Financial planning software uses real-life variables to reach retirement targets
I keep the family financial records current and organized. Still, it took me nearly two hours to find and enter the copious and detailed information requested by the financial planning software I just tried.
It was by far the most exhaustive and at times exhausting personal finance program I’ve used. But it was also the most thorough, earning my faith and respect.
The program is developed by Economic Security Planning Inc., a company headed by Laurence J. Kotlikoff, professor of economics at Boston University. Unlike other programs that merely ask a few quick questions, ESPlanner software doesn’t assume we will spend a set percentage of our preretirement income in retirement.
ESPlanner considers a multitude of real-life variables to recommend annual spending, saving, and insurance targets to achieve a stable lifetime standard of living for each person in the household.
Rather than splurge today and starve tomorrow, or scrimp unnecessarily now, the program’s goal is “consumption smoothing’’ - consistently spending the most we can every year in line with our resources and without going into debt.
That makes more sense than what Kotlikoff denounces as “sales-driven’’ financial planning. That’s being told we need to save huge amounts to generate a predetermined income in retirement, and the way to do it, of course, is to buy financial products sold by those advising us.
By contrast, ESPlanner software can calculate the implications on our living standard of a variety of decisions, such as having another child, getting divorced, retiring early, making gifts to children, contributing to charity, or taking Social Security benefits at a certain age, and adjust our annual spending, saving, and insurance targets.
“This stuff is serious business,’’ said Kotlikoff, whose firm does not sell any financial products other than the software “and never will,’’ he said. The program is continually being tweaked with features and updated to include current tax rates and Social Security rules.
Four versions of ESPlanner software exist, from a free online ESPlannerBASIC to more advanced ESPlanner, ESPlannerPLUS, and ESPlannerPRO (for financial planners), available for purchase and download at www.esplanner.com.
I used ESPlannerPLUS, which costs $199 with free program updates for one year ($50 a year for updates afterward) and includes so-called Monte Carlo computer simulations showing how investment choices can affect the variability of our living standard.
I strongly recommend trying the free basic version first. It’s sophisticated enough to show the impact of changing jobs, having children, downsizing your home, and many other lifestyle decisions.
Unlike the paid versions, ESPlannerBASIC does not let you save the information you input.
Humberto Cruz can be reached at AskHumberto@aol.com. 
