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Looking for a Retirment Planning tool that supports modeling of different income sources, forecasts Medical Expenses and LTC costs, Expected Returns in Monte Carlo. I’ve read reviews about a few – Maxifi, Boldin, Wealthtrace. Has anyone tried those tools or know of others?
I’ve used a variety of tools over the years, and decided my best course was to pick at least three to continue using as I began retirement. I run each, and then pick a number among the three projections for my next annual withdrawal.
When one varied, it meant I should dig deeper to understand why.
But most often, one would become obsolete and I would take the opportunity to find and vet another tool.
I like the safety of having three predictions. So long as I’m spending based on three recommendations, I feel that I’m on safe ground.
How do you create a margin for surprises when these projections turn out wrong? Averaging three wrong numbers is still wrong. Each tool is doing extrapolations from some market history (how much? what periods?) and from unstated assumptions about the future. What if those are no longer true?
For example, stock valuations – the ratio of price to earnings – has been slowly growing for some years, goosing stock returns; what if that stops? Or reverses? The effect will be a drop or steady decline in stock prices.
What if our lower birth rate and less immigration cause the economy to grow more slowly over the next 30 years, a headwind for stocks? Or the long-term cost of more frequent $1B+ wildfires, hurricanes, and floods lowers stock earnings and dividends? Or inflation returns more often but the tools assume a low inflation rate averaged using data from 2009-2020?
Unless a tool is completely transparent about its data sources and all its key assumptions, they’re doing more harm than good. You’re literally better off rolling dice.
none of those can forecast your medical expenses or LTC costs.
Your best bet assuming age 65 is to take the Part B and D premium and current Plan G medigap premium in your area and escalate by 8% a year. Combined those coverage will pretty much equal your out of pocket costs given your Rx OOP will be limited to $2,000 a year.
LTC is based on your risk. If you are in the retirement age area, buying coverage may be too expensive.
I know everyone’s needs are different but I looked at several of the software options out there (Boldin, Pralana, MaxiFi, Projection Lab, etc) and watched a lot of the Rob Berger reviews on YouTube. I concluded that they didn’t work for me for several reasons:
In any case, as a retiree, what I was really looking for was short-term tax projections and some calculations that would help me manage my optional income (self employment and Roth conversions) w none of the fluff, bells and whistles, and learning curve of commercial software.
I built a simple Excel spreadsheet that is, in effect, an interactive tax return. Have months across the top columns and income sources and tax withholding in the rows. I populated the entire year for the known figures (social security, pension, etc. with related tax withholding) and then added YTD data for interest, dividends, self employment, Roth conversions, etc). Each month, I update those items. The spreadsheet then does all the related tax calculations including self employment tax, qualified business income deduction, how much of the $12K OBBB Senior Deduction still applies, etc. and gives my estimated tax so I can adjust withholding if need be. It then estimates how much more income I can handle before I hit various tax brackets, begin to phase out of the $12K Senior Deduction, and/or hit an IRMAA threshold. I then use that to make decisions on Roth conversions or additional self employment income.
If taxes need to be adjusted, I do it through adjusting my pension withholding, not estimated tax payments. Easier, and I believe gets you around the IRS issues with underpayment as my understanding is taxes paid through withholding are assumed to be appropriately applied to income as opposed to quarterly payments which need to directly relate to quarterly income.
Spreadsheet took a morning to create prob because I’m no Excel pro. I watched a couple YouTube videos and went at it. Also the MSoft Excel Co-Pilot “bot” follows you around on Excel like your smarter older sibling helping you with your homework. I then popped back in a few more times over the week to pretty it up w some formatting and window dressing.
I know this approach may be too simple and limiting for some but I’m happy with the way it turned out and it’s giving me what I need but nothing more. And the price was right! 🙂