Your non-retirement assets, referred to as regular assets in MaxiFi Planner, are an important piece of your planning model. Each model or variation in the model you create is going to show regular assets with its own unique saving and withdraw pattern. You can view this annual saving/withdraw pattern in the Annual Saving and Withdraw report.
It may at first appear to be arbitrary or random: indicating that you should be saving different amounts for several years, then withdrawing for a year, then saving for another 4 years, then withdraw for 6 years, etc. However, this unique saving and withdraw pattern is an important element in keeping your discretionary spending smooth year over year. In other words, the program is not trying to smooth your regular asset saving or withdraw, it's instead trying to smooth your annual spending. You can't typically have it both ways. Of course you can add annual special expenses to the model and these will appear as fixed expenses in the Other column, but discretionary spending will be smoothed, and the regular assets saving/withdraw pattern will adjust to accommodate these new special expenses.
What if I want to save $1000 per month into my non-retirement assets?
This question could mean several things depending on the context of your planning model.
- If you want to save this money up to some specific balance level (say til you accumulate $10,000) then you could use the Reserve Fund feature. But with a reserve fund, the accumulated saving is never spent. It remains in reserve for the life of your model.
- If you want to save some amount for a future expense--say you are saving up for a $10,000 vacation 7 years from now--then the best way to model this is to enter a $10,000 special expense 7 years from the current year and the saving/withdraw pattern will reflect what is needed to save each year to provide for this expense and your annual discretionary spending will be smooth through the year of this expense.
- If you want to save in order to lower your discretionary spending for a period of time and then raise your discretionary spending later, there are a few things you can do.
- You can contribute more to your retirement accounts or create a Roth and contribute there, but remember that using a qualified account to save assumes that your withdraws are after age 59.5 and unless you use "special withdraws" the amount you put into these accounts will come out as "smooth withdraws" per the assumptions you use in Settings and Assumptions > Retirement Accounts.
- You can represent this extra saving as a series of annual special expenses and then, at some future year after this saving pattern is complete, you can return the saving to yourself in regular assets (including interest if you do a side calculation) as a tax-free special receipt. For example, you could indicate a special expense of $12,000 per year for 5 years and then provide a $60,000 special receipt to yourself (or whatever amount you calculate you'll have plus interest; such calculation are usually represented as nominal dollars) 5 years hence. When you do this, MaxiFi is still going to create an additional saving/withdraw pattern in regular assets apart from this special expense in order to keep your discretionary spending smooth.
- Finally, you can simply save the money, the $1000 per month in this example, from your discretionary spending and think of this extra saving (in addition to what the Annual Saving and Withdraw Report is showing) as the way that you are using your annual discretionary spending allowance. This approach is the most common way to address this desire to spend less than the discretionary spending cap that is shown. At the end of the year, your accumulated regular assets will be more than the model shows because you are under spending and adding this unspent discretionary spending to next year's regular assets. At the end of the year you will update to reflect your new, higher balance in regular assets and next year's discretionary spending, all other things being equal, will consequently be higher than the current model shows because you will have spent less than allowed in the current year, shoveling it forward to all future years. If you do this year over year for a number of years, you will in effect have lowered your near-term annual spending allowance and raised your far-term spending allowance. Most people prefer this flexible approach because it provides the option of knowing what your annual discretionary spending allowance "cap" is but also the flexibility of not spending it all and reconciling the result of this unspent money at the end of the calendar year. There is no rule that says you have to spend all that is available to you. You can under spend in any year or any series of years and then, when you recalibrate at the end of that year, see your new (higher) annual spending allowance pattern going forward. Of course it can work the other way too: you can over spend (by not saving what the program suggests that you should for a smooth discretionary spending pattern) and thus, after recalibrating at the end of the year, see your new (now lower) annual discretionary spending allowance going forward.
Note from Support:
What you choose to do has a lot to do with what you want to do with this extra saving. Is it for a reserve fund to never spend? Is it ear-marked for some future special expense such as a car or vacation? Should it be going into a Roth? Or do you really want to tighten your spending belt for a period of years so that you have a future period of years with a higher spending allowance? If this last question describes you, one approach not described above is to use the "living standard adjustment" feature in Settings > Living Standard. I tend to discourage this last approach because I really do believe that most people want a smooth annual living standard (economics research backs this up) and that they want to make the decision to live below their means (by saving more or withdrawing less) or beyond their means (by saving less or withdrawing more) on a year-by-year basis as described above rather than locking such decisions into the model using the living standard adjustment feature.
So this is the design of the program: Instead of putting saving on auto-pilot (so to speak), it puts spending on smooth pilot and creates a saving/withdraw pattern that is in service of smooth optimal spending, not a spending pattern in service of smooth saving.