Beat cream cheese and butter at medium speed with an electric mixer until creamy. Gradually add confectioners sugar alternately with milk, beating at low speed until blended. Add vanilla; beat until smooth. Stir in coconut.
FANTASTIC and really easy icing! Someday I'm going to use it for cupcakes or add chocolate to it, but I never stray from this cake with this icing. It's always a hit with young and old at reunions, parties and holidays and it looks nice too.