Discretionary Spend Evaluation

I previously asked a question on how to drive discretionary funds to my end of plan. In my case, I have accounted for projected annual spend within the housing entries or Special Expenditures (SE) area.
My goal:
- define funds I can save for other purposes outside of routine annual spend and project the aggregate amount.

My assumptions are:
- SE are post tax. Please confirm.
- In the modeling, its assumed the SE are consumed each year and not carried forward into future years. Please confirm.
Potential Solutions
- It was suggested to enter SE near end of term to drive targeted funds to end of plan. This generally worked but required numerous attempts to adjust Estate standard of living adjustments in order to control life insurance spend and still left relatively high annual SE funds during the middle years.
- I also tried adjusting smoothing withdrawals and adjusting the Assumptions standard of living entries which resulted in similar additional life insurance adjustments ot drove a high spend to current year.
- Assuming my perspective is correct in the assumptions above, I'm thinking that I could leave projected spend in the SE section and then create a new file (either ESP or a spreadsheet) where I enter the ESP projected discretionary funds and essentially create a projected savings plan with after tax dollars which could grow over time at some assumed interest rate. I could revisit the plan annually and update based on whether I actually did or didn't use the discretionary funds during the previous year. Does this seem like a practical solution?

Thanks again


Dan Royer's picture

You could use the Reserve Fund to sequester funds for later use. The user interface there is a little confusing at first, but it makes sense after you realize how it works.

It seems that you want lower discretionary spending now and higher later. Or you just want to give money away at the end of life presuming it is still there. If the former, have you just tried using the standard of living index and pushing up SOL for the last decade or so? Say put current years at 80% or something maybe? You could experiment with that.

You can also give funds away through Special Expenditures in any given year and when you set that up you can indicate whether its tax deductible or not. These funds are, yes, post tax since they come from your regular assets area.

If life insurance recommendations are high, I'd not ignore them of course unless you are not concerned about the survivor's living standard or have term life already that someone else pays for?

Anyway, yes, if you indicate a Special Expenditure for a given year, it's assumed that they money is spent on that special expense in that year. That's how those work.

If you want to enter a series of special expenditures for a period of years, that's fairly easy to set up.

ESPlanner is not an annual accounting tool--it's more like a lifetime accounting tool. So if you don't spend your specified discretionary spending it means that your regular assets will be higher in the next year when you readjust your data (update end-of-year balances in retirement assets and regular assets). I believe your best approach is still to experiment with the standard of living index--make it lower in the near term and higher in the far term. If this causes insurance needs, you can ignore them if they are small amounts or you can offset them with special receipts (to reimburse yourself for these premiums if they are more than you actually pay, though that might be tedious) or you can adjust these away with the estate survivor living standard function.

Your problem sounds like you have more discretionary spending than you intend to use. Knowing this you can push it toward the end if you think you might spend it later, or you can just rest assured knowing that you won't spend it all and that as a consequence you'll see it go up every year as you adjust up your regular assets balance at the end of each year. You can enter future special expenditures if you prefer to give it away or spend it.

Hi Dan,

The following is from another thread, but is relevant here...

Spending less than ESPlanner’s recommendations can be easily modeled using a “safety factor” approach based on the “Standard of Living” (SOL) index in the Assumptions tab. To do this, create a copy of your profile and set your last few years to a high SOL. This forces the program to reduce consumption in earlier years and preserves assets for late in life. Essentially, you are shifting potential consumption to the end of your life (or the life of your spouse). This can be used to create a margin of safety, gifts or bequest, as a resource for late in life healthcare and/or long-term care or other reasons.

The beauty of this approach is that it preserves all of the year by year taxes, spending, asset levels, etc. that are part of ESPlanner’s calculations and reports so you do not have to guesstimate them with side calculations. This can also be used to create different safety factors ($ or %) at different points in time.

The approach is very flexible and only takes a few minutes to fine tune. For example, say you want to spend 10% less than ESPlanner’s “ceiling” for the next 2 years, then 5% less until end of life. To do this, keep the Standard of Living at 100 for 2 years, then raise it slightly to say 110 for several years, then raise the SOL again to 200 or higher during the last few years of life. The exact numbers will vary depending on your specific profile, but this should get you in the right neighborhood. Each year, you can adjust the safety factor again as you wish.

I've tried every method listed on the forum for the past ~7 years along with others that I've thought of and this is my preferred option.


Thank you Dan and Brian. I had seen the previous thread and tested various scenarios with mixed results. I will continue to understand the SOL adjusting approach.

Thanks both for your suggestions

Dan Royer's picture

Thanks Brian.