Not understanding Reserve

I don't understand how to use the reserve tab. I want to contribute a set amount of money annually to a reserve fund for a period of ten years. I want the money off limits until the end of the ten years. How do I use the input controls to accomplish this?


The user interface is odd for the reserve fund. Here's what I'd do:

1. Enter your expected nominal rate of return (RoR). For example, if the money will be in savings, you'll make almost nothing so may as well enter 0% RoR.
2. Since you're starting with $0 in the reserve fund, leave step 2 blank or enter $0.
3. Click on 2015 (in the table), then enter your contribution amount (say $1,000).
4. Click on 2016, then enter $1,000 again.
5. Repeat for 10 years.

Unless your RoR is equal to your inflation rate, the math will be off a bit because of real/nominal conversions which ESPlanner will automatically calculate. This may lead you to make some minor adjustments in your annual amounts, but should get you in the neighborhood.


dan royer's picture

I agree with Brian that the Reserve fund is odd. What's odd about it is that it doesn't function the way you are thinking--or quite the way even Brian describes. It doesn't allow you to enter how much you will contribute each year as you are hoping or as we might normally think. Instead, it asks you to enter what you want your balance to be in a given year.

So I think what you want to do is much like what Brian describes, but instead of entering $1000 each year (that will simply hold your balance at $1000 year after year and ask for contributions (or withdrawals) that will hold it steady at that amount given your rate of return and inflation.

But when I think you want to do instead is say something like the following: I want $1000 at the end of 2015, $2000 at the end of 2016, $3000 at the end of 2017, etc. You enter those as dollars valued in those future denominations. Then the grid will show you how much you'll have to contribute each year to have $3000 in today's dollars at the end of three years for example. See the screen shot.

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Thanks Dan. I did exactly as you describe, then goofed in my explanation. Reserve fund is the least user friendly section of ESPlanner.


Thanks Dan and Brian. I initially Entered the same value and realized that the reserve was not growing. So I then went in and doubled the balance each of the years.

At the end of the ten years, with no subsequent contributions, how does ESPlanner start to make use of the reserve? It appears, in the graphic example, that the year after the final reserve contribution there is a negative contribution.

The funds go into "regular" assets. Take a look at the reports (regular assets or net worth) and you should see the change. The negative contribution is book keeping to bring the reserve fund back to $0.


dan royer's picture

Yes, as Brian says, they are given back to regular assets. Once you accept the weirdness of saying what you want your balance to be relative to 2015 dollars, things sort of fall into place. If you resist, as I did for years, wanting instead to think of it as depositing so much per year, you'll be frustrated by the way it works.

If you think of it as "how much do I need to have on reserve?" rather than "how much to I want to put into reserve?" it's a little easier to grasp.

Dredging up this old thread to clarify something - where the reserve fund starts with "Value at the end of last year", how does that relate to the Regular Assets tab in the Assets and Savings folder?

I keep my reserve in a money market fund. Do I include it as part of the MMF balance on the regular assets tab? Or do I reduce my actual MMF account balance by the amount I want to keep as reserve fund, before recording it on the regular assets tab?


Never mind. Figured this out by comparing different values in the reports. The reserve is in addition to regular assets.

My mistake. Now I need to work long enough to make up for having double-counted it. Not a huge deal but it adds a few months to my working life.

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