How-To and Q&A User Webinar - How to get the most out of dynamic income planning (September 2021)

hello everyone um thank you so much for signing up for the webinar

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we are just gonna give folks another minute to get in here we'll get set up and then we'll kick

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things off in another minute or so and just so we can make sure

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everyone can hear me um yep if someone wants to just put in the link and make sure that our audio and

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everything sounds good that'll be really helpful as well

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perfect thanks so much colin perfect and there we go

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derek i will promote you to panelists

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perfect all righty well hey thanks so much for that um

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quick uh just introduction and then i'll kick it off to our uh two experts here justin and derek um most of you already

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know me but for those who don't my name is malcoly yabua i am vice president of

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customer success here at income lab um working with most of you users every day

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um and really this webinar series came from feedback from our users who wanted

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a space where they could you know talk to our experts ask questions and just hear how other users our other advisors

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are using income lab and some of the situations they're dealing with so we thought this was a perfect great idea

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and a perfect time for us to start this series so this is our official first of many um monthly user webinar series that

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we will have um i'll kick it off to justin to do an intro kind of talk through one of our best practices

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but you'll see in the webinar here that there's a q a section in your toolbar

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feel free to ask questions there um you can if someone asks a similar question that you

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had you can also kind of like it and and push it up this line here and then after

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justin and derek get through a little bit of their presentation we'll open up the q a and work through some of those

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questions but also feel free in the chat to give us ideas for future topics that you'd be

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interested in um as i said this really came from our users so we do want to get your feedback on how we can best uh use

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these time use this time for everyone um but that's all i had uh justin derick

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can you guys hear me okay yep awesome well hey guys thanks so much um

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i will kick it off uh to you justin and i will be monitoring the q a and and

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i'll uh drive that when we're at that part of the meeting sounds good so yeah i think the plan

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today was um to do a short presentation and then um

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kind of kick it over for um some q a and that the topic for today we're going to

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focus um on the dynamic income part of uh

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of the platform that doesn't mean your questions have to be on that but uh um kind of starting things out getting the

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juices flowing um on dynamic income so i will uh

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share my screen as i kind of start this off so um as you know

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uh income lab part of income lab is very very much focused around dynamic income

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planning so the plans that you're building for clients on income lab

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um are themselves dynamic so they know that change can happen and they have a plan for change and i know a lot of

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folks have been planning that way for years have wanted to plan that way for years

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but the the key with income lab is that the plans themselves can have that and

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that we can help you kind of paint the picture and communicate um with clients

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about what a dynamic or uh retirement could look like so what i wanted to

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cover today are um kind of some ways that advisors who use income lab have have

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told us that they sort of present these concepts to clients um some ideas of our own as well

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so hopefully making this uh fairly um you know something that you can you can kind of take to your practice and then

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also i wanted to talk a little bit about the sorts of settings that affect um the dynamic uh part of the

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uh of the platform um so i'll just get into i've got a family set

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up here the jones family um 62 and 64. um and i and i just i made three planned

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scenarios for them with some different income settings um but the

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once you've created a plan uh the presentation kind of kicks off here and for some clients this may be enough

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if you're talking about retirement planning um so

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we we have you know everything about this family they're the s the timing of their social security the you know their

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portfolio and so on and we have them set uh on their income setting at a moderate

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setting so there are nine um kind of preset income settings

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that uh will affect their uh both their current income level and the levels at

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which um this plan would call for for a change we're going to dive into that a lot more um

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in a second but so presenting this screen this is kind of your one page you

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know short term income plan okay based on your entire situation

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we uh propose that you could spend a little under 16 000 a month

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um or 14 4 after taxes um

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and the biggest differentiator then is going to the next part which is what could

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make that change um and so for these folks a five percent increase in their portfolio would lead

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to an uh almost an 800 per month increase in income whereas a 17 and a half percent

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reduction in their portfolio would um would cause a similar size decrease so

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um this sets them up uh with kind of where am i now and when might i expect

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uh something to change what am i expecting a phone call from you um keep in mind that everything about their

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plan feeds into this you know that social security timing um portfolio allocation and so on

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so as an example um if this family had um you know lots of

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pensions and social security and things but not as much portfolio

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balance to fund their withdrawals we would likely see it take a much

