Model retirement spending less than 'smoothed consumption'
Submitted by pms_kjs on Fri, 10/02/2020 - 14:09
I want to understand the effect of spending less than the esplanner 'smoothed consumption' amount. For example, say my smoothed consumption number is 100,000, but I only have expenses of 70,000 - what is the impact? What is the best way to see this? I suppose I could enter a special receipt every year for the difference - is this right, or is there some more elegant way to proceed?
thanks
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dan royer
Fri, 10/02/2020 - 15:28
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Sure, so you want to see the
Sure, so you want to see the effect or impact on what? I assume you must mean: how much would I leave on the table at the end of the model unspent? To figure that out, create a bequest to represent what's left on the table and this will cause your consumption to drop from 100K down to 70K. Of course it will take a little trial and error to get it exactly at 70K. But essentially you are asking how much you can leave unspent. So that's teh way to do that.
Not wanting to use MaxiFi Planner?
Dan
pms_kjs
Sat, 10/03/2020 - 04:52
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thanks. I think I can work
thanks. I think I can work with that. Its a little backwards of how I think about my finances, but should yield the answer.
I considered maxifi planner, but this seems like a cheaper alternative. Assuming I don't need updates, I can use it for at least a few years for one renewal fee. Actually, I only needed to renew to ask this question as I'm taking another look at my finances now.
thanks for your help
pms_kjs
Sat, 10/03/2020 - 06:04
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Sorry for this follow up
Sorry for this follow up question. Applying a bequest doesn't actually work as it then adds $250K insurance premiums into the mix pretty late in life. I suppose I can just edit the premiums out of the excel spreadsheets & manually adjust the totals. My other idea is to leave the bequest idea out of it, and just extract the difference in reduced spending into a separate column on the resultant spreadsheet, and treat this outside of esplanner. I'm kind of leaning towards this second option.
Please let me know if you have any better ideas.
thanks
ken
dan royer
Sat, 10/03/2020 - 10:15
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Yes, ESPlanner/MaxiFi always
Yes, ESPlanner/MaxiFi always solves for the highest level of safe, smooth, annual spending. The annual discretionary spending is the "answer" provided to every questions: it's never itself an adjustable variable because, as I said, it leaves open the question: and where do you want the excess to go? It won't just pretend that money disappeared.
I forgot that ESPlanner does not allow you to shut off life insurance calculations. This is one of the many advantages in MaxiFi. So, instead of bequest, try creating a special expense of some large amount in the final year of the model to represent giving away the excess and this will, I believe, lower your annual discretionary spending.
Note the active development going on in MaxiFi: https://maxifiplanner.com/release-notes
When you don't update ESPlanner, you miss out on SS updates, fed and state tax updates, etc. Doesn't seem worth it to me. If you want me to start up a MaxiFi 30-day preview for you I can. I could also switch over your recent purchase to MaxiFi.
Dan