HOME ........................................................................................................................................................ 7
Starting Year .......................................................................................................................................... 8
The Graph ............................................................................................................................................ 10
Other Buttons on the Home Page ....................................................................................................... 12
INCOME ................................................................................................................................................... 12
Upgrade to PRC/GOLD for Advanced Features ........................................................................................... 21
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INTRODUCTION PRC/Bronze is a high-fidelity tool designed to model your financial future with rich details and then
provide useful outputs that will provide insight into the possible range of outcomes to help you make
decisions. It offers much more than the quick-and-dirty assessments available with most on-line
calculators but still lacks the robustness of PRC/Gold.
This manual is intended to help you get to know PRC/Bronze and learn how to get the most out of its
capabilities. We’ll begin by sharing with you the design philosophy of PRC/Bronze, then explain how it’s
structured, and finally address the details.
PRC BRONZE DESIGN PHILOSOPHY
Most of us understand that the future is inherently unpredictable, yet many of us still desire an effective
tool to assist us in making key financial and lifestyle decisions that will shape our future despite the
uncertainties. PRC/Bronze strives to meet that desire with this design philosophy:
Since effective financial and retirement planning is not a one-time endeavor the tool must make
the planning and analysis process as painless as possible for the user. This translates to an
interactive tool that saves your data to enable you to re-visit and update your data as often as
you wish without having to start over each time.
The tool must provide a high degree of user control over key modeling assumptions, including life
expectancy, inflation, rates of return and effective tax rates.
It is easier to specify income and expense events relative to your age rather than to a year, so all
income and expenses are started and stopped in conjunction with the user’s age.
Taxes are a significant part of most people’s financial life, so reasonable treatment is necessary to
get beyond a low-fidelity long-term projection. Consequently, income taxes are estimated based
on nuanced user-specified effective tax rates, and taxes on the growth of regular savings accounts
are assumed to be payable upon withdrawal (i.e., growth is assumed to be capital appreciation as
opposed to simple interest and dividends). Further, RMD’s from tax-deferred accounts are
modeled and taxed properly, including early withdrawal penalties.
The tool must allow the user to specify contributions to tax-deferred and tax-free savings but it is
problematic for the user to specify contributions to regular savings. Instead, contributions to
regular/taxable accounts will always be calculated based on the difference between income and
expenses. This ensures that all money is fully accounted for while accommodating ebbs and flows
of both income and expenses.
Fixed rate projections are useful for comparing alternatives and getting a rough idea of where the
user is headed based on fundamental assumptions; however, since fixed rate projections fail to
account for the effects of market volatility, Monte Carlo analysis is incorporated to provide a
range of likely outcomes based on a simulation of market volatility.
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STRUCTURE PRC2019/Bronze is partitioned into four pages:
Home
Income
Expenses
Tabular Projections
The Home page is where you define your age and the major variables typically associated with what-if
exercises (life expectancy, inflation and rates of return). It also contains a graphical projection of its output
to enable you to make changes to these key variables and instantly observe the effect on the projections.
The Income page allows you to define a detailed income profile with up to 10 sources of income.
The Expenses page allows you to define a detailed expense profile with up to 30 separate expenses.
The Tabular Projections page contains a tabular view of the tool’s output projection, including income,
expenses, taxes, cash flow and year-by-year savings balances.
Navigation between these pages is done via the page links at the top of each page. The current page is
indicated by bright blue font in the page link.
MACROS Regarding the Security Warning you probably received from your operating system while bringing up
PRC: this is expected and is related to the fact that PRC contains macros that enable its automated
features. Macros are software programs that interact with the PRC spreadsheet file to perform a
function, and are executed anytime you click on one of PRC's "buttons". PRC macros will have to be
enabled for you to use this tool.
The reason the operating system is giving you a warning is because viruses and other harmful software
are often located in macros, so it's advisable to carefully control the macro content that is enabled on
your computer. We understand this, and for this reason Pralana Consulting LLC has gone to the trouble
and expense of getting a digital certificate (via GoDaddy.com) which we can subsequently use to
"digitally sign" our macros. All of this means that we are who we say we are, that we're a company in
good standing in the State of Texas, and that our macros can ONLY be changed by our computer that
hold this digital certificate. As a final note, our computers are scanned for viruses, malware, etc. on a
daily basis so you can be assured that our files are safe for you to download.
With that said, here's some guidance for responding to the security warning from your OS. How you do
this will vary from OS to OS and from one version of Excel to another, but basically what you may want
to do is confirm that the macros are digitally signed by Pralana Consulting LLC before enabling them. To
do this, try to click on the message that tells you Macros have been disabled. This will probably take you
to another screen where you can Enable Content.
