WO2002011029A1

WO2002011029A1 - Method, system and computer program for auditing financial plans

Info

Publication number: WO2002011029A1
Application number: PCT/US2001/023647
Authority: WO
Inventors: David B. Loeper
Original assignee: Individual
Current assignee: Individual
Priority date: 2000-07-27
Filing date: 2001-07-27
Publication date: 2002-02-07
Anticipated expiration: 2003-01-27
Also published as: AU2001284671A1

Abstract

A method for evaluating a financial plan, including a predetermined initial values of investments (540) and one or more contribution or withdrawal amounts corresponding to selected times after the commencement of the financial plan, includes the steps of calculating the change in a predetermined initial value of an investment over a time interval based on changes in value over a randomly-selected first historical time interval (530) to obtain a changed investment value, updating the changed investment value based on the selected contribution or withdrawal amount corresponding to the length of the time interval in accordance with the financial plan to obtain a further changed investment value, calculating the change in the further changed investment value over a second time interval based on changes over a randomly-selected second historical time interval to obtain a further investment value, repeating the steps of calculating, updating and again calculating with respect to a randomly-selected third historical time interval and a randomly-selected fourth historical time interval, respectively.

Description

PATENT DOCKET NO. D5009-00029

METHOD, SYSTEM AND COMPUTER PROGRAM FOR AUDITING FINANCIAL

PLANS

Field of the Invention.

This invention relates to computer programs and related methods and systems for

financial planning for individuals.

Background of the Invention.

Financial plans are essential to the plans for retirement, saving for major expenses,

such as children's education, for most individuals. If too little is saved, or the wrong

investments are made, individuals will not be able to maintain their lifestyles in retirement,

may not be able to send their children to desired schools, or may find themselves outliving

their savings. On the other hand, if more sums than are needed are set aside for future needs, individuals may find themselves unnecessarily denying themselves and their families even minor luxuries, such as vacations and larger homes. Professional financial planners and

individuals have a variety of ways of creating financial plans. The financial services industry

has adopted standardized means of projecting out individual financial plans. There currently

exists today no program or mechanism that allows an individual to have an accurate perception of what would have happened to their financial plan historically. In lieu of

actually doing that, which is also a little bit insufficient, the financial services industry has

adopted two standard means, either a simple annualized return or a statistical estimation of

future values. The fundamental flaw with those standard means is: 1) they use either an assumed rate of investment return over the whole period of time, and as can be proven mathematically, lacks any relation to what the values will be in the future even if those

annualized returns are received, or 2) they try to statistically calculate to come out with a PATENT DOCKET NO. D5009-00029 forecast of statistical probability of the distribution of outcomes; by the very nature of the

statistical estimation, those do not really relate to actual historical experience. In either case,

the fundamental problem in any financial plan done with any of these standardized tools,

either using simple annualized return as a means of estimating future values or a statistical estimation of future values, that the plans do not accurately predict the future wealth of the

individual using the financial plan. For example, existing prior art tools help the individual

figure out a risk tolerance, and then request the user to furnish a return expectation is or

determine what the return expectations should be for the risk tolerance. These prior art tools then advise the user to expect a certain return, or a certain outcome based on a certain return,

allowing for projected cash flows.

The lack of accuracy in prediction, as noted above, causes great problems for the

individual. The individual may fail to meet his financial goals or forego opportunities in trying to meet those goals. A financial plan may direct an individual to save more money then she needs to, or retire later than he or she needs to. A financial plan may advise an

individual that he may retire earlier than he should, or withdraw more money than he should

from investments. All of this advice results from the estimation errors made through either

of the current industry norms.

Financial plans are generally reviewed and revisited once every few years. The financial plan and forecasting tools are not meant to help the individual client make decisions

on a daily basis about the implications of making an asset allocation decision or making

purchasing decisions or retirement decisions. These decisions tend to be very long term in nature and updated fairly infrequently. Even if the tools were accurate, predictions may be made after investment, spending or retirement decisions have already been made. Their PATENT DOCKET NO. D5009-00029 inherent nature is such that they are not updated on a regular basis. Such plans provide little support for investors to make investment decisions.

