{"id":16551,"date":"2016-11-17T07:20:26","date_gmt":"2016-11-17T07:20:26","guid":{"rendered":"http:\/\/www.safetyangel.com\/recdev\/?page_id=16551"},"modified":"2016-11-17T08:13:10","modified_gmt":"2016-11-17T08:13:10","slug":"example-f-2-planning-a-retirement-strategy","status":"publish","type":"page","link":"http:\/\/www.safetyangel.com\/recdev\/example-f-2-planning-a-retirement-strategy\/","title":{"rendered":"Example F-2 &#8211; Planning a Retirement Strategy"},"content":{"rendered":"<div id=\"dt_row_1177728728542\" class=\"clearfix dt_row\"><div id=\"dt_column_2\" class=\"dt_column col-sm-12\"><div id=\"dt_row_3177728728549\" class=\"row dt_row\"><div id=\"dt_column_4\" class=\"dt_column col-sm-6\"><div id=\"dt_row_5177728728564\" class=\"row dt_row title-blck\"><div id=\"dt_column_6\" class=\"dt_column col-sm-12\"><div id=\"dt-section-head-7\" class=\"dt-section-head center  size-custom\">\r\n              <div><h2 style=\"color:#ffffff;font-size:35px\" class=\"section-main-title\">Example F-2 - Planning a Retirement Strategy<\/h2><\/div><\/div><\/div><\/div><\/div><div id=\"dt_column_8\" class=\"dt_column col-sm-6\"><\/div><\/div><div id=\"dt_row_9177728728588\" class=\"row dt_row\"><div id=\"dt_column_10\" class=\"dt_column col-sm-5\"><\/div><div id=\"dt_column_11\" class=\"dt_column col-sm-7\"><div id=\"dt_row_12177728728562\" class=\"row dt_row\"><div id=\"dt_column_13\" class=\"dt_column col-sm-12\"><div id=\"dt_text14177728728572\" class=\"dt_text\">\n<h3><span style=\"color: #000000; font-size: 1em;\">Examples provided here are purely for illustrating software features and functionality.<\/span><\/h3>\n<\/div><\/div><\/div><\/div><\/div><\/div><\/div><div id=\"dt_row_15177728728546\" class=\"clearfix dt_row\"><div id=\"dt_column_16\" class=\"dt_column col-sm-12\"><div id=\"dt_row_17177728728528\" class=\"row dt_row\"><div id=\"dt_column_18\" class=\"dt_column col-sm-12\"><div id=\"dt_row_19177728728570\" class=\"row dt_row\"><div id=\"dt_column_20\" class=\"dt_column col-sm-1\"><\/div><div id=\"dt_column_21\" class=\"dt_column col-sm-5\"><div id=\"dt_text22177728728597\" class=\"dt_text\">\n<h3><span style=\"color: #0093d5;\">Example F-2 &#8211; Planning a Retirement Strategy<\/span><\/h3>\n<p><b>Download Example File for <a href=\"http:\/\/www.reliasoft.com\/alta\/examples\/rc1\/alta_example_1_V10.rsgz10\" download=\"\">Version 10 (*.rsgz10)<\/a> or <a href=\"http:\/\/www.reliasoft.com\/alta\/examples\/rc1\/alta_example_1_V9.rsr9\" download=\"\">Version 9 (*.rsr9)<\/a><\/b><\/p>\n<h3><span style=\"color: #0093d5;\">Problem Statement:<\/span><\/h3>\n<p>In planning for your retirement, you normally invest a percentage of your income in &#8220;safe investments&#8221; (Bank) or in &#8220;riskier investments&#8221; (Stock Market). For this example, assume that you are choosing to invest some of your money in the bank and some in the stock market, and let\u2019s say that NASDAQ is tied to the NASDAQ Composite Index.<\/p>\n<p>First, you do your research on the two investment vehicles and determine the following:<\/p>\n<ul class=\"normal\">\n<li>The interest from the bank investment follows a generalized gamma distribution with mean = 1.7406, standard deviation = 0.1141 and lambda = 4.3106.<\/li>\n<li>The profit from the NASDAQ investment follows a normal distribution with mean = 13 and standard deviation = 28.