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You can then click on the Enable Content button with a little arrow that suggests further options await
on the next page. When you get there, you may see a couple of options. One of these might say
"Enable All Content: Always enable this document's active content (make this a Trusted Document)" and
the other might say "Advanced Options". By clicking Advanced Options, you'll finally get to see the
digital signature and then get two other options: 1) Enable content for this session or 2) Trust all
documents from this publisher. At this point you can decide which option suits you best. One way or
another, though, you will need to enable this content to effectively use the features of PRC Bronze.
COMMON FEATURES OF ALL PAGES All PRC pages are color-coded in a similar manner: fields with a white background and bright blue font are
your data entry fields; fields with a white background and dark blue fonts are descriptions or fields
automatically filled in by PRC/Bronze. Fields with a small red triangle in the upper right corner contain
hidden comments that will appear when you place the cursor over that field. There are many of these
throughout the various pages to provide guidance regarding the specific meaning of a field or to clarify
potential user questions regarding that field. Small blue circles containing a white question mark are help
icons and are located near the object on the page to which they are related. Just click on them to get
additional information.
There are two icons on every page, one at the upper left and one toward the upper right. The disk-like
icon on the upper left is the SaveAs icon. Just click it anytime you wish to save your work with a new
filename. You can use the Windows shortcut of Ctl-S or the Mac shortcut of Cmd-S to save the file with
the existing filename. The “x” icon toward the upper right is the Exit icon. Click that whenever you’re
ready to quit working on your file. PRC/Bronze will always do a Save before it exits to be sure your work
isn’t lost.
PRC/Bronze tries to call you and your spouse by name everywhere possible, so it starts by asking for your
names on the Home page. Thereafter, when you see input data that is unique to either you or your
spouse, it will refer to the corresponding person by name.
Most pages contain “buttons” that you can “click” to invoke some PRC/Bronze operation. All of these
buttons have a similar appearance, with 3-D effects and the function they perform written on them in
dark blue font.
All pages are organized in a table format where you simply type in the data requested and PRC/Bronze
validates your inputs as you provide them to ensure the data you enter is in a proper range. In numeric
data entry fields (such as years, ages and dollar amounts), a blank is treated as a zero or not applicable;
however, it’s important to understand that a blank is created via the DELETE key and not via spaces.
Buttons are provided to help you clear the large tables. Conditional formatting is employed to alert you
to certain situations where an entry in one field demands a corresponding entry in another field.
Considerable care has been taken to minimize the keystrokes and clicks required to get your data entered,
so you won’t find many pull-down menus, and you’ll find check boxes for yes/no types of inputs and
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“toggle” buttons for selecting mutually exclusive functions, such as whether to display results in today’s
dollars or future dollars.
The clock for PRC ticks once per year. So, all income and expenses for a year should be entered as Jan 1st
values. Alternatively, if it is nearer to the following year, you can enter the starting year equal to the
following year on the Home page and enter current savings figures (which may be nearer to the following
year’s starting values).
TODAY’s MONEY vs. FUTURE MONEY Money can be quantified in terms of today’s money or future money. Future money reflects the
expected quantity of money including the effects of inflation. For example, $1000 in 2017 money that
grows at 3% each year will be $1030 in 2018, $1061 in 2019, and so on. Similarly, a $1000 expense in
2017 money that inflates at 3% each year will be a $1030 expense in 2018, a $1061 expense in 2019, and
so on. Today’s money reflects the expected quantity of money after removing the effects of inflation.
So, if inflation is 3%, $1000 in 2017 money that grows at 3% each year will be $1000 in 2018, $1000 in
2019, and so on. Similarly, a $1000 expense in 2017 money that increases at the inflation rate will be a
$1000 expense in 2018, a $1000 expense in 2019, and so on.
The conversion from future money to today’s money is simple: today’s money = future money divided
by cumulative inflation. Cumulative inflation is simply the following: cumulative inflation in year n = 1 *
inflation in year 2 * inflation in year 3 * … * inflation in year n.
It’s often useful to look at projections in terms of today’s money because it helps to see how the value
of the money changes over time. An income stream that grows at the same rate as inflation will remain
a constant value over time in terms of today’s money, and thus its buying power will remain constant. If
the income stream increases faster than inflation, its value will increase over time in terms of today’s
money and, thus, its buying power will increase. Alternatively, a fixed income in terms of future money
(for example, an income of $20,000 per year with no raises each year) will be decreasing in terms of
today’s money and, thus, its buying power will decrease over time. Naturally, the same thing applies to
total savings: when viewed in terms of today’s money, an increasing amount reflects increasing buying
power and a decreasing amount reflects decreasing buying power.
