How to model actual consumption less than smoothed consumption in retirement | ESPlanner Inc.
This is a retirement spending question. ESP assumes I will take the smoothed consumption and spend it. How would I model the case where I plan to just spend what I estimate I need, and to leave the remainder in place, or perhaps move it from tax deferred IRA to a taxable account? Would I have to hone in on the situation by trial and error, assuming various estate values until I get close to my desired spending level, or is there a more direct way?
Sounds like you say you want or need to spend less than what is actually available to spend. There's a few ways to approach it. You could indicate that you want to spend some percentage less than 100% of retirement assets. At some point, if you choose a percentage too small, the program will impose RMD, so you can't leave it all on the table.
You can also just not spend it each year as you go forward and your spending amounts will go up and up each year as you keep pushing unspent money into the future. There's no harm in that, but it sounds like you are less interested in the question, "do I have enough spending available? or How much can I spend?" as you are the question: How much will I have left over if I spend less than what I can spend?" If it's this last question, you can also enter a special expense at the end of life and through trial and error raise that amount until the amount of annual spending drops to what you think you will spend.
Yes, that's right. I think your suggestion of using a special end of life expanse will work just fine. Without this tweak, the excess smoothed consumption amount over our actual spending would not be accounted for in future periods. It would look like the money was gone, when in reality, it was still available to spend and still earning a return.