For example, an investor feels wealthy because he has received some great market returns. His plan called for saving $20,000 a year, and he intends to continue to do so. His current plan said he was supposed to have $2 million at a given time, and because of great market return, he now has $2.5 million. He then decides to make a major purchase using a portion of the additional $500,000. He fails to rerun his financial plan. He does not know • how making that purchase decision will affect his likelihood of achieving his long-term goals. An object of the invention is to provide a method for evaluating financial plans to determine the likelihood that an investor will meet the investor's financial goals.

An advantage of the present invention is that such a method is provided. Additional objects and advantages will become evident from the detailed description of a preferred embodiment which follows. Summary of the Invention. A method for evaluating a financial plan, including predetermined initial values of investments and one or more contribution or withdrawal amounts corresponding to selected times after the commencement of the financial plan, includes the steps of calculating the change in a predetermined initial value of an investment over a time interval based on changes in value over a randomly-selected first historical time interval to obtain a changed investment value, updating the changed investment value based on the selected contribution or withdrawal amount corresponding to the length of the time interval in accordance with the financial plan to obtain a further changed investment value, calculating the change in the further changed investment value over a second time interval based on changes over a PATENT DOCKET NO. D5009-00029 randomly-selected second historical time interval to obtain a further investment value, repeating the steps of calculating, updating and again calculating with respect to a randomly- selected third historical time interval and a randomly-selected fourth historical time interval, respectively. The method may include presenting the result of the calculations as a report to an individual. The method is preferably implemented by suitable computer software.

Investments may be categorized in more than one asset category, and distinct historical data employed in calculations for each asset category. The results of the calculation may be compared to a selected wealth goal. After each calculation relative to historical data, an adjustment of the investment value to simulate tax effects may be made. The use of randomly-selected historical time intervals provides a very large number of simulated historical periods against which to evaluate a financial plan.

A system for evaluating financial plans, including predetermined initial values of investments and one or more contribution or withdrawal amounts corresponding to selected times after the commencement of the financial plan, includes a computer programmed to calculate the change in a predetermined initial value of an investment over a time interval based on changes in value over a randomly-selected first historical time interval to obtain a changed investment value; to update the changed investment value based on a contribution or withdrawal amount set in the financial plan for a time corresponding to the time interval to obtain a further changed investment value; to calculate the change in the further changed investment value over a second time interval based on changes over a randomly-selected second historical time interval to obtain a further investment value, to further calculate, update and again calculate with respect to a randomly-selected third historical time interval and a randomly-selected fourth historical time interval. PATENT DOCKET NO. D5009-00029

A storage medium has stored therein instructions, wherein the instructions, when

executed by a processor, cause the processor to perform the steps of: calculating the change in a predetermined initial value of an investment over a

time interval based on changes in value over a randomly-selected first historical time interval

to obtain a changed investment value;

updating the changed investment value based on a contribution amount or a

withdrawal amount set in a financial plan and corresponding to the duration of the time interval, to obtain a further changed investment value; and calculating the change in the further changed investment value over a second

time interval based on changes over a randomly-selected second historical time interval to

obtain a further investment value, and repeating said steps of calculating, updating and again calculating with respect to a randomly-selected third historical time interval and a randomly-selected fourth historical

time interval, respectively.

Brief Description of the Figures.

Figures 1A, IB and 1C are a flow chart illustrating the steps in a method according to

the invention.

Figure 2 is a sample graphic representation of the result of a method of the invention.

Figure 3A and 3B are a sample chart of a result of a method of the invention.

Figure 4 is a sample chart showing another result of a method of the invention.

Figure 5 is a block diagram showing features of a system according to the invention. Figures 6A and 6B are a flow diagram showing a method according to the invention. Description of the Invention. PATENT DOCKET NO. D5009-00029

Referring to Figures 1 A - 1C, the method of the invention is illustrated in block diagram format. Generally, the initial step is to provide to a program sufficient information about the individual, the individual's current investments, planned future contributions, and planned withdrawals, to permit the method to ran. At step 102, the user is prompted to define personal information. The personal information preferably includes information important to financial planning. The basic information includes the individual's birth date, the individual's intended retirement age, and the end age for the plan. The information may also include, if the individual has a spouse, the spouse's birth date, the spouse's intended retirement age, and the end age of the spouse for the plan. The user may then be prompted to define one or more accounts, as shown at block

104. Preferably, these accounts are named by the user. The user is prompted to define the properties of each account as shown at block 106. The most important property of the account is the tax treatment of the account. For example, the gains on the account may be subject to current taxation. Alternatively, the gains on the account may be deferred until withdrawal. Pull-down menus may be provided to provide a selection from a variety of different types of investments, such as 401(k), 403(b), Individual Retirement Account, savings account, Education IRA, Roth IRA, investment real estate, and other investment types.