ANALYSIS Due to the fact that some variables are unknowable, no calculator can produce a single “right answer”
regardless of the amount of detail you put into it. Most notably, this includes life expectancy, inflation,
and rates of return (ROR) on investments. Further, the long term growth of investments is a function of
market volatility and the sequence of returns. Year to year variations in ROR can make a big difference in
the size of your savings accounts over time. Here’s just one simple example to illustrate the point: A 10%
loss one year followed by a 10% gain the following year is really a 1% loss over that two-year period. A
$100,000 portfolio would be reduced to $90,000 after the first year and would rise to $99,000 after the
second year for a loss of $1000, or 1%. Even though the average return in this example is 0%, if this
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portfolio actually experienced a constant 0% return over that same period, it would still be worth
$100,000 and, thus, ahead of the same portfolio that experienced the volatility.
To address these uncertainties, PRC/Bronze analyzes your data using two different analysis methods to
provide you with a range of outcomes:
1. Fixed-rate analysis generates a single projection using an average inflation rate and average rates
of return each year, as specified on the Home page. This is the most basic form of financial
analysis and the source of all of the data presented on the Tabular Projections page (discussed in
subsequent sections of this manual). It is particularly useful for getting a general understanding
of where you stand relative to long term objectives, for making trade-offs between major choices
and for exploring the sensitivity of your plan to certain parameters, such as inflation, rates of
return, life expectancy, and so on. Its primary weakness is that it does not model year-to-year
fluctuations in rates of return and inflation, which are facts of life in the real world. Consequently,
the probability that your actual long term results will be better than those predicted by fixed rate
projections are (very roughly) 50%, but the probability that you’ll do worse are also (very roughly)
50%.
2. Monte Carlo analysis generates 500 projections using the specified average inflation rate with
randomly varying ROR to simulate market volatility. The random RORs are based on a mean ROR
equal to the average ROR specified for each account type on the Home page and a corresponding
standard deviation that is proportional to that ROR (see the note below), assuming a normal
distribution. Every one of the 500 projections will result in a different long-term projection, so
some form of additional analysis must be done to translate this into useful information and avoid
overwhelming you with data. PRC/Bronze presents Monte Carlo analysis results as an envelope
representing the range of outcomes, where the top edge of the envelope is the 90th percentile of
results and the bottom edge of the envelope is the 10th percentile of results (see note below for
an explanation of percentiles). The points on those curves are an aggregation of all 500 test cases.
Therefore, for any given year in the analysis, you can get a sense of the distribution of results
across a large number of cases. PRC/Bronze also calculates the overall success rate by dividing
the number of test cases that completed with a positive savings balance by the total number of
test cases (i.e., 500), and presents this result above the envelope. Each time you repeat the
analysis, the Monte Carlo results will change slightly because the ROR is randomized and changes
from one analysis to the next. By simulating year-to-year fluctuations in rates of return (i.e.,
market volatility), Monte Carlo analyses are an attempt to address the weakness of the fixed rate
analysis method described above. Still, Monte Carlo analyses have their own weaknesses: year-
to-year market fluctuations aren’t totally random but do exhibit a cyclical nature that isn’t
modeled. Further, Monte Carlo analysis is not a good tool for trying to make trade-offs between
major choices or to study the sensitivity of your plan to certain parameters because of its non-
deterministic outputs. We believe that a combination of analysis methods yields the most useful
product and why PRC/Bronze provides both fixed rate and Monte Carlo analyses. (FYI, PRC/Gold
includes historical analysis to supplement fixed rate and Monte Carlo analyses, and provides user
control over the percentile levels that govern the upper and lower edges of the envelope).
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A Note on Percentiles
In statistics, a percentile is the value of a variable below which a certain percent of observations fall. For
example, if you’re at the 80th percentile of human heights, then 80% of all people are shorter than you,
and 20% are taller. You can interpret PRC’s percentile outputs as follows: Out of all the test cases
executed, X% of the cases yielded results below the Xth percentile edge, and Y% of the cases yielded
results below the Yth percentile edge.
A Note on Standard Deviations
For simplicity, PRC/Bronze recognizes that investments with higher potential returns also tend to be
more volatile and uses a look-up table to establish a canned relationship between ROR and standard
deviation (SD). Here are some of the mappings from that table, and the data points not shown fit
smoothly between these points:
1% ROR; 1% SD
5% ROR; 7% SD
10% ROR; 20% SD
15% ROR; 30% SD
For comparison purposes, PRC/Gold accepts user inputs to specify standard deviation (as well as real
ROR) on an asset class basis.
