planner calculate gains on your portfolio? I use 5% return on investments as an assumption, but the actual gain is around 4% of last years portfolio value. I'm showing the "today's values".
<Edited title for clarity> @Scooterlam
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One thing I think would be of great value in the Lifetime Planner would be keeping the history and plotting it against what really happened, but unfortunately that isn't what is happens.
The Lifetime Planner knows nothing about the real world/past events. It blindly uses the return on investments you put in to calculate how that would affect the future values, even if your real return on investments is completely different.
In other words, the Lifetime Planner takes the current value of your investment account as a starting point, and then does calculations for the future values based on what you have told you, in no way is it a check that the settings it has bears anything to reality. As it sits it is very easy for people to fool themselves into believing they have a good plan for the future.
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I haven't run a test but I know that" Todays values" mean "real" values, i.e. current noninflated dollars. Try changing to Future values to see if that gets what you are expecting.
Edit: Do that from the gear icon on the top right of the plan results
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Note that I was picking up on the "last year's portfolio value" part of the statement. Which implies to me that there was some kind of belief that Quicken looks at that (it doesn't), or that the numbers given reflect true returns in some way (it doesn't).
If you are just looking for the "math". It is pretty simple. You tell Quicken that you have 5% return on investments then it adds 5% to your investments every year.
If you are wondering about the "today's value" is like @Bob_L stated and deals with what Quicken does with the inflation percentage you gave Quicken. "Today's value" means to use your inflation percentage to try to estimate what you would be able to buy in the future as if there was no inflation. As in if you had the inflation number correct for say bread, then if you are pay $3.00 for a loaf of bread today, it would still show a loaf of bread to be costing $3.00 ten years from now. "Show amounts in future value" on the other hand leaves out the inflation calculation. So, it would now show that your loaf of bread costs say $6.00 in ten years.
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To calculate investment gains, Quicken LTP starts with the portfolio balance value, adds forecasted deposits for the following year, subtracts forecasted withdrawals and inflation for the following year, times the rate of return as entered in the return assumption matrix. There are 2 similar formulas shown below depending on the year of interest. OP would seem to be interested in #2.
A Taxable Account Example:
To calculate gain on investments in LTP, refer to the Plan Summary Tables for current year ('23) and following year ('24), refer to the Portfolio Value>Taxable lines:
 For Taxable Investment Gains for All Years Beyond the Current Year (ex. 2024+). See formula and image 1:
Plus:Gains ('24) = (Total Taxable_'23 + Plus:Deposits_'24  Less:Withdrawals_'24  Less:Inflation_'24) x Rate of Return
Where: Rate of Return = assumption setting matrix. See Image 2 below:
Image 1: From my LTP test file (today's $). Again, you would see these line lables and values in the Plan Summary Tables for the given year.
Image 2: Rate of Return Matrix
2. For Taxable Investment Gains in the Current Year (2023): Similar formula as #1, except that you use the sum of your current taxable portfolio balance included in LTP, as the starting point:
Plus:Gains ('23) = (Sum of all Current Taxable Portfolio Balances + Plus:Deposits_'23  Less:Withdrawals_'23  Less:Inflation_'23) x Rate of Return
Where: Sum of all Current Taxable Portfolio Balances = The sum of your current taxable balances in portfolio accounts included in LTP, image 3, and Rate of Return = assumption setting matrix. Image 2.
Image 3: Investing Portfolio Market Value. Sum of all market values for taxable accounts included in LTP. NOTE, You may have multiple, taxable accounts included in LTP.
Also note that the "Sum of all Current Taxable Portfolio Balances" will likely change each market day depending on market action that day. As such, all gains downstream will also change.
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