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whyme

Interesting financial planning software

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I've run across what seems to be a very sophisticated d-i-y financial planning tool.  I like it,  so I figure it may also be of interest to some of you. 

It is called Maxifi planner. (It costs money--$99 for one year then $79/year if you continue to use it.  I'm a recent customer, I have no affiliation with the product.)  https://maxifiplanner.com/

This does not dole out portfolio advice.  It is overall financial planning: you input the expected rate of return on your investment accounts (the default is a reasonable 5% annual return) plus your other sources of income.  What it does consider, with considerable precision, are factors like taxes, social security, housing costs, effects of projected inflation on pensions, etc.  You can run endless alternative scenarios--what if you sold your house and moved to a different state? what if you retired in 2021? what if you purchased rental property this year? what if the income tax rate jumps 20% in 2025?, etc.   All of the calculations about things like income tax (including state taxes) and medicare part B premiums are done by the software.

Designed by Lawrence Kotilikoff, a Professor of Economics at Boston University, it eschews the annual percentage method of calculating how much you can withdraw in retirement.  Instead, it calculates the maximum amount of "discretionary spending" you can expect in a given scenario, considering numerous variables, with the idea being that you want that income amount to be level (inflation-adjusted) across your lifetime (through a default age of 100, which you can also adjust).  Evidently the economists call this "consumption smoothing."  Discretionary spending is the income that remains after "fixed" spending, which for purposes of this planner is housing, taxes and Medicare or life insurance premiums. 

As a single person with a relatively uncomplicated financial situation, I'm finding this both interesting and useful.  If I had a spouse and children, it would be more useful yet.  It calculates from which accounts you should withdraw money in what order, it calculates when you and your spouse should file for social security, whether and when to purchase life insurance or an annuity and more.  It allows you to include expected future large expenses, inheritances and other anticipated changes to your financial picture in the plan.  It will maximize your income such that you will spend it all by the year of death, or you can determine a percentage of your assets that should remain at the end of the allotted years.  It has a fairly straightforward interface--all done online via a web browser--but if you poke around a bit, you'll see that there are many options and scenarios you can try out.  

If you follow the link above, you'll find v i d e o s that provide some examples of how this thing works, and you can also locate a page about the company president where he briefly lays out the reasoning behind this planning software.

 

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Bogleheads always talk about the gazillion online calculators, including maxifiplanner.com: https://www.bogleheads.org/forum/viewtopic.php?t=242283 or scroll down to "bobcat's" post: https://www.bogleheads.org/forum/viewtopic.php?t=242283#p3796783 

Some like it despite the cost. I don't know it as I am like you. My finances are very simple, just me. 

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I think it is good for a single person, even better for a family.  In your case, Steve, it sounds to me as if you are very happy with your current plan and are not looking to further maximize your available spending money or make changes for some other purpose, so there's probably not much point.  But for people who are still in the planning/retirement decisions stage or who are trying to get the most out of their nest egg without over-spending, this seems valuable to me.  Some of those other planning calculators may also be very good, I have not looked at them all. The ones I have seen struck me as either less sophisticated than Maxifi or they exhibit complications that are daunting for folks like me who aren't fluent with Excel spreadsheets.

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As always Whyme, thanks for your contributions.

There is money to be made in developing these things so I am skeptical that it offers anything you can't formulate on your own. Sometimes these calculators actually complicate your life instead of making it simpler. I guess I am cynical because many years ago I paid $200.00 for a supposedly sophisticated calculator offered to me by American Express (I took the bait)also devised supposedly by some prominent university professor. The advisor sold me what sound like a similar program covering similar topics. I answered the long online questionnaire  but my  final report didn't really help me at all and actually gave advice that was way off the mark. Maybe I ended up with someone else's report but I doubt it. I didn't follow any of the advice it offered and some of the advice was something I already knew or was common sense. I got ripped off pure and simple.

I will stick to my keep it simple stupid  internal financial calculator for now on. 

Please don't take this personally, its just one man's opinion. Thanks for posting it. It may  be useful to some folks.

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No problem, Tony.  Like Steve, you seem to have arrived at a happy, sustainable retirement lifestyle, so you may not want to change anything.  Perhaps this planner is most useful for someone who is not yet retired.  If anyone's curious, here's an article by the guy who designed Maxifi: https://www.forbes.com/sites/kotlikoff/2018/06/25/the-4-retirement-asset-spend-down-rule-is-rubbish/#368ccf8f5eb6

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Thanks for sharing that whyme. You described it very well. I thought we'd get all that when we hired a financial planner to help with a 403b. You know, someone who helps you plan your finances! Ha, nothing like that at all. It sounds flexible with options to change parameters. My family tells me I'm a bit obsessed with money so I'm going to stay away for now. But I do like having tools in my toolkit so thank you.

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