PAGE-BY-PAGE DISCUSSION
HOME As stated above, the Home page is where you define your age and the major variables typically associated
with what-if exercises (life expectancy, inflation and rates of return). It also contains a graphical projection
of its output to enable you to easily make changes to these key variables and instantly observe the effect
on the projections. Here’s a screenshot:
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The following is a field-by-field discussion of the data entry fields on the Home page, shown above.
Starting Year
First Year: This field tells PRC the year you wish the modeling to begin and it assumes January 1 of the
specified year. This year will be the basis for determining “today’s dollars”.
Demographics
Names: Entering your name in the left-hand column and your spouse’s name in the right-hand column
will later enable you to specify income and expenses that start and stop based on ages rather than by
year. This design choice was made because you probably have a particular retirement age in mind, and
you probably have a good idea of the age at which you plan to start Social Security benefits, but you may
not necessarily know the year in which those events will occur.
Current Ages: Enter your age as of January 1 of the specified starting year in the left-hand column and
your spouse’s age as of January 1 in the right-hand column. If you entered a blank in the spouse name
field above, the spouse age field won’t be visible even if it contains data.
Life Expectancy: Enter the maximum ages to which you and your spouse expect to live. PRC models a
death occurring on December 31 of the year in which the specified Life Expectancy is reached. In other
words, if you tell PRC that you expect to live to age 100 the last year of the simulation will be the year
you’re 100 years old.
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Inflation Assumptions
This is the general inflation rate PRC will use to generate income and expense profiles based on the data
you enter on the income and expense pages.
Tax Assumptions
Period Start Years: Notice that PRC allows you to specify your tax rate for two separate time periods,
referred to as Period 1 and Period 2. These periods are defined based on their starting years: Period 1
begins in the First Year as previously defined and continues until the start of Period 2, which begins in the
year you specify on the row labeled “Period Start Years”. If this is left blank Period 1 applies indefinitely.
Effective Tax Rate: This is the effective tax rate on all sources of income. Effective tax rate is determined
by dividing your total federal, state and local income taxes and your FICA taxes by your total Income. For
this calculation, you should include all sources of income including gross earned income, Social Security
and pension income, and realized capital gains. Note that this calculation is done by you outside of
PRC/Bronze and simply entered via this field.
For comparison purposes, PRC/Gold does detailed federal income tax and FICA tax calculations. State
taxes are based on the effective tax rate entered by the user x federal AGI (adjusted gross income).
Savings Account Modeling
Savings Account Assumptions
PRC allows you to define your assumptions for three savings categories: tax-deferred accounts, tax-free
(for example, Roth) accounts and regular accounts. For each account category, data fields are provided
through which you can specify the starting balance and the expected nominal (i.e., not inflation-
adjusted) rates of return (ROR). For regular (taxable) accounts, you can also specify the initial amount of
unrealized long term capital gains.
Unrealized LTCG: Enter the amount of money currently in regular accounts that is the result of capital
appreciation and that has not yet been taxed. Note: this does not apply to tax-deferred or tax-free
accounts.
Note: The design decision to model taxation on withdrawals from regular savings rather than on the
annual growth of regular savings was based on the assumption that when regular savings accounts grow
to level where the taxation matters, the funds will be invested in assets that appreciate within the
account and taxation occurs only upon withdrawal (as opposed to the growth being simple interest).
Then, taxation will occur based on the assumption that withdrawals are made with the ratio of principal
and capital gains being equivalent to the overall ratio of principal and capital gains in the account, and
only the capital gains portion will be taxed (at the effective tax rate specified on the Home page). PRC
Bronze determines and maintains this ratio throughout the modeling timeframe based on contributions,
growth and withdrawals, but it is not visible to the user.
Contributions to Savings Accounts
You specify the initial balance of all savings account types as described above, but subsequent
contributions to tax-deferred and tax-free accounts are specified on the Income page. Contributions to
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regular accounts are never specified by the user. Instead, PRC calculates these contributions based on
this simple principle: the difference between your income and your expenses (which we define to
include contributions to tax-deferred and tax-free accounts) is the money available for contribution to
regular savings. In this manner, 100% of your money is accounted for. This is elaborated further in the
next paragraph.
Cash Flow and Withdrawal Priorities
For every year in the projection, PRC determines your overall cash flow by subtracting total expenses from
total income. Positive differences result in contributions to regular savings and negative differences result
in withdrawals from regular savings. Therefore, the growth or decline of regular savings is a function of
the rate of return specified for regular savings and your annual cash flow. If and when the balance of
regular savings goes to zero, PRC will attempt to make up any residual negative cash flow by making
withdrawals from tax-deferred or tax-free savings accounts. Withdrawal priorities are not user-selectable
in PRC/Bronze, so negative cash flows will be handled via withdrawals from tax-deferred savings until
they, too, are depleted. At that time, any subsequent negative cash flows will be covered via withdrawals
from tax-free savings.