The user is prompted to provide opening balances of each account at block 108. For an effective financial plan, the opening balances preferably represent the actual present values of the accounts.

The user is prompted to furnish the planned annual contribution to each account, as shown at block 110. The program may provide for changes in planned annual contributions PATENT DOCKET NO. D5009-00029 to accounts at different time periods in the future, or selection of the start and end age of contributions for various accounts. A default may be a level contribution starting immediately and continuing until retirement.

The user is prompted to provide planned retirement distributions, as shown at block 112. This may be a desired retirement income level. The user may further refine by providing specific distributions from specific sources. For example, such sources might include a defined benefit retirement plan.

In a preferred embodiment, the user is then prompted to provide information on Social Security and other sources of retirement income, as shown in block 114. The user may select a desired retirement age. The program may then display annual social security benefits based on formulas or tables accessed by the program. Such formulas or tables have been constructed from publicly-available Social Security benefit information.

The user is prompted to enter additional withdrawal information at block 116. For example, a form may be provided to input the age of each child, what levels of education for the child will be paid by the individual, and the expected cost per year. The amount and time of the expected withdrawals from investments may then readily be calculated. Other anticipated large expenses may optionally be included.

The user is then prompted to enter allocations of assets by asset categories, as shown at block 120. The asset categories are preferably large categories, such as large capitalization stocks, small capitalization stocks and foreign investments, bonds, and

Treasury bills and cash. The selection of particular categories may be altered. The desired categories should be those as to which considerable historical data is available. It is preferred to assume essentially a passive investment, rather than looking at historical returns of PATENT DOCKET NO. D5009-00029 particular managed investments. Depending on the features desired, asset allocations may be selected separately for both currently taxable and tax deferred investments. A further feature that could be added would be changes in asset allocations at different times in the future. The user may also be prompted to input expected, optimistic, and pessimistic returns on investments.

The user may also be prompted to enter a number for investment expenses. If investment expenses are given a positive percentage, this would indicate investments that underperform the market historically. If investment expenses are given a positive percentage, this would indicate investments that outperform the market historically. The user is then prompted to enter tax information, as shown at block 122. This information preferably includes Federal income tax filing status, state of residence, and any local tax rates. The program may access tables to look up applicable Federal ordinary and capital gains income tax rates and state tax rates. Local tax rates may also optionally be entered. Tax rates may be entered from a look-up table separately for pre-retirement and retirement rates.

It will be understood that the order that the foregoing information is furnished may be changed without affecting the method. The information preferably includes as much information as possible relevant to the individual's projected cash flow into and out of investments and other retirement income. The option of selecting an assumed inflation rate may be provided. Different inflation rates may be used with respect to different investment categories. The option may be provided of furnishing results in inflation-adjusted dollars or actual dollars. PATENT DOCKET NO. D5009-00029

When all the desired information has been entered, the user is prompted to run the calculation. The program has stored a series of changes in values for each separate category

of assets for a selected number of time periods. The time periods may be, for example, years,

months, or shorter or longer periods as desired. The performance of the plan, will then be

determined assuming a large number of different starting points. Based on the input asset

allocations and the current holdings values, starting values for each asset allocation and each tax status are calculated, as shown by block 124. The program selects a time period, as

shown by block 125. The performance for the first selected time period is then calculated

based on the historical data, separately for each asset allocation and tax status, as shown by

block 126. The performance may be adjusted either before the calculation or after the calculation by the investment assumptions. For currently-taxable investments, any gain is adjusted by deducting appropriate amounts based on assumed tax rates, as shown by block