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larger decrease in their portfolio to trigger a decrease in income because so

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much of their income would be unaffected by my portfolio decreases so that's a a key

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thing to look at here um the nice thing about this and we've really had some interesting

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conversations with you um over the last few months and year is you know clients

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come if if they're currently working or or have been working uh recently you're

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kind of used to living their financial life in a dynamic way so adjustments aren't new to clients

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but what's important is they may feel that a retirement income plan

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is not the same so what we're trying to help you do is sort of paint a picture

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or kind of map out a geography of what retirement could look like to help them understand no life is still going to be dynamic we're

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going to be you know updating your plan we're going to be keeping on top of things and we'll let you know when it would be prudent

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to make an adjustment typically the other thing to note here

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is you know if if a family has kind of saved well or their you know financial situation is is

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um fairly strong and their spending needs i don't don't outpace that um it's

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often possible to build an income plan a dynamic income plan where the the chances of a decrease are much lower

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than the chances of an increase so we see that here because you know it would only take a five percent increase to

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trigger uh in their portfolio to trigger an increase in income but a much larger decrease and that's because this plan

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has a buffer built in right that's by design um we'll look at a an option to plan where

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where these are a little bit more uh uh evenly likely in a bit

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but when that's possible typically what happens is plans don't have a a high likelihood of

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a large downward adjustment so really talking about adjustments doesn't have to be scary in this

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situation um another way to view it is you know retirement is a lot more achievable than maybe we've been taught

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to believe um kind of through sort of uh high level you know uh financial

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media and things because small adjustments we typically see

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can save almost any income plan especially if it begins um you know in a very fairly healthy way um like like

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this one does um so the second place to to kind of paint this picture

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of a dynamic retirement so you know it's kind of setting the expectations here by the way these if you if you have a plan

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set to um to be tracked on income lab so we call that implementing a plan and that just means income lab is going to

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redo the uh or update all the values every month um then uh you'll see these

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update monthly and kind of see if you know these this family is you know drifting toward one or the other of

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these uh of these adjustments um but the second place to kind of to

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paint the picture actually you know what i'll do is let's start with the cash flows so

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this is sort of the cash flow picture for this particular income plan

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for this particular family so they have um the retirement smile built in so they're going to plan to spend less in

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today's dollars you know in their 70s and 80s than they do today in their 60s so that's and this is

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today's dollar so in future dollars you actually wouldn't see much if any decrease here

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but um think of this as the plan the static plan the plan

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without any changes over time now we know that there probably will be changes right so

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if we go to the test plan section we can see very high levels starting to build out

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that the picture for clients is okay this is a dynamic plan

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it will call for an increase in income if

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risk has gone down a lot and we feel that you could afford it afford to kind of you know live a little um it'll call

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for a decrease in income a belt tightening if we feel that's prudent so

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what might the future look like let's let's sort of think through um if

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you lived out your retirement following this plan well for this particular plan

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92 of the time this family would actually have have had

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income lifetime income that exceeded this picture

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eight percent of the time they would have had income that um didn't quite hit that picture

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right so that's that's really this high level 30 000 foot view of okay lifetime income you know what are my chances of

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being better or worse and again because this this has a fairly substantial buffer built in you're really you know

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putting your finger on the scale toward you know much much higher chance of good news

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than bad news on average um families that were above plan had 31

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percent more lifetime income than planned on average families that were below had two percent less than planned all right

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so now we can really see how you're stepping away from terms like success and failure which

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have this kind of absolute feeling to them and are starting to paint a picture of

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a range of outcomes um and uh you know the majority the vast

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majority of them being good outcomes but even in cases where we didn't quite hit our plan for this family the average

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you know i wouldn't want to have two percent less income than i'd hoped but um that's you know probably at worst uh

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an inconvenience and in the worst case it's 14 below planned income and that is

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substantial right i i again i definitely wouldn't want that but it's not failure it's not financial ruin so we can kind

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of avoid painting those pictures in clients heads um again for some households those two

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things are enough so the short-term income plan and and this um but if then you want to go into even

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painting the picture even more in more detail we um can go to the income adjustments

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so we just saw the whole lifetime experience well how does that experience uh kind of unfold over time well it