The Graph
The graph on the left side of the page enables you to see the tool’s outputs and be able to interactively
examine how it changes in response to changes you make to the key modeling parameters controlled
from the Home page, such as life expectancy, inflation and rates of return. Using the radio buttons
located beneath the graph, you can control the graph’s content. Your options are: Income vs. Expenses,
Savings by Account, and Monte Carlo Results.
Be aware that the Monte Carlo analysis results will be updated every time you click the Show Monte
Carlo Results button and anytime you come to the Home page from any other page. The time to
perform this update is very slight on modern computers; however, it could take a few seconds on older
computers. There’s nothing wrong when you experience this pause; the Monte Carlo analysis is
computational extensive and takes a while on slower computers.
Savings by Account Display
The screenshot at the top of this section shows the Home page with this option selected. Please note
that these are the results of PRC’s fixed rate analysis. The graph is formatted as a stacked area graph.
This enables you to see the year-by-year balance of each account category (taxable, tax-deferred and
tax-free) as well as the total across all accounts (represented by the upper edge of the set of stacked
areas).
Income vs. Expenses Display
Here’s a screenshot of the Home page with Income vs. Expenses selected:
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Monte Carlo Results Display
Here’s a screenshot of the Home page with Monte Carlo Results selected:
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The envelope representing the range of outcomes is indicated via the narrow vertical blue lines. The
upper edge of the envelope is the 90th percentile of test results (i.e., 90% of results were lower than this
and only 10% were higher) and the lower edge is the 10th percentile of test results (i.e., 10% of results
were lower and 90% were higher). For comparison, the total savings generated by the fixed rate
analysis is superimposed on the envelope as the solid dark blue line.
Please note the “Update Monte Carlo Analysis” button just to the right of the Legend box. You can click
this button to tell PRC to update the Monte Carlo analysis anytime you’ve made a change to one or
more of the parameters on the Home page. Even if no input changes are made, updating the Monte
Carlo analysis will always result in some changes to the graph because of the fact that the simulated
ROR’s involve some amount of randomness and, therefore, the results are slightly different on each
separate analysis.
Other Buttons on the Home Page
Hide Excel Menus: You can click this button to eliminate the MS Excel menus that will otherwise occupy
the top portion of every screen and thereby devote the entire screen to PRC displays. None of the Excel
menus are needed to operate PRC; however, if and when you should desire to see those menus, just press
the Escape button on your computer. Note that this hiding function doesn’t have nearly as much effect
on Macs as it does on Windows machines.
Zoom: You can use this button to increase or decrease the magnification level on all PRC pages at the
same time. When you click the button, you’ll see a pop-up display that asks what zoom level you want.
PRC will assume the value you enter is a percentage value, so it isn’t necessary to enter the % sign.
Import Data: You can click this button to initiate the importing of data from a prior version of
PRC/Bronze, including both PRC2019/Bronze and PRC2018/Bronze files. After the button is clicked, a
new window will appear in which you can select the PRC/Bronze file from which you want to import the
data. After selecting the file, just click OK and the import process will commence. When complete, an
“import complete” will pop up.
When you do an import on a Mac, the Mac O/S will probably ask you about enabling macros on the file
being imported. Just click “yes” and continue on.
User Manual: You can click this button to bring up the User Support page on the PRC website and then
download the PRC/Bronze User Manual.
Help: You can click this button to initiate an email to Pralana Consulting to ask a question or report a
problem.
License: This button takes you to a page where you can view the PRC License that describes your rights
and restrictions as a PRC/Bronze user.
INCOME The Income page is a simple table that allows you to define up to 10 income streams. With this
information, PRC will create an income profile that represents your annual income level for every year for
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the rest of your life and that profile is represented by the green line on the Income vs. Expenses graph on
the Home page.
The following is a column-by-column description of the fields in the Income table above.
Income Streams: This is simply a description field where you can enter a brief description of each of the
income sources.
Whose: This field contains a pull-down menu containing your name and your spouse’s name, if applicable.
Since the start and stop times for each income source are specified by ages rather than being tied to
certain years, PRC needs to know whose age is being specified.
Start Age and Stop Age: This is the age of the person selected in the “Whose” field in the year the income
source is expected to begin and end, respectively.
Amount in Today’s $: Use this field to specify the income amount in today’s dollars and it will be adjusted
over time in accordance with the growth percentage specified in the next column.
Annual Growth % Relative to Inflation: This field tells PRC how this income stream changes over time.
