MaxiFi Planner Review - Financial Analyst Insider
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MaxiFi Planner Review

Trying to figure out how much money you will have during retirement is a really critical aspect of your retirement plan.  The problem is that it is also incredibly difficult to accurately determine.  The reason this issue is so challenging is that small changes to your assumptions frequently result in magnified changes to your cashflow during retirement.

Comprehensive financial planning requires more sophisticated lifetime budgeting, spending and saving plans that maintain a household’s living standard starting right away, not just in retirement, and sophisticated Monte Carlo analysis that considers how different investment strategies impact the different future living standard trajectories a household may face. 

The simplistic free online retirement planning tools just don’t offer the required level of fine tuning necessary to accurately analyze your future income and expenses in retirement.

MaxiFi Planner software was created by Boston University economist, Laurence Kotlikoff, to provide a more comprehensive and practical financial planning tool for both individual investors as well as financial advisors.  The MaxiFi software platform offers a nice combination of advanced data analysis along with a reasonable price point.  This article provides an overview of the MaxiFi Planner software.

How Does MaxiFi Work?

MaxiFi was designed to take the guess work out of financial planning.  This means that investors can create a comprehensive financial plan using advanced statistical analysis.  Although the data analysis is incredibly advanced, the MaxiFi software is easy to use and implement for all investor sophistication levels.

Create a Base Plan

The first step is to create a base plan using your current financial information.  MaxiFi incorporates your current income and expenses from all potential sources.  This includes income, assets, retirement accounts, taxes, social security, and other planned spending including housing and education.

When creating your plan, you have the ability to input as much detail or as little detail as you would like.  The more information you can include, the more precise your results will be. 

Keep in mind you can also return to your base assumptions and easily incorporate any changes in your assumptions as needed.

Analyzing your Base Plan

MaxiFi internally calculates what you can spend on a discretionary basis over the rest of your life, i.e., from this year onward. It then figures out how to spread this discretionary spending power across this year and all future years to provide you and your dependents a smooth living standard per person.

What is Consumption Smoothing?

The program does this consumption smoothing subject to your cash flow constraints. I.e., if you have to spend less for a while because your income is low or your non-discretionary spending on, say, mortgage payments or your child’s tuition is high, the program will tell you to spend less so as to never run into debt.

MaxiFi’s consumption smoothing is day and night different from conventional financial planning, which asks you to tell it what you’d like to spend in retirement.

Boston University economist, Laurence Kotlikoff’s answer to this question is $1 trillion a year. He says this would make him very happy. But he also says that this question, which is the basis for all conventional financial planning, is first-order stupid.

Measuring Discretionary Spending Relative to Fixed Spending Requirements

We can only spend what we can afford and we seek to spend at a smooth pace. So our economic resources (lifetime income) less our lifetime fixed spending (on housing, taxes, alimony payments, etc.) dictate what we can spend on a discretionary basis. Then it is just a matter of smoothing that expenditure through time. Hence, financial planning is not a guessing game.

MaxiFi translates your base case inputs about your current and future labor earnings, assets, 401(k)s, fixed expenses, taxes and Social Security benefits (both of which it meticulously calculates), into an easy to read, lifetime balance sheet, which shows, to the dollar, the amount you can spend on a discretionary basis over the rest of your days.

The next screen shows how MaxiFi allocates that lifetime discretionary spending over each future year to ensure your living standard (your household’s annual discretionary spending per household member adjusted for economies in shared living and the relative costs of kids) is constant.

Maximizing your Base Plan

The real magic happens after you generate a base plan.  The MaxiFi software analyzes your data using thousands of scenarios to determine how to maximize your annual living standard path from your current age, which might be 40, through your maximum age of life.

This is full lifetime financial planning, not the standard fixation just with retirement, which you may never live to see. The net result of this maximization analysis is a new, optimized financial plan — one that typically entails higher if not far higher lifetime as well as annual discretionary spending.

The Value of an Optimized Financial Plan

You can easily compare the optimized plan with your base plan.  The optimized plan offers specific recommendations for how you can enhance your lifetime (including retirement) discretionary spending plan.  Making small changes recommended by the software have the potential to add tens to hundreds of thousands of extra dollars to your discretionary spending capacity.

The optimized financial plan offers a variety of specific recommendations including:

  • Suggestions for how to maximize your social security benefits.  MaxiFi determines in dollars and cents when the best time will be to apply for your social security benefits.
  • Determining the most tax efficient retirement withdrawal start dates for your retirement plan.
  • Decide whether to tap your Roth or non-Roth accounts first.
  • Calculates the most beneficial timing for withdrawing tax free vs taxable retirement accounts during retirement.
  • How to optimize retirement income using inflation protected annuities.
  • Examine the gains from contributing more to retirement accounts.

You can also manually explore a range of other options in the tool, including doing Roth conversions, downsizing, switching jobs, changing careers, moving to lower-tax states, working longer, pre-paying your mortgage, and the list goes on.

Tracking your Plan

After you have created a detailed financial plan, the software provides on-going, real time progress tracking. 

You can easily monitor your results from a desktop, tablet, or a phone. (Note, this is now done manually. Within six months, MaxiFi intends to add the ability to track your plan automatically with automatic feeds.)

Your detailed financial plan is easily exportable as a pdf or an excel file.

Software Options

The MaxiFi software is available for individual investors and professional financial advisors. 

MaxiFi is available for individual households under a Standard and Premium plan.  Financial advisors have access to the MaxiFi Pro plan.

MaxiFi Standard Plan

  • Create unlimited base and maximized financial plans.
  • Optimized financial plans provide specific recommendations to increase your lifetime discretionary spending.
  • Ability to run unlimited reports.
  • Viewable on devices.
  • $99 annual license; $79 annual renewals.

MaxiFi Premium plan

  • All features included in the MaxiFi standard plan.
  • Includes Living Standard Monte Carlo analysis which utilizes algorithms that incorporate hundreds of living standard trajectories based on your investing strategies and spending behavior.
  • Access pre-set common portfolio strategies based on your age.  This incorporates allocations across investment classes as you age.
  • Create custom asset and investment strategies.
  • Contingency planning and survivor reports.
  • $139 annual license; $99 annual renewals.

MaxiFi Pro

The MaxiFi Pro plan includes all the advanced financial planning analysis along with enhanced features to customize the product based on your practice. 

  • Includes all advanced investment management and data analysis features.
  • Ability to manage multiple client portfolios and run unlimited reports.
  • Create customized client reports with your firm’s logo and contact information.
  • $499 annual license; $379 annual renewals.

Using MaxiFi

I had an opportunity to create my own financial plan using the MaxiFi Planner software.  I was really impressed with how easy it was to create a financial plan.  Creating a very basic plan only required about 20 minutes using the information I already knew about my own personal finances.

However, to really take advantage of the software, you need to spend the time necessary to pull together all your financial information and spend some time realistically thinking about your retirement goals.  Pulling that information from your files will take some time, but the results are worth their weight in gold.

Final Thoughts

Most investors understand the importance of saving with a Roth IRA account or an employer sponsored 401K account for retirement.  However, most people are much less prepared to answer questions like when they should start drawing social security or how to figure out which type of retirement account to withdrawal from and at what rate. 

MaxiFi Planner answers those questions, as well as many other questions you haven’t even thought of yet.  The software is easy to use and provides amazingly detailed financial recommendations which are supported by advanced Monte Carlo analysis.  MaxiFi Planner is an outstanding resource for regular investors as well as for professional investors with a large financial planning practice.

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