128. The gain is added to the value in each category, as shown by block 130. The

contribution at the end of the time period is then added to each category, based on asset

allocations and previously defined contribution amounts. Alternatively, if the year of the plan calls for a withdrawal, for retirement needs, education or otherwise, the appropriate

adjustment is made to the values. This is shown by block 132. This value is stored as an

ending value for the time period, as shown by block 134. The method then checks to see if

the final year for the plan has been reached, as shown by decision block 136. If not, the method returns to block 125, a new time period is selected, and the calculations are repeated, using historical data from the next year in the applicable table, and the contribution,

withdrawal, distribution and tax information from the next year in the plan. The method

repeats until the last year of the plan is reached. When the final year of the plan is reached, PATENT DOCKET NO. D5009-00029 the method checks to see if the total number of starting points is the final number of starting

points, as shown by decision block 138. If not, then the entire method repeats, using the same

opening balances as allocated, commencing from a different starting point. This is repeated

until the desired number has been completed. A possible minimum number is 32 different starting points. The calculation need not be performed for consecutive years. For example,

the number of years of the plan may exceed the number of years of historical data. In one

embodiment, each test is run from the start point consecutively until one-half of the time

period of the plan is reached, and then the calculation returns to the start point. Other

methods may be used if the number of plan years exceeds the historical data.

To determine the appropriate amount to be withdrawn, Social Security and other sources may be deducted from the desired annual retirement income amount.

For purposes of comparison to a standard calculation, the program that implements

the method can also calculate the returns based on a flat annual rate of return, without reference to historical data.

The method then provides the results in a display for the user. Preferably, only certain

results are selected for display. For example, the tests may be ranked by ending value. A

middle ending value, ranked at 50% probability, may be selected. An ending value

representing a result better than all but one percent of the results may be selected and labeled as having a 99% probability of success. The results may be displayed in tables or graphically

in a variety of formats. For example, the results may be displayed in a graph showing age

against value of investments. Sample results for fictional assumptions are shown graphically at Figure 2. Line 202 represents a standard result based on a steady annual increase in value. PATENT DOCKET NO. D5009-00029

Line 204 represents values based on a result worse than 99% of the starting points. Line 206

represents a result that is at the midpoint of the analyses that were run.

As shown in Figure 3 A and 3B, the results may also be displayed as a table. The table

may show the plan year, from the date the plan is ran, as shown at 302, the age of the

individual at the time of the plan, as shown at 304, and the ending value, as shown at 306.

Additional information, such as the cash flow into or out of investments, the yield on

investments in the year, the appreciation or depreciation in value of investments, and the taxes, may also be shown for each plan year.

The report may also include a detailed analysis listing the ending value and market

periods for each test that was run. A sample is shown as Figure 4. The tests are ranked in

order from highest ending value to lowest. Column 402 displays the probability of obtaining

at least the ending value listed. Column 404 displays the ending value of each test. Column 406 displays the years of the historical periods.

Other displays may include a display of cash flows into and out of investments,

showing contributions to investments, withdrawals, and retirement distributions, on a year- by-year basis.

The program and system may also provide the user, together with the results of the plan, the opportunity to adjust various variables to ascertain the change in historical results.

For example, an input may be provided to permit the user to change asset allocations,

retirement age, contribution amounts, distribution amounts, and amounts of other withdrawals.

The program may be made accessible to users at client computers connected on the World Wide Web to a server running the program. Web-based forms may prompt the user to PATENT DOCKET NO. D5009-00029 provide required and optional information. The results of the analysis may be displayed on the page. The results may also be presented as a report in a convenient format, such as

portable document format (pdf) for downloading to the client computer, or may be e-mailed

from the server to an address identified by the user at the client computer. This format is

advantageous in that the tables containing historical data can readily be supplemented, and

tables containing tax rate information can readily be updated. Also, a financial planner and a

client can share a report on a web server with suitable security.

Figure 5 illustrates a system according to the invention. Processor 505 is running in a

server computer. Processor 505 is connected to client computer system 510 via Internet 515.