Enter a zero (or blank) if the income is adjusted at the same rate as inflation. Enter a positive value if it
gets adjusted faster than inflation or a negative value if it falls behind inflation.
Here are some examples, and you can reference the screenshots above and/or below:
Example 1: To model employment or Social Security income that exactly tracks inflation, just enter
a blank in the Annual Growth % field.
Example 2: Let’s assume inflation is 3% and you have a pension with a specified COLA level of 2%.
In this case, you’d enter a -1% in the Annual Growth % field.
Example 3: Let’s again assume inflation is 3%. To model an income stream that grows 5% each
year, you’d enter 2% in the “Fixed Annual % Increase” field.
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% Taxable: With this field, you can tell PRC the percentage of the income source that is taxable. The
primary reason for this column is to enable you to declare windfalls, such as inheritances or the capital
gains from the sale of your home, as non-taxable income. Additionally, though, you could choose to
specify, for example, that only 85% of your Social Security income is taxable. Please note, though, that if
you do this you’ll need ensure that the effective tax rate specified on the Home page also takes this into
account.
Examples: For each of these examples, you can refer to the screenshot below.
Employment income is generally 100% taxable; however, if you are contributing 10% of that
income to tax-deferred savings, then it is only 90% taxable. In this case, you’d enter 90% in this
field. If you do this, you need to ensure that the effective tax rate specified on the Home page
also takes this into account.
Social Security benefits are taxable if your benefits exceed certain thresholds, depending upon
your filing status. A maximum of 85% of your benefits are taxable, worst case. In this case, you’d
enter 85% in this field. If you do this, you need to ensure that the effective tax rate specified on
the Home page also takes this into account.
If you’re modeling the sale of your home and your profit falls beneath the capital gains exemption
level, you won’t have to pay any capital gains taxes. Therefore, enter 0% in this field (or leave it
blank).
Inheritances are exempt from income taxes unless they exceed a multi-million dollar threshold,
so if you’re modeling an inheritance, enter 0% in this field (or leave it blank).
Personal Contributions to Tax-Deferred Retirement Savings ($): If the income source is employment
income and you are contributing some of it to tax-deferred savings, you can enter the dollar amount in
this field. Otherwise, just leave it blank. PRC will increase this contribution amount each year at the rate
specified in the Annual Growth % field (plus inflation).
Company Contributions to Tax-Deferred Retirement Savings ($): If the income source is employment
income and your company is making contributions to your tax-deferred savings, you can enter the
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contribution dollar amount in this field. Otherwise, just leave it blank. PRC will increase this contribution
amount each year at the rate specified in the Annual Growth % field (plus inflation).
Personal Contributions to Tax-free Savings ($): If the income source is employment income and you are
contributing some of it to Tax-free savings, you can enter the dollar amount in this field. Otherwise, just
leave it blank. PRC will increase this contribution amount each year at the rate specified in the Annual
Growth % field (plus inflation).
Note: All of the previous three fields can be used on the same income source.
$ CONVERTER: PRC/Bronze expects your income amounts to be specified in terms of today’s dollars;
however, there may be cases where you know the amount in terms of future dollars and need some help
in converting it to today’s dollars (for example, pensions are commonly defined in future dollars).
Therefore, in conjunction with every row in the Income table, PRC/Bronze provides a convenient dollar
converter to help you with this conversion. To use it, just enter your Future $ value and PRC will convert
it to today’s $ based on the current age and future age of the associated person. Then, you’ll just need to
note the amount in the “Converted to Today’s $” field and enter it into the “Amount in Today’s $” field.
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EXPENSES The Expenses page is another simple table that allows you to define up to 30 separate expenses. With
this information, PRC will create an expense profile that represents your annual expense level for every
year for the rest of your life and that profile is represented by the red line on the Income vs. Expenses
graph on the Home page.
As you can see, this table contains only six columns of data. Each of the 30 rows in this table can be
associated with a specific expense item and can apply to a single year, to the rest of your life, or to any
span of years in between, and can be adjusted for inflation or not.
Description: This is simply a field where you can enter a brief description of each expense.
Whose: This field contains a pull-down menu containing your name and your spouse’s name, if applicable.
Since the start and stop times for each expense are specified by ages rather than being tied to certain
years, PRC needs to know whose age is being specified.
Start Age and Stop Age: This is the age of the person selected in the “Whose” field in the year the income
source is expected to begin and end, respectively. The expense will continue through the year in which
the “owner” is the specified stop age.
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Amount: The amount of the expense in terms of today’s dollars.
Adjust for Inflation? Check this box if you expect this expense to increase at the rate of inflation. If it’s a
constant expense, such as a fixed rate home mortgage, leave the box unchecked.
