I recently purchased ESPlanner from www.esplanner.com. The software is a financial planning package developed by Laurence Kotlikoff, Professor of Economics at Boston University, and Dr. Jagadeesh Gokhale, Senior Fellow at the Cato Institute. Having played around with it for about a week, I figured I would post my initial thoughts.
First, the idea of the software is "consumption smoothing". In other words, the goal of the software is to attempt to generate a level standard of living throughout the user's life. It does this by varying the amount saved or dissaved year-by-year. I think this is a great concept, because it is a more holistic approach, taking into account changes in household size (children being born and moving out), housing costs (buying or selling a home), large one-time purchases (vehicles, vacation homes, etc), and one-time windfalls (inheritances), as well as a host of configurable events, or ongoing or recurring situations. The software creates a detailed plan on how much to save or dissave (spend down savings) each year in order to maintain a smooth living standard per adult. ESPlanner takes into account economies of scale, so a 2-person household can live as cheaply as 1.7 single-person households. Likewise, as household members are added, there are similar economies of scale. It is very computationally intensive and generates a lot of data in spreadsheet form, along with a consolidated PDF summary report.
Now to the negatives. The design of the software is quite spartan. The interface reminds me of freeware, which is not a compliment. I noticed a number of small bugs, none of which made the software unusable but were nagging nonetheless.
For younger people, I would take ESPlanner's recommendations with a grain of salt. The software requires many detailed projections of expenses, income, savings, household changes, etc. Any error in these projections could have a big effect on your plan and could throw off your projections. For older people who are approaching retirement, the variables are fewer and less fuzzy, and the projections are probably more accurate.
ESPlanner Review (Financial Planning Software)
January 30th, 2009 at 02:35 pm
January 30th, 2009 at 03:30 pm 1233329458
January 30th, 2009 at 03:31 pm 1233329471
January 30th, 2009 at 04:05 pm 1233331521
http://hec.osu.edu/people/shanna/lcsprogram.htm
(see http://hec.osu.edu/people/shanna/lcs/overview.htm for explanation).
And I understand that there's a competing model for lifetime consumption smoothing by another finance professor named Moshe Milevsky, who's written a book "Are you a Stock or a Bond?" based on the idea that you should allocate your retirement based on your human capital expected net cash flows. That is, if you expect that in the future, your income will be high but variable (e.g., a young MBA, like a stock), your retirement investments should be allocated more to bonds, while if you are older and have a pension (like a bond), your retirement savings should be allocated more to stocks. His web site (with articles) is at http://www.ifid.ca/.
January 31st, 2009 at 01:27 am 1233365273
March 22nd, 2009 at 02:28 pm 1237732092
This is my second year of using Esplanner. I am pleased with it so far. Besides living standard smoothing capabilities, the software also allows me to price career and housing decisions -most of which I find are difficult to price properly.
I'm aware of Prof Hanna's software. But not sure how much it's been field-tested so I chose esplanner.
There's a online version of esplanner which I helped beta-test a while ago, not sure if this is already released.
Cheers.
February 22nd, 2012 at 10:22 pm 1329949321
It seems like ESPlanner is heavily weighted on Social Security Planning. Social Security may not be around for much longer, so I believe that it should be viewed as a bonus for younger generations (not a cornerstone to long term income planning). Furthermore, there is still a lot of guesswork to be done when it comes to predicting how the market rates with ultimately align with what may be ideal.
I'm impressed that ESPlanner has incorporated taxes and inflation. However, the software does not seem to mention much about asset protection to make any of the projections truly sustainable.
This seems to be a phenomenal tool to help the public reach out of obsolete planning methods and to pressure test financial beliefs.