As noted, the world wide web may be used for interchange of data. Processor 505 accesses program files 520 for instructions. Program files 520 are stored on a suitable storage

medium, such as a hard drive, CD-ROM or other storage medium. Processor 505 accesses

general files 525, which contain, non-exclusively, as shown by block 530, historical

performance data, by time period, for different categories of investments, tax data, and Social

Security data. Processor 505 may also access client files 535, which contain, as shown by

block 540, non-exclusively, investment values, asset allocations, contributions, withdrawals,

age and retirement age. Processor 505 causes the data in block 540 to be updated and

changed based on data received from client system 510 in accordance with instructions

contained in program files 520.

The use of the method, system and program of the invention is not limited to running on a web server. Copies of the program may be distributed on physical media or by electronic transmission. PATENT DOCKET NO. D5009-00029

In testing this method, the inventor has observed tremendous differences between the

present invention and prior art tools, depending on the individual's pattern of contributions

and withdrawals and the resulting periodic balances of their investments.

The result may be expressed as the percentage of outcomes for which the desired

financial goal is actually achieved. That financial goal can be, for example, a certain amount

of wealth by a certain date, or a desired stream of withdrawals. The probability of success

may be expressed a percentage. The inventor believes that the analysis of a financial plan using the method of the invention will, notwithstanding the annualized rate of return, advise

the individual investor as to the likelihood of achieving his objectives.

The method of the invention gives the investor the distribution the results of any

financial plan based on historical market outcomes. Probabilities of obtaining certain

outcomes can be derived from the distribution. Some financial plans, subjected to this analysis, will show that the investor would have run out of money before the plan indicated that. This permits the investor to know, for example, that the investor has a one-in-ten chance

of failing to meet his objective. Based on this information, an investor may choose to adjust

the financial plan to provide for less risk.

Unlike prior art analyses, the results of the method of the invention are is unique to the asset allocation, planned contributions and withdrawals, beginning wealth, and risk tolerances of each user. For example, for one investor, lowering the small capital

stock/foreign allocation may increase the likelihood of running out of money. For another

investor, increasing the small capital stock/foreign allocation may increase the likelihood of running out of money. PATENT DOCKET NO. D5009-00029

The software may be enhanced to include a mechanism for the investor to prioritize

their financial outcomes. For example, an investor may have a goal of having a certain

probability of having $10 million at age 85. The investor may prefer to retire at 65, but

would be willing to retire as late as 70. The same investor may be able to save up to $40,000

per year, but may strongly prefer not to save more than $20,000 per year. By weighting the

variables, the investor can then have the program ran a series of scenarios. This will then

provide the investor with a number of different options that meet the criteria.

Another extension of this method is, instead of splitting the length of the plan to repeat historical periods, taking actual historical returns and randomly selecting from those

actual results to create a large universe of randomly ordered historical returns. This would

solve the problem of sampling period due to the amount of historical data that is available.

For example, a database of historical data may contain data covering 70 years. Under historical audit methodology, the method of the invention may be used to ran 30 back tests for a 40 year

plan. Splitting the plan period into two 20 year period and re-ranning each half of a plan over

identical market periods would create 60 back tests. Of course, one could run each half of the

plan over all the periods which would create a multiplicative effect where each half of a plan is run from the 50 potential 20 year periods (rolling monthly or quarterly data could also be

used if available to expand the number of samples as well) creating 50 market periods

combined with each half plan 50 times, for 2500 samples.

By using a modified Monte Carlo or wealth simulator method, one may create a randomly ordered universe of actual historical returns that simulates having 100, 1000, 10,000 etc. years worth of market data. The actual historical returns are randomly selected to PATENT DOCKET NO. D5009-00029 simulate having much more historical data. In this way, one could use the rolling period methodology of running through rolling periods, or, since one could create such a large

universe of randomly ordered actual market returns, that each period is totally unique.

Referring to Fig. 6A - 6B, there is shown a process flow diagram for a computer

program according to the invention using the method of a modified Monte Carlo for

increasing the possible historical returns. As indicated by step 605, the plan assumptions are set. These assumptions indicate the selection of the initial asset amount, allocation of assets

among various types of securities and types of accounts, tax information, and other

information. The change in the initial asset amount is then calculated for a randomly-selected first historical period, as indicated by block 610. The length of the historical period may be a

year, or other period. As indicated by block 615, any changes in amounts as a result of

predetermined contributions or withdrawals, as well as other factors, such as tax effects, are

made. These changes result in obtaining a further changed asset amount. The further