TABULAR PROJECTION PRC/Bronze generates a fixed rate projection based on all of your input data and presents it in a single
tabular projection page.
As you can see in the screenshot below, the columns are organized into the following categories:
Income. This is the profile of the taxable and non-taxable income specified on the Income page.
Expenses. This is the profile of the expenses specified on the Expenses page plus calculated taxes
and contributions to tax-deferred and tax-free savings (as specified on the Income page).
Cash flow and Other Contributions. Cash flow is taxable income + non-taxable income - specified
expenses - taxes - personal contributions to tax-deferred and tax-free savings. Contributions to
Regular Savings is cash flow + Required Minimum Distributions (RMD’s) if that amount is greater
than zero; otherwise, the contribution is zero. Company contributions to Tax-Deferred Savings is
as specified on the Income page.
Growth of savings. This is the growth of each account type resulting from interest or capital
appreciation, and all of it remains in the associated account unless and until it is needed to cover
a negative cash flow.
Withdrawals. This includes mandatory Required Minimum Distributions (RMD’s) and the
withdrawals from each account type that are required to cover negative cash flows.
Savings totals. This shows the year-ending balance by account type and the grand total.
The information contained in this view corresponds exactly to the graphical view presented on the
Home page (in the Savings by Account view), but the tabular form enables you to see exactly what’s
going on year by year.
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Some Illustrations of PRC/Bronze Projections
RMD’s Always Begin When You Reach Age 70
PRC/Bronze makes a simplification in the modeling of tax-deferred accounts by treating it as a single
account rather than separate accounts for husband and wife. This necessitates a decision regarding the
timing of the start of Required Minimum Distributions (RMD’s), and that choice for PRC/Bronze is when
you (as opposed to your spouse) reach age 70. You can observe that timing in the screenshot above.
Contributions to Tax-Deferred and Tax-Free Accounts Are Treated Like Expenses
Contributions to tax-deferred and tax-free savings are treated like expenses. Typically, these are done
via payroll deductions and in virtually every case they must come out of some stream of earned income.
PRC Bronze is thus designed to make these contributions as a matter of course and the remainder of
each income stream is all that’s available for covering expenses, including taxes. If the total of this
residual income is insufficient for covering the remaining expenses, then a negative cash flow condition
will exist and be treated as described below.
Prioritization of Withdrawals is Always Regular, Then Tax-Deferred and Then Tax-Free
Negative cash flows necessarily result in withdrawals from some savings account. PRC Bronze always
models these withdrawals in a particular order: regular savings first, then tax-deferred if and when
regular savings become depleted and, finally, tax-free savings if and when tax-deferred savings become
depleted. See the screenshot below for an example of this behavior.
Positive Cash Flows Result in Contributions to Regular Savings
Cash flow is simply the annual difference between total income and total expenses. Anytime this is a
positive value, it indicates that your income is higher than your expenses and PRC Bronze treats that as a
contribution to regular savings. Some (most) calculators allow/expect you to specify your contributions
to regular savings but PRC calculates it for you to ensure that 100% of your money is accounted for.
This, then, enables it to treat the accumulation phase and the distribution phase of your life exactly the
same way, modeling both accurately. If you’re still in the accumulation phase you probably arrange for
automatic contributions to regular savings. If you do, then the column entitled “Contributions to
Regular Savings” should closely match those automatic contributions if and when all income and
expenses are accounted for accurately.
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If you have a negative cash flow, it might be partially or completely offset by mandatory RMD’s from
your tax-deferred accounts and, thus, reduce the withdrawals required to cover it. In this case, the
Contributions to Regular Savings column will reflect the cash flow amount plus the RMD amount, but
with a minimum amount of zero. If cash flow + RMD is negative, you should be able to observe a
corresponding withdrawal from regular, tax-deferred or tax-free savings. Please see year 2023 in the
screenshot below as an example where regular savings has already been depleted and an additional
withdrawal from tax-deferred savings is required.
Taxes and Withdrawals to Cover Negative Cash Flows are Interdependent
PRC Bronze has to deal with an interdependency issue related to taxes on account withdrawals
necessitated by negative cash flows. You can easily see it by looking closely at the columns in the
tabular projection page: Cash flow is simply income minus expenses, where expenses includes taxes.
When this results in a negative value, it requires a withdrawal from savings to “balance the books”. The
issue is that some portion of withdrawals from regular savings and all withdrawals from tax-deferred
savings are taxable events. So, herein lies the interdependency: taxes affect the withdrawal amount and
the withdrawal amount affects the tax amount. The perfect mathematical solution involves iterative
calculations; however, a simplification with insignificant long-term affects is to avoid this
interdependency by including the taxes on those “unplanned” withdrawals from regular and tax-
deferred savings as an expense in the subsequent year. This is the design choice made in PRC Bronze
(and in PRC Gold) and you can see an example of this behavior in the screenshot below (see Taxes on
Withdrawals from Regular Savings in years 2018 and 2019).