<\/li>\n<\/ul>\n<p><i>Note that you can use the <a href=\"http:\/\/www.reliasoft.com\/Weibull\/\" target=\"_blank\">Weibull++ software<\/a> to analyze data on average bank interest rates and NASDAQ annual returns to obtain the distribution and parameters for this analysis, as illustrated <a href=\"http:\/\/www.reliasoft.com\/reno\/examples\/renoexf2\/fig_research.htm\" target=\"_blank\">in the linked figures<\/a><\/i>.<\/p>\n<p>You will invest X% of your income per year for the next Y years. Assume that your current income is $40,000 per year and, based on past history, your income will increase yearly by a percentage that is normally distributed with mean = 4 and standard deviation = 1.5.<\/p>\n<p>You will put Z% of your investment money in the bank for the first year and the remainder in NASDAQ. Given the volatility of NASDAQ, the following strategy is applied for subsequent years:<\/p>\n<ul class=\"normal\">\n<li>Any profits made in the stock market at the end of each year will be transferred into the savings account for safe keeping. Thus, the amount invested in NASDAQ will be restricted to the initial amount put in plus annual contributions and minus any losses.<\/li>\n<li>The amount invested in NASDAQ will not increase as your income increases every year. It will always be equal to the first year investment.<\/li>\n<\/ul>\n<h3><span style=\"color: #0093d5;\">Objectives<\/span><\/h3>\n<ul class=\"normal\">\n<li>Estimate your investment income over the next 20 years if you invest 5% of your yearly income with 50% going to savings.<\/li>\n<li>Compare your investment income after 20 years, varying the investment portion from 0% to 20% of your yearly income (with 50% going to savings).<\/li>\n<li>Compare your investment income after 20 years, varying the investment portion from 0% to 20% of your yearly income and varying the amount invested in savings from 0% to 100%.<\/li>\n<\/ul>\n<\/div><\/div><div id=\"dt_column_23\" class=\"dt_column col-sm-5\"><div id=\"dt_text24177728728585\" class=\"dt_text\">\n<h3><span style=\"color: #0093d5;\">Define the Resources<\/span><\/h3>\n<p>Define models to describe the stock profit, bank interest and the yearly increase in your income, as shown next.<\/p>\n<\/div><div id=\"dt_image25\" class=\"dt_image\"><div class=\"image-align-center\"><img decoding=\"async\"  class=\"img-responsive style-default\" src=\"http:\/\/www.safetyangel.com\/recdev\/wp-content\/uploads\/2016\/11\/51.png\" alt=\"\"\/><\/div><\/div><div id=\"dt_text26177728728552\" class=\"dt_text\">\n<p>Note that even though the investments are measured in money, the <b>Model Unit<\/b> has been set to Hours. This is because RENO flowchart results are always given in terms of the system base unit (SBU), and resources that require you to define a unit (i.e., Synthesis models) will have their values automatically converted to base units during simulation. Therefore, whenever you don&#8217;t want RENO to convert the value obtained from a model resource, simply make sure the model uses a unit that is defined as equal to 1 SBU. See the <a href=\"http:\/\/help.synthesisplatform.net\/blocksim_reno10\/using_time_units_in_reno.htm\" target=\"_blank\">application help file<\/a> for more information.<\/p>\n<p>For this example, whenever one of the models returns a value as &#8220;X hours,&#8221; it should be read as &#8220;X dollars.&#8221; If the model unit you are using is not equal to 1 SBU (choose <b>File &gt; Manage Repository &gt; Manage Units<\/b> to confirm), you will need to change the model units before resimulating the flowchart.