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unfolds with adjustments it unfolds with you calling them or emailing them or you know at your meetings talking with them

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um and we've we show here the actual adjustments the average frequency of those adjustments

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the sizes of those adjustments and so on and again you see that the increases are

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much more common um than the decreases so you know one every 2.1 years on the increased side

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one every 14.4 years on average on the decrease side so maybe you know once or twice in a lifetime on average right

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and we can see okay um most of these increases are between 5 and 20 percent you're always going to

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have some you know some crazy uh edge cases right where you called and doubled their income um the decreases you can

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see um also within a fairly small range but you know in the absolute

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worst case we had a you know one substantial reduction

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um i think uh the the next

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step is really you know just for the the very math heavy folks um but you can

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then say okay what would this really look like you know me making calls what could your income

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kind of path look like over time um and so i often use nominal here just

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because the actual experience of you calling them is going to be in

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nominal dollars right there's no such thing as a forever dollar and so you can see here i sometimes take

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out the you know the very best you know just to

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you know not not kind of over promise um and you can see every one of these stair steps is me calling you so maybe you say

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well let's look at the median situation right it might be several calls and then you

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know later in retirement maybe we would do some more um kind of tweaking

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and keep in mind at any one of these stair steps that's what that really is is a conversation with the client at any

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point they could decide you know what i don't want the income increase or you know what i don't want the income decrease is there anything we can do

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to adjust our plan and so this is really just setting the client up to expect

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adjustments to expect advice about changes but you know let's say we were you know 22 years into retirement here

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and there was a proposed decrease from their plan they may choose to decrease their legacy goal instead of taking an

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income decrease right so um that's uh i think what this does is really sets

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people up to expect uh expect change

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um i think the last thing i wanted to cover i i did want um derrick to maybe address

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that kind of expecting change thing but just so that we're not flipping back and forth a lot i wanted to recover cover

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the report center as well places you can highlight those concepts

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um so i created a template here called income plan

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[Music] and you can see

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i just have a cover page the long-term income outlook and the short term income plan

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um i ordered the short term before the long term you know you can you can drag these

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around you could do it without a cover page if you wanted um and then

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what you'll get um is you know this is just uh dummy data so this does not correspond

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to the one that we just saw um [Music] kind of a very similar view to what you

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saw on the main dashboard for the short-term income plan and a very similar view to what you saw in the

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planned test section for the longer term outlook with

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overall kind of you know lifetime income experience and then income adjustment numbers again these don't correspond to

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the plan that we just saw these are just kind of dummy ones um

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so uh before we kind of get into um you know the

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income settings and how those can affect um can affect uh the actual income i

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wondered on that that concept of kind of setting clients up to expect

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change i know derek you you've kind of done some some work on that and some thinking about it

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yeah um i think to for me working with clients it's just a it's a big deal to actually be able to

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articulate that and kind of paint that picture like justin said in terms of

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what to actually expect in retirement it just gives a very different

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when you go from like a framework like this back to just delivering a standard monte carlo report

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with a 90 probability of success it just feels so empty um to me because it doesn't

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give that that context when we've even done some psychological research

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looking at consumers and their responses to seeing results like this and it does seem like

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there's a lot more value for that person you're building a plan for uh when you actually present kind of

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these guard rails that help keep the plan on track rather than just a probability of success

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um yeah and we've actually had some kind of you know i know that was that was real research but anecdotally we've also

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um we've we've had some feedback from uh advisors recently

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uh who've actually kind of done a b testing with again kind of more typical uh static

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planning um versus the you know painting this dynamic picture and it's been um

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it's been really good some of the we i even have some some quotes from clients you know kind of wow this will help me

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sleep better at night you know or sometimes i've literally shown a client the same

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you know a static plan on a dynamic plan and said you know which one do you like better and uh and it's definitely always

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been the dynamic one so um and then derek i don't know

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i think you've done some stuff kind of on credibility or um you know sort of like trust advisor

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trust with this as well i don't know if you're able to share any of those yeah and it's

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not published yet still still working its way through but the basically the finding there we we had people go through kind of a

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simulated experience of a market downturn and seeing you know when if you've ever run a you know you could

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go in and try with any monte carlo software put put your portfolio in there simulate