Calibration
In any given year, the age columns indicate your ages at the start of the year, income and expenses are
expressed in year-beginning values and savings balances are year-end values with respect to inflation
adjustment. PRC recognizes there is no practical difference in the value of a savings account between the
last tick of the clock in year n and the first tick of the clock in the year (n+1) and, consequently, applies
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inflation to the year-end savings balance in year n based on the year n inflation. Inflation which occurred
in year n is applied to Income and expenses upon the first tick of the clock in year (n+1).
The basic formula for determining the balance of regular savings at the end of year n is: balance (end of
year n) = balance (end of year n-1) + growth (year n) + income (year n) – expenses (year n). You can readily
verify the math when the projection is shown in terms of future dollars; however, it’s not as straight-
forward when looking at it in terms of today’s dollars because of the inflation corrections being calculated
behind the scenes. To convince yourself the math is correct in terms of today’s dollars you must divide
the result by 1+ inflation. Let’s take a look at the screenshot below:
As an example, we’ll verify that the 2018 year-ending balance of regular savings is correct. The basic
calculation is 500,000 (the balance at the end of the prior year) -48,000 (income minus expenses for 2018)
+ 30,000 (growth in 2018) = 482,000. This would be the value of the account if we didn’t have to apply
the year-end inflation correct; however, since the tool does present account balances in inflation-
corrected year-end amounts we need to divide the 482,000 by 1.04 (which is 1 + 4% inflation) which yields
463,462.
PRC FILE HANDLING When you download PRC/Bronze and the computer asks you what you want to do with the downloaded
file, tell it to Save and then Open. That will ensure it gets saved on your computer, and you’ll find the
saved PRC2019.x.Bronze file in your Downloads folder. When the file opens, you can click the various
buttons to explore PRC and modify the data fields as you like. When you’re ready to save the modified
file, you have two options: 1) you can use the Excel shortcut (for Windows machines, push the Ctrl and
the s buttons simultaneously, which we’ll call “ctrl-s”; for Macs, push the Cmd and the s buttons
simultaneously, which we’ll call “cmd-s”) to save the file in the original location (your Downloads folder)
and with the original name (PRC2019.x.Bronze) or 2) you can click the PRC SaveAs icon to do a “save as”
operation, which then allows you to specify the folder and filename of your choice. When you’re
finished working with the file, click the X icon to exit. Before the file is closed another save will be
performed automatically.
To bring the file back up, you have two options: 1) bring up Excel by double-clicking its icon and then use
Excel’s File menu to locate and select the PRC file you just saved, or 2) navigate to the folder containing
the saved PRC file (using Windows Explorer on Windows machines or Finder on Macs), and then just
double-click it. That action will start Excel, if necessary, and bring up the selected PRC file. Once it’s up,
you can continue working with it, make more changes and then save it again. Once you have the file
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where you want it and with the name you’re happy with, then most subsequent saves (to prevent loss of
your work) can be done with the Excel shortcut “ctrl-s” or “cmd – s”.
So, fundamentally, PRC/Bronze is now managed just as any other Microsoft Office file, and you can save
the PRC/Bronze file under as many different names as you choose. Just click the save-as icon and type in
whichever filename you wish and click Save (within the Excel pop-up). Every time you do this, you’ll be
creating new files. To bring up a particular file later, just use either of the two methods described
above.
Upgrade to PRC/GOLD for Advanced Features If you like PRC/Bronze but have a need for more advanced features with a similar look and feel, you may
want to consider PRC/Gold. It’s not free but it provides lots of value for the price, including the
following:
advanced income and expense modeling (pensions, SS benefits, annuities, mortgages, healthcare, college, rental properties)
derived rates of return based on detailed portfolio definition, including asset classes and allocations and asset-specific taxation characteristics
detailed federal and state income tax calculations
modeling of cash, taxable, tax-deferred (separate for husband and wife) and tax-free (Roth) account categories, plus inherited traditional and Roth IRA’s
full withdrawal priority control across taxable, tax-deferred and tax-free (Roth) account categories
SEPP's (substantially equal periodic payments) and scheduled withdrawals from tax-deferred savings
Roth conversion modeling
Social Security start age optimization for both husband and wife
consumption smoothing (to maximize your standard of living)
user-customizable tabular outputs and print-formatted reports
survivor scenarios
simultaneous modeling and comparison of 3 independent scenarios
historical analysis and more advanced Monte Carlo analysis