changed asset amount is then adjusted by the historical performance of a second randomly

selected historical period, as indicated by block 620. This second randomly selected historical period is preferably selected independently of the selection of the first historical

period. An asset amount is then obtained from the result of this calculation. The asset amount

is adjusted for contribution amounts, withdrawal amounts, and any other appropriate factors,

as indicated by block 625. The process is repeated, using randomly-selected historical periods, through the entire period of the financial plan, as indicated by block 630. The final

value, the interim values, and the historical periods selected, are stored in a suitable location

in a storage medium. The process is then repeated, commencing with the initial investment amount, using a new set of randomly-selected historical periods, as indicated by block 635. PATENT DOCKET NO. D5009-00029

The process may be repeated for a very large number of iterations, as a very large number of

different orders of randomly-selected historical periods may be obtained even for a relatively

small number, such as 50 to 70, historical periods. The results may be presented as a report

to a financial planner or individual, as indicated by block 640. Various tools may be employed to format the results. Analyses may be conducted on the results and included in the

report. For example, tools may be provided to create and include in the report comparisons of

results using different randomly-selected sets of historical periods to financial goals of the

investor. These financial goals may include having a certain amount of money at the end of the financial plan, being able to make withdrawals at certain amounts in the future, and other

goals.

It will be appreciated that the term "randomly" for the selection of historical periods

may use any suitable technique for randomly, or pseudo-randomly, selecting individual items

from a set of items, and need not be strictly random. The selection may take place during

processing, or may be accomplished before analysis, stored in a suitable file, and accessed at the time of calculation.

Information for all these methods could also be displayed to the user as the percentage

of market periods (whether randomly ordered with or without rolling periods, historical back

test, or historical back test with splits) as the percentage of periods that exceeded a wealth target goal, the percentage of tests that the investor would have run out of money (including

the age the investor would have ran out of money) and the percentage of the tests falling short

of the target wealth goal but not having failed. All of these methods could also be combined with the probability of the investor living the length of the plan or out living the length of the plan, thereby further increasing the sampling by running the length of plan instead of a PATENT DOCKET NO. D5009-00029 target age, but instead setting the plan length based on the sampling distribution on numerous

plan lengths based on the probability distribution of how long the investor, their spouse, or

their combined lifetimes would be.

The method of the invention may be used dynamically by investors for guidance in

making investment and purchase decisions. For example, an investor may find that, by

foregoing, a purchase, he may retire earlier, or increase his likelihood of achieving his savings goal at retirement, by not making the contemplated purchase. An investor contemplating an

investment may find that, depending on the category of investment, she may either increase or

decrease her likelihood of achieving her financial goals.

The planning software of the invention, including the historical data on which the

calculations are based, can be made available to the investor to update based on the actual current data on the value of investments. Data could be transferred automatically from financial services providers to client files on a server so that the updates could be

accomplished without requiring the data to be input by the investor.

The processor may be an Intel Pentium or similar microprocessor. The method can

be implemented in custom software, or in spreadsheet software such as Excel. The computer program with commands that cause a computer to execute the method can be stored on any

storage medium that now exists or may be developed in the future, including fixed disk drive,

floppy discs, and CD-ROM. The computer program may also be transmitted as a digital

signal over telephone lines, other transmission lines, or via radio waves. The signal may be transmitted in packets over a packet-switched network, such as the Internet.

The computer program in accordance with the invention may be stored and distributed in any suitable storage medium, such as fixed disk, portable diskettes, and CD-ROM or other PATENT DOCKET NO. D5009-00029 read-only memories. Also, methods described as being carried out in software ranning on general-purpose computer hardware may be implemented in hardware.

It will be understood that various changes in the details, materials and arrangements of the methods and systems which have been described and illustrated above in order to explain the nature of this invention may be made by those skilled in the art without departing from the principle and spirit of the invention.

