Why does the ESPlanner show negative savings?


I am confused as to why ESPlanner shows negative savings under the Annual Suggestions. I don't need it for the income, there is enough of that.
In the attached image the software recommends I unsave for several years and then in the last year before retirement it suggests I borrow ~$63000. Am I missing something?


The regular assets page of the suggestions section may be revealing. If, in any year, the balance of regular assets hits 0, ESP can't smooth your living standard. Until circumstances change in future years to permit regular assets to become non-zero, other events don't always conform to your expectations.

The total spending page may also be informative. Look at columns other than discretionary spending to find sources of outflow that require the savings withdrawals you observe.

Income also matters. Does it fluctuate around that time?

Without more data it would be hard to speculate much further.

(a user)

I missed the detail about "in the last year before retirement". Look at key ages. Note that those settings seem to determine the calendar year in which contributions stop and withdrawals start, and assume it happens for the entire year. You may have set appropriately for your plans, but it might be worth double-checking.

It's not necessarily saying you need to borrow. It could be spending down "regular" (taxable) assets in that specific year is needed to achieve a smooth living standard per adult. This is more likely unless you have set a maximum indebtedness value under the assumptions tab.

For example, let's say you have $1M dollars in savings/taxable assets such as mutual funds. In this case, the program may have you spend down different amounts of these funds each year prior to starting your Social Security, down sizing a house, paying off your mortgage, having a large special expenditure (e.g. wedding, car, college), kids move out of the house, have a new baby, tax-sheltered withdrawals start, contributing more/less to tax-sheltered assets, retiring or some other event. Since we can't see your specific profile, it's just a guess, but you may have something along these lines, perhaps in addition to retirement.

In any case, the program tries to produce a path towards a smooth living standard per adult, subject to your specific assets and constraints. By adjusting different fields, it is possible to raise and/or smooth your results which may be of interest. In the graphic you posted, there is a large swing in living standard per adult. I'd suggest taking a close look at how you can adjust your inputs (e.g. when to take SS, amount to save in tax-sheltered assets, many others) to see if you can make your living standard in retirement closer to it is when you are working.


dan royer's picture

Yes, the negative saving is just withdrawals from your regular assets needed to smooth discretionary spending. I'm puzzled by the discretionary spending pattern which shows odd discretionary spending in 2021. It could be you changed something in the standard of living settings (see assumptions). That's my guess since after that it goes down. So it could be that you are trying to live too far below your means and ESPLanner is pushing a lot of money into 2021. If you don't want to spend all your money, you can lower the percentage of retirement assets spent in the Retirement Accounts screen. That's one way to do it.

I seem have a much more bizarre result. I am new to ESPlanner Plus, and just finished entering all of the data to run my first result. The 2017 Suggestions have me completely confused (see attached PNG file)

Then, I get even stranger results for the Annual Suggestions(see attached PNG file)

Comment Image: 
dan royer's picture

This looks like a classic case of using Conventional Planning? If so, turn it off and go back to the standard Economics Mode. With conventional planning mode if you guess low on your discretionary spending, it just pushes all the extra into the first year. Not very helpful! Perhaps it just shows the folly of trying to guess? I don't know, but I don't think you should use it, especially on your benchmark cases. Let the software do what it was designed to do and reveal your smooth discretionary spending pattern from year to year in econ mode.

dan royer's picture

I'd also just suggest ignoring the current year report and focusing on the Annual Suggestions report and the others under that.

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