<\/p>\n<\/div><div id=\"dt_text27177728728555\" class=\"dt_text\">\n<p>Define the following variables:<\/p>\n<ul class=\"normal\">\n<li>A variable to represent your yearly income (CurrentSalary)<\/li>\n<li>Three variables to represent the percentage invested in the bank (StocksPercent), the percentage of income invested (InvestmentPercent), and the number of years to be analyzed (Years). These variables will be varied during simulation.<\/li>\n<li>Five other variables that will be used to keep track of the values that are passed during simulation.<\/li>\n<\/ul>\n<\/div><div id=\"dt_image28\" class=\"dt_image\"><div class=\"image-align-center\"><img decoding=\"async\"  class=\"img-responsive style-default\" src=\"http:\/\/www.safetyangel.com\/recdev\/wp-content\/uploads\/2016\/11\/52.png\" alt=\"\"\/><\/div><\/div><\/div><div id=\"dt_column_29\" class=\"dt_column col-sm-1\"><\/div><\/div><\/div><\/div><\/div><\/div><div id=\"dt_row_30177728728558\" class=\"clearfix dt_row\"><div id=\"dt_column_31\" class=\"dt_column col-sm-12\"><div id=\"dt_row_32177728728554\" class=\"row dt_row\"><div id=\"dt_column_33\" class=\"dt_column col-sm-12\"><div id=\"dt_row_34177728728520\" class=\"row dt_row\"><div id=\"dt_column_35\" class=\"dt_column col-sm-1\"><\/div><div id=\"dt_column_36\" class=\"dt_column col-sm-5\"><div id=\"dt_text37177728728524\" class=\"dt_text\">\n<p>Define RENO static functions to calculate the following:<\/p>\n<ul class=\"normal\">\n<li>The amount of money that will be invested (Current_Investment).<\/li>\n<li>The amount that will invested in the bank each year (Savings_Portion).<\/li>\n<li>The threshold (Savings_Threshold) that will be used to determine whether you earned money in the stock market during a given year (and will therefore move those earnings into the bank account).<\/li>\n<\/ul>\n<\/div><div id=\"dt_image38\" class=\"dt_image\"><div class=\"image-align-center\"><img decoding=\"async\"  class=\"img-responsive style-default\" src=\"http:\/\/www.safetyangel.com\/recdev\/wp-content\/uploads\/2016\/11\/53.png\" alt=\"\"\/><\/div><\/div><div id=\"dt_text39177728728598\" class=\"dt_text\">\n<h3><span style=\"color: #0093d5;\">Simulation<\/span><\/h3>\n<p><b>Estimate your investment income over the next 20 years if you invest 5% of your yearly income with 50% going to savings.<\/b><\/p>\n<p>First, make sure that the initial value of the <b>InvestmentPercent<\/b> variable is <b>5<\/b> and the initial value of the <b>StockPercent<\/b> variable is <b>50<\/b>.<\/p>\n<p>On the General Settings page of the RENO Simulation window, specify <b>100<\/b> simulations and a seed of <b>1<\/b> for repeatability, as shown next.<\/p>\n<\/div><div id=\"dt_image40\" class=\"dt_image\"><div class=\"image-align-center\"><img decoding=\"async\"  class=\"img-responsive style-default\" src=\"http:\/\/www.safetyangel.com\/recdev\/wp-content\/uploads\/2016\/11\/renoexf2_5.png\" alt=\"\"\/><\/div><\/div><\/div><div id=\"dt_column_41\" class=\"dt_column col-sm-5\"><div id=\"dt_text42177728728519\" class=\"dt_text\">\n<h3><span style=\"color: #0093d5;\">Build the Flowchart<\/span><\/h3>\n<p>Construct the flowchart shown below.