Maximizing Discretionary Spending over a Lifetime

I did a "maximize" on my base profile in Maxifi (I'm sure something similar would be the case in ESPlanner) and the net result was that it shifted a large amount of discretionary spending from pre-retirement to post-retirement. Much of it so late (80+ years old) that I wondered whether I'd actually be able to make use of it. It was more total discretionary spending over a lifetime, but spent much later in life, at a time when I might not be able to enjoy it or might not even be living.

It was unclear to me that that was "better". Which makes me wonder:

- How might you adjust for this sort of risk in doing planning and what if scenarios?
- How is Maxifi discounting discretionary spending/income/etc. from future back to present? Is it just using inflation as the discount rate, or is there something more sophisticated? What discount rate is it using and is it "risk-adjusted" in any way?


dan royer's picture

Well, if this is MaxiFi, it's better to ask the question in a support ticket over there so I can look things up or view your profile if necessary. The issue you are describing sounds like "liquidity constraint" where the overall lifetime spending is higher, but it's pushed toward the end. I often run those maximization things with the limit to change in living standard at 0.