Your non-retirement assets, referred to as regular assets in MaxiFi Planner, are an important component of your financial plan. Each plan or variation in the plan 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: for example, it might indicate 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 of the Spending Overview report, but discretionary spending will be smoothed, and the regular assets saving/withdraw pattern will adjust to accommodate these new special expenses as it seeks to smooth your annual spending.
What if I want to save $1000 per month into my non-retirement assets?
The best practice, initially anyway, is to let the program calculate the saving/withdraw pattern related to Regular Assets for you so that you can see what your natural, annual, smooth, safe spending allowance is before you start trying to manipulate that annual spending amount by saving more than is needed to create the smooth, sustainable, safe spending level.
After seeing that smooth spending allowance (discretionary spending), then look at your Annual Saving/Withdraw report to see what the annual saving/withdraw pattern looks like.
Next, how to handle a desire to specify regular asset saving may have different solutions depending on the motive or purpose for doing so and context of your planning model.
- If you want to save this money up to some specific balance level (say til you accumulate $10,000 as a backup) then you could use the Reserve Fund feature. But with a reserve fund, the accumulated saving is never spent. It's an emergency fund. It remains in reserve for the life of your model or until in some future year you switch it back to a non reserve fund.
- 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 show you what saving is needed 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 described below.
- 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. Furthermore, this approach may not lower your near-term spending. It will move your regular assets over to qualified retirement assets.
- You can simply save the money (i.e., not spend it)--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. In effect, you are just not spending the full annual spending allowance and rolling this saving into next year's regular asset balance when you update your plan in the new year.
This approach is the most common way to address this desire to spend less than the discretionary spending allowance that is shown. In other words, simply spend less than you CAN spend. At the end of the year, your accumulated regular assets will be more than the model shows because you are under spending your safe, annual allowance 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 one year at a time. 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 annually updating your plan with 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 your annual budget. You can under spend in any year or any series of years and then, when you update at the end of that year, observe 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 updating at the end of the year, see your new (now lower) annual discretionary spending allowance going forward.
- If you are simply wanting to lower your annual spending allowance this year and every year, create a bequest which will save money for the estate, much like creating a reserve fund and adding to it each year.
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. However, 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), MaxiFi puts spending on smooth pilot and creates an irregular saving/withdraw pattern that is in service of smooth optimal spending, not a spending pattern in service of smooth saving.