<\/p>\n<\/div><div id=\"dt_image43\" class=\"dt_image\"><div class=\"image-align-center\"><img decoding=\"async\"  class=\"img-responsive style-default\" src=\"http:\/\/www.safetyangel.com\/recdev\/wp-content\/uploads\/2016\/11\/54.png\" alt=\"\"\/><\/div><\/div><div id=\"dt_text44177728728511\" class=\"dt_text\">\n<p>In order to keep track of how the investment incomes accumulate over the years, this flowchart is looped through. The loop is created by using the following blocks:<\/p>\n<ul class=\"normal\">\n<li>A flag marker called &#8220;Start&#8221; to mark the start of the loop.<\/li>\n<li>A reset block called &#8220;Reset&#8221; to force the flowchart to generate new values for the RENO static functions at the start of every loop.<\/li>\n<li>A counter block called &#8220;Years&#8221; to count the number of years.<\/li>\n<li>A conditional block to check whether the number of years is less than the specified number. If the condition is met, the investment strategy will be applied (i.e., profits made in the stock market are transferred to the bank account). The go-to-flag block will then direct the flow of execution back to the flag marker and close the loop.<\/li>\n<\/ul>\n<p>If the condition is not met (the number of years is up), then the value of the investments are calculated and then stored in the result storage block called &#8220;Total.&#8221;<\/p>\n<\/div><\/div><div id=\"dt_column_45\" class=\"dt_column col-sm-1\"><\/div><\/div><\/div><\/div><\/div><\/div><div id=\"dt_row_46177728728560\" class=\"clearfix dt_row\"><div id=\"dt_column_47\" class=\"dt_column col-sm-12\"><div id=\"dt_row_48177728728516\" class=\"row dt_row\"><div id=\"dt_column_49\" class=\"dt_column col-sm-12\"><div id=\"dt_row_50177728728534\" class=\"row dt_row\"><div id=\"dt_column_51\" class=\"dt_column col-sm-1\"><\/div><div id=\"dt_column_52\" class=\"dt_column col-sm-5\"><div id=\"dt_text53177728728543\" class=\"dt_text\">On the Sensitivity Analysis page, specify to vary the number of years from <b>1<\/b> to <b>20<\/b>, and use an increment of <b>1<\/b>.<\/div><div id=\"dt_image54\" class=\"dt_image\"><div class=\"image-align-center\"><img decoding=\"async\"  class=\"img-responsive style-default\" src=\"http:\/\/www.safetyangel.com\/recdev\/wp-content\/uploads\/2016\/11\/renoexf2_6.png\" alt=\"\"\/><\/div><\/div><\/div><div id=\"dt_column_55\" class=\"dt_column col-sm-5\"><div id=\"dt_text56177728728540\" class=\"dt_text\">When the simulation completes, close the RENO Simulation window and then click the <b>Plot<\/b> icon on the diagram\u2019s control panel. The results are displayed in the following plot with the plot scaling adjusted to Y = 0 to 120,000 and X = 0 to 25.<\/div><div id=\"dt_image57\" class=\"dt_image\"><div class=\"image-align-center\"><img decoding=\"async\"  class=\"img-responsive style-default\" src=\"http:\/\/www.safetyangel.com\/recdev\/wp-content\/uploads\/2016\/11\/55.png\" alt=\"\"\/><\/div><\/div><\/div><div id=\"dt_column_58\" class=\"dt_column col-sm-1\"><\/div><\/div><\/div><\/div><div id=\"dt_row_59177728728596\" class=\"row dt_row\"><div id=\"dt_column_60\" class=\"dt_column col-sm-12\"><div id=\"dt_row_61177728728541\" class=\"row dt_row\"><div id=\"dt_column_62\" class=\"dt_column col-sm-1\"><\/div><div id=\"dt_column_63\" class=\"dt_column col-sm-5\"><div id=\"dt_text64177728728591\" class=\"dt_text\">\n<p><b>Compare your investment income after 20 years, varying the investment portion from 0% to 20% of your yearly income.<\/b><\/p>\n<p>To vary the investment portion, configure the Sensitivity Analysis page as follows and repeat the simulation.