Annual Suggested Consumption Is Absurdly High. What did I do wrong?

Hi -- I just purchased ESPlanner yesterday, so today is my first day working it. In my first run, I used the Conventional Planning method, specifying the discretionary retirement spend to start in 2017, on the assumption that I retire at the end of 2016 and my wife retires at the end of March 2017. As the attached screen shot indicates, I got a very odd result for the years 2015 and 2016, namely that we should aim to spend over $1.4million each year, before settling down to our target expenditure of 'a mere' $180K per year. In the pdf report on p.37, suggestions for 2015 are as follows:
Discretionary spending = $1,413,112
Saving = $1,151,216

Clearly I did something very wrong when entering our data in the program, but I can't figure out what. Where did I go wrong?

Best regards,



dan royer's picture

Hi David, and welcome.

The conventional planning mode is not really the place to begin I guess. It has several uses perhaps, but one of them seems to be to show the folly of conventional planning. If you set your own target and get it wrong, then something has gotta give somewhere--because the program is going to spend all your available resources one way or another (including any Estate planning or special expenditures, etc.) So in your case, you set the target too low and the program is, in the short time it has prior to retirement, spending that money down so you an meet your target in retirement.

I know that seems kind of silly--but I guess the response is from the program, "this target doesn't work well; if you are going to spend so little later, I'm going to spend more now."

The place to begin is in economics mode. Let the program show you the smoothest sustainable discretionary spending (in Excel it's labeled as "consumption") pattern and its equivalent "living standard per adult." It's going to be higher than 180K I presume because of the snippet I see above.

So run it in economics mode--don't get bogged down in Monte Carlo mode--and return here with your questions.

Hi Dan,

Thanks for the quick reply. As it turns out, after I 'played' with ESPlanner a bit more, I kinda, sorta figured out what was going on, and as you say turned to the economics-planning mode. The first time I ran in that mode, the program spent down all our resources, which is what I believe the program is supposed to do. However, I feel uncomfortable doing that, so I specified what I will call a terminal amount (i.e., bequest) made by wife, who would be expected to outlive me, to ensure that there is a buffer or contingency. Does that make sense? And, in any event, we still 'get' to spend what seems like an outrageous sum of money each year in our retirement.

I am using the pdf reports right now, and the discretionary spending is what I am looking at. However, it seems odd that the discretionary spending is not twice the living standard per adult (we have no children or other dependents). Why is that?

Another thing that strikes me as a bit odd is that the program specifies the same level of spending for this year and 2016, when we will still be employed full-time, as for the out years. I know that I could change the standard of living to be less than 100% for our retirement years, but to be honest I have no good idea of how much less we would spend in retirement. Or maybe I should just be 'happy' that ESPlanner is telling me we can 'safely' plan to spend more in retirement than I would have expected.



Consider establishing a reserve fund?

dan royer's picture

Yes, there are several ways to keep yourself from spending down everything. In the retirement assets area notice that there's a setting to indicate what percent of the available assets will be spent for both husband and wife. It defaults to 100% but you could set it to 90% to create a buffer for example. And you can also use the estate area to model leaving money at the death of one or the other outside the family economy. But remember, that might also create an insurance need since that amount is assumed to be needed even if she (in this case) were to die next year. That money would not be assumed to be coming to you since it's an estate.

Some people create an end-of-life special expenditure.

The assumption (see assumptions) is that two live as cheaply as 1.6. So per-adult living standard times 1.6 should equal discretionary spending. But if there are children, then it's more complicated.

The default assumption is that you want to have the same living standard. I personally agree with this since I assume one kind of expense just gets substituted for another kind of expense as we age. But you can roll it down or up using the standard of living index in assumptions. I leave it at 100% all the way down.

Some people are short on regular assets and don't like seeing them all spent down in the short- or near-term. That may not be you, but if so, you'd see that running balance in the regular assets report.

There's pretty much ways to deal with everything; you just gotta fiddle with things and figure out where all the levers are.

