Why is my Suggested spending very low now, and very high later?

ESPlannerPro is telling me that our living standard per adult now (I am 56, my wife is 62) should be about $29,000 per year. When we are both retired, the recommendation is for over $72,000 per year. This make no sense to me. I thought that the whole purpose of this program is to smooth out our lifestyles.
Here are the numbers:

2014 57 62 46,325 21,754 0 0 28,953
2015 58 63 46,325 19,359 0 0 28,953
2016 59 64 46,325 16,897 0 0 28,953
2017 60 65 46,325 13,407 0 0 28,953
2018 61 66 46,325 10,844 0 0 28,953
2019 62 67 46,325 (80,894) 0 0 28,953
2020 63 68 46,325 (12,752) 0 0 28,953
2021 64 69 46,325 (12,820) 0 0 28,953
2022 65 70 80,781 0 0 0 50,488
2023 66 71 83,853 0 0 0 52,408
2024 67 72 90,966 0 0 0 56,854
2025 68 73 93,216 52 0 0 58,260
2026 69 74 93,216 (52) 0 0 58,260
2027 70 75 99,004 0 0 0 61,877
2028 71 76 115,560 1,176 0 0 72,225
2029 72 77 115,560 1,059 0 0 72,225
2030 73 78 115,560 938 0 0 72,225
2031 74 79 115,560 814 0 0 72,225
2032 75 80 115,560 687 0 0 72,225
2033 76 81 115,560 557 0 0 72,225
2034 77 82 115,560 415 0 0 72,225
2035 78 83 115,560 277 0 0 72,225
2036 79 84 115,560 135 0 0 72,225
2037 80 85 115,560 (10) 0 0 72,225
2038 81 86 115,560 (159) 0 0 72,225
2039 82 87 115,560 (312) 0 0 72,225
2040 83 88 115,560 (469) 0 0 72,225

Comments

dan royer's picture

Yes, that's quite a jump. I'd have to see your database to know what's going on for sure, but there are circumstances (not that uncommon) where one is "borrowing constrained" or "liquidity constrained." This means that there is some money in the future that one can't take advantage of now (unless you tell the program that you are willing to borrow--which is generally not a good idea).

I'm guessing that based on the dates I see that it has to do with Social Security kicking in at the age of 70. At least that might explain a lot of it. It's also possible that you are not starting retirement withdraws until age 70 for you and the spouse. But lots of things are possible as well that I'd just have to see to explain. For example, perhaps you have a special receipt like an inheritance scheduled for later.

Normally, the program looks to use "Regular Assets" to smooth this consumption. But perhaps you have few or zero regular assets for this purpose. (see assets and savings folder).

There are many different possible workarounds, but I'd have to see the database to say. If you remain stuck on this one, create a support ticket and upload your database and I'll take a quick look.

dan royer's picture

Another thing I see sometimes is that a user is "saving too much." In other words, if you take too much of your current, available discretionary spending (living standard) and save it for age 65 or age 70, and if you don't have enough regular assets to cover, then of course your going to have too little to spend now and too much to spend later! That's another cause of liquidity constraint.

Dan@MHealy, assuming Dan Royer is correct about your delaying Social Security until 70, try adding special withdrawals between retirement and when SS kicks in. To get a starting point, look at your retirement account withdrawals in the detail reports. Then add special withdrawals starting when you retire, of about 10% higher. That's just a guess.

Be aware that special withdrawals are replacements for smooth withdrawals, not supplements. If the first attempt doesn't fix it, do the same thing a few times, increasing the amount of special withdrawals in steps.

You can also add a debt allowance (try $10K), then look at the regular assets report. Where it's negative, you're cash constrained. Increase your special withdrawals in the years before that, until regular assets are positive. It needn't be much, just not negative.

Dan Royer has some videos somewhere on the site that illustrate that process. That's where I first learned about it.

Chris
A relatively new user.