<\/p>\n<\/div><div id=\"dt_image65\" class=\"dt_image\"><div class=\"image-align-center\"><img decoding=\"async\"  class=\"img-responsive style-default\" src=\"http:\/\/www.safetyangel.com\/recdev\/wp-content\/uploads\/2016\/11\/renoexf2_6.png\" alt=\"\"\/><\/div><\/div><\/div><div id=\"dt_column_66\" class=\"dt_column col-sm-5\"><div id=\"dt_text67177728728513\" class=\"dt_text\">The results are displayed in the following plot.<\/div><div id=\"dt_image68\" class=\"dt_image\"><div class=\"image-align-center\"><img decoding=\"async\"  class=\"img-responsive style-default\" src=\"http:\/\/www.safetyangel.com\/recdev\/wp-content\/uploads\/2016\/11\/56.png\" alt=\"\"\/><\/div><\/div><\/div><div id=\"dt_column_69\" class=\"dt_column col-sm-1\"><\/div><\/div><div id=\"dt_row_70177728728578\" class=\"row dt_row\"><div id=\"dt_column_71\" class=\"dt_column col-sm-1\"><\/div><div id=\"dt_column_72\" class=\"dt_column col-sm-5\"><div id=\"dt_text73177728728526\" class=\"dt_text\">\n<p><b>Compare your investment income after 20 years, varying the investment portion from 0% to 20% of your yearly income and varying the amount invested in savings from 0% to 100%.<\/b><\/p>\n<p>To vary both the investment portion and the savings portion, configure the Sensitivity Analysis page as follows and repeat the simulation.<\/p>\n<\/div><div id=\"dt_image74\" class=\"dt_image\"><div class=\"image-align-center\"><img decoding=\"async\"  class=\"img-responsive style-default\" src=\"http:\/\/www.safetyangel.com\/recdev\/wp-content\/uploads\/2016\/11\/renoexf2_10.png\" alt=\"\"\/><\/div><\/div><\/div><div id=\"dt_column_75\" class=\"dt_column col-sm-5\"><div id=\"dt_text76177728728582\" class=\"dt_text\">To view the results in a three-dimensional plot, click the <b>3D Plot<\/b> icon on the control panel. The following plot shows the results.<\/div><div id=\"dt_image77\" class=\"dt_image\"><div class=\"image-align-center\"><img decoding=\"async\"  class=\"img-responsive style-default\" src=\"http:\/\/www.safetyangel.com\/recdev\/wp-content\/uploads\/2016\/11\/57.png\" alt=\"\"\/><\/div><\/div><\/div><div id=\"dt_column_78\" class=\"dt_column col-sm-1\"><\/div><\/div><\/div><\/div><\/div><\/div>\n","protected":false},"excerpt":{"rendered":"","protected":false},"author":1,"featured_media":0,"parent":0,"menu_order":0,"comment_status":"closed","ping_status":"closed","template":"fullwidth.php","meta":{"footnotes":""},"class_list":["post-16551","page","type-page","status-publish","hentry"],"_links":{"self":[{"href":"http:\/\/www.safetyangel.com\/recdev\/wp-json\/wp\/v2\/pages\/16551","targetHints":{"allow":["GET"]}}],"collection":[{"href":"http:\/\/www.safetyangel.com\/recdev\/wp-json\/wp\/v2\/pages"}],"about":[{"href":"http:\/\/www.safetyangel.com\/recdev\/wp-json\/wp\/v2\/types\/page"}],"author":[{"embeddable":true,"href":"http:\/\/www.safetyangel.com\/recdev\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"http:\/\/www.safetyangel.com\/recdev\/wp-json\/wp\/v2\/comments?post=16551"}],"version-history":[{"count":15,"href":"http:\/\/www.safetyangel.com\/recdev\/wp-json\/wp\/v2\/pages\/16551\/revisions"}],"predecessor-version":[{"id":16583,"href":"http:\/\/www.safetyangel.com\/recdev\/wp-json\/wp\/v2\/pages\/16551\/revisions\/16583"}],"wp:attachment":[{"href":"http:\/\/www.safetyangel.com\/recdev\/wp-json\/wp\/v2\/media?parent=16551"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}