Hi Dan,

I thought I would tag further questions onto my original questions and your replies.

As I mentioned previously, I want to create a buffer to prevent spending down all our assets. My initial approach was to create a special bequest in my wife's estate, on the assumption that she will outlive me. Then, following a comment you made, I have also tried a special expenditure for the maximum year of life for my wife. I noticed two things:

> the bequest apparently triggers substantial life insurance expenditure during the last few years of life

> the special expenditure eliminated the life insurance expenditure at the end of life, but in its place ESPlanner is not recommending massive dissaving in 2016, which is the last year before we both retire

Neither outcome is realistic. Any other thoughts about ways to build in a buffer so that there is still a non-trivial amount of (buffer) assets planned to be available at the end of my wife's life?

The easiest way is to adjust the Standard of Living in the Assumptions tab. I describe a process for this in the comment to the link below describing a "safety factor" approach:

Most other options such as special expenditures or bequests can cause issues such as those you are seeing. This approach causes the program to reduce consumption until near end of life (or never if you decide not to spend it) which provides your cushion. It's very flexible to adjust to fit your specific needs.


dan royer's picture

And also just don't spend all your retirement assets:

In the retirement assets area notice that there's a setting to indicate what percent of the available assets will be spent for both husband and wife. It defaults to 100% but you could set it to 90% to create a buffer for example.

That will leave money unspent (along with the value of your home).

Hi Dan and Brian,

I tried Dan's suggestion first as it seemed to be the easiest to implement. Unfortunately, taking the % of regular assets spent down from 100% to 50% had an almost invisible impact on annual consumption (aka living standard) and estate at the end. So I'm going to try the safety factor approach, but I have a question. In the linked post, Brian indicates to duplicate my profile. Question -- How do I duplicate the profile?

Thanks, and regards,


Hi David,

I think I've tried every variable/approach to do what you are looking to do. From my experience, this approach is the cleanest and most effective, without many of the "side effects" of other approaches.

You can set only the last year of life for you or your spouse (very high) or the last few years of life (somewhat high) through the standard of living index.

In any case, it will force the program to spend less than the maximum recommendations and reserve assets for end of life for whatever purpose you choose. The program still shows these being spent by end of life, but if you see an extra $500K (or whatever your cushion turns out to be) being spent at ages 98-100 (for example), you know that is your "extra" money for your "buffer".

As you can see, there are multiple ways to do most things in ESPlanner so definitely experiment to see what works best for you along with making use of the forum.

Also, just in case you missed it, Chris answered your direct question about copying profiles below.



It looks like your approach will do the trick. Thanks for the suggestion.


David, to duplicate the profile, highlight the profile and click Save as at the top menu, or right-click and select Save As.

dan royer's picture

David, it could be that spending only 50% of your retirement assets (not regular assets as you wrote) is still too much. What happens if you spend 0% of your retirement assets for both husband and wife? It's hard to guess at all the variables in your database. If the standard of living is largely generated from pensions or regular assets instead of retirement assets, then of course it's not going to have much impact. But modeling a very high living standard in the last five years of life or whatever as Brian suggests may do what you want.

Dan, just to be sure I am doing what you are suggesting, on the Retirement Accounts folder, there is a tab for smooth withdrawals, which is where I am adjusting the % of non-annuitized assets to be spent. Is this what you are suggesting that I do? If so, even going to 0% has little impact on consumption (as it is called in the Excel output) and terminal net worth. Also, at the moment we are assuming no assets will be annuitized.

dan royer's picture

If you set that to 0%, it's only going to do required minimum withdrawals. But if that's not a big part of what's supporting your living standard, it might have minimal impact. For example, perhaps your consumption is supported mainly by SS and Pensions, not by retirement accounts--and RMD is not nothing, so it's still withdrawing. That said, it should lower consumption and you should see in Details that some retirement money is left on the table at the end.

So I think you are getting it.

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