Claims

PATENT DOCKET NO. D5009-00029What is claimed is:

1. A method for evaluating a financial plan including predetermined initial values of

investments and one or more contribution or withdrawal amounts corresponding to selected

times after the commencement of the financial plan, comprising the steps of: calculating the change in a predetermined initial value of an investment over a

to obtain a changed investment value; updating the changed investment value based on a selected contribution or withdrawal amount corresponding to the length of the time interval in accordance with the

financial plan to obtain a further changed investment value; and

calculating the change in the further changed investment value over a second

time interval based on changes over a second historical time interval, said second historical time interval being randomly-selected independent of said first historical time interval, to obtain a second changed investment value, and

repeating said steps of calculating, updating and again calculating with respect

to a third historical time interval and a fourth historical time interval, respectively, said third

historical time interval and said fourth historical time interval being selected randomly.

2. The method of claim 1, further comprising the step of presenting the result of

said steps to an individual.

3. The method of claim 1, wherein said investments are categorized in more than

one asset category, and distinct historical data is employed in calculations for each of said asset categories. PATENT DOCKET NO. D5009-00029

4. The method of claim 1, wherein the results of said calculation are compared to a selected financial goal.

5. The method of claim 1, wherein, after each calculation relative to historical

data, an adjustment of the investment value to simulate tax effects is made.

6. The method of claim 1 , further comprising the step of prompting a user to

enter the intial investment value, and allocations to asset categories.

7. The method of claim 1, wherein the steps of calculating results over a first historical interval are repeated for at least twenty randomly-selected historical intervals.

8. A system for evaluating financial plans including predetermined initial values

of investments and one or more contribution or withdrawal amounts corresponding to

selected times after the commencement of the financial plans, comprising: means for calculating the change in a predetermined initial value of an

investment over a time interval based on changes in value over a randomly-selected first historical time interval to obtain a changed investment value;

means for updating the changed investment value in accordance with contribution or withdrawal amounts from based on said selected amount and time to obtain a further changed investment value;

means for calculating the change in the further changed investment value over

a second time interval based on changes over a randomly-selected second historical time

interval to obtain a further investment value, and

means for further calculating, updating and again calculating with respect to a third historical time interval and a fourth historical time interval, respectively; and PATENT DOCKET NO. D5009-00029 means for after at least one of the calculations, adjusting the investment value based on at least one of a contribution amount and a withdrawal amount.

9. The system of claim 8, further comprising means for presenting the result of

said steps to an individual.

10. The system of claim 8, further comprising means for categorizing said

investments in more than one asset category, and for employing distinct historical data in

calculations for each of said asset categories.

11. The system of claim 8, further comprising means for comparing the results of

said calculation to a selected financial goal.

12. The system of claim 8, further comprising means for, after each calculation relative to historical data, adjusting the investment value to simulate tax effects.

13. The system of claim 7, further comprising means for prompting a user to enter

the intial investment value, and allocations to asset categories.

14. A storage medium having stored therein a plurality of instructions, wherein the plurality of instractions, when executed by a processor, cause the processor to perform the

steps of:

calculating the change in a predetermined initial value of an investment over a time interval based on changes in value over a randomly-selected first historical time interval to obtain a changed investment value;

updating the changed investment value based on one or more contribution or

withdrawal amounts set forth in a financial plan corresponding to selected times after the commencement of the financial plan to obtain a further changed investment value; and PATENT DOCKET NO. D5009-00029 calculating the change in the further changed investment value over a second

obtain a further investment value, and repeating said steps of calculating, updating and again calculating with respect

to a randomly-selected third historical time interval and a randomly-selected fourth historical

time interval, respectively.

15. The storage medium of claim 14, wherein the plurality of instructions, when

executed by a processor, cause the processor to perform the further step of presenting the

result of said steps to an individual.

16. The storage medium of claim 14, wherein the plurality of instructions, when

executed by a processor, cause the processor to perform the further step of, for investments

categorized in more than one asset category, employing distinct historical data is employed in

calculations for each of said asset categories.

17. The storage medium of claim 14, wherein the plurality of instructions, when

executed by a processor, cause the processor to perform the further step of comparing the

results of said calculation to a selected financial goal.

18. The storage medium of claim 14, wherein the plurality of instructions, when executed by a processor, cause the processor to perform the further step of, after each

calculation relative to historical data, adjusting the investment value to simulate tax effects.

19. The storage medium of claim 14, wherein the plurality of instructions, when

executed by a processor, cause the processor to perform the further step of prompting a user to enter the intial investment value, and allocations to asset categories.