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a 30 percent downturn see how much that pulls the probability of success down

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basically that's what we did so we showed results that change in plan results after a downturn

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and we showed them two different scenarios basically the standard money carlo plan and then showed them

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um one with the actual uh setting those expectations for change with the dynamic plan

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and the level of trust was higher with the dynamic plan people were less likely to basically question

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uh the credibility or the competence of the advisor in the scenario because they

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were setting up the expectation for for success and i think you know the problem with probability of

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success is that it um it really in some cases can even paint a false

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sense of security um if it says 99 probability of success and you head down

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one of those more worrisome paths then he the the shock to the client to see the

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probability of success fall so far uh could threaten kind of that that trust and credibility

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right that's a good point so it's it's like you you don't have a gauge on here that's you know you're not going to

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slowly watch your probability of success fall um instead what you would see is that you know if you were on one of

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those as you said the unfortunate paths then you would just see that

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the portfolio level that would trigger a downward adjustment is getting closer um and that doesn't feel the same as

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you're saying a failure is coming you know as i said a lot of times these are

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relatively small adjustments so um you're saying hey you know there might be a belt like coming or there might not

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it could turn around right so it's not it's kind of worrying of a concept i think it's a it's a big deal to be

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able to show what that adjustment is when you hit that guard rail uh that's you know for

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somebody to understand okay if things do fall um to the point that we need to tighten our belt we they

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know ahead of time what that adjustment is going to be that's a pretty big deal for just managing that fear

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right right um so what i've done here is i've used the plan scenarios section so um you

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know income live has a whole kind of a b testing scenario planning section often people would use this for

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um you know maybe two different retirement dates or two different um you know social security claiming strategies or

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you know buying a lake house or not and seeing how that affects somebody's you know possibilities for income what i've

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done here and this another perfectly good use of it is change the income settings so the one we were just looking

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at was the what on the uh kind of preset slider is the middle setting um

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and you saw it was you know 15 874 with you know those those changes um

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you can sort of play around ahead of time and and see what would happen if you know

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maybe these folks don't need that much income you know what would it look like if i put on that slider the lowest the

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most conservative setting um well it looks like they'd go from 18 that's from 15 874 down to 14

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598. so um you know about about a 1300 difference um

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and uh it also kind of really sort of

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changes their their guard rails a bit so it's just a very conservative um

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plan uh what you get for that is again if they could afford this um you know maybe their maybe their spending needs

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are are well within that um it makes the the plan test um

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you know really outstanding um so it's you know predicting like look we're almost

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certainly going to call you at some point uh with uh an increase um and if

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uh if there is is ever a decrease it's it's almost you know at least in simulations uh

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not even worth talking about um the adjustments you know on average they happened only downward adjustment

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happened only once every 45 years so you know most people would never see one um

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and you know the example income scenarios are you know almost universally up again there are some in

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the simulated scenarios there are some that went down but you know not many uh so even the 10th percentile

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is a pretty darn good uh outcome um hey justin we had a quick question on

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the example scenarios just while you were you were there um and question is on the example

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scenarios uh page would it be fair to say that the worst scenario is a bad

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sequence of return yes definitely um

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that's exactly what you're seeing here and these folks had you know a reasonable amount of their income was coming from

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uh portfolio investment so like i said if if this were somebody that depended less on portfolio investments you'd see

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less effect there um so yeah that's exactly what's happening here

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so there's also you know kind of getting into the the data science of this

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we're very rigorous in terms of uh you know not letting

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these simulated households know anything about their future right so they're making decisions along the way not

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knowing the future which is exactly the kinds of decisions we're making today right um so

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you know these folks and on the worst line here you know they it just turned

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out that their future was worse than expected right which that is in the range of possibilities

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um but yeah even you know getting rid of the the edges it's basically um you know

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a lot of a lot of upward stair steps again i i found most advisors don't use this with every household because it you

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know it's a lot of lines so uh as i presented it kind of the

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the unfolding the details of um you may you may not present that one

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um on the other hand and this is this is kind of an interesting um effect of this

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kind of dynamic planning because you're not talking about success in failure so it's not financial ruin versus you know

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exactly hitting your income goals what you're really helping clients do is

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make informed decisions about when they can retire and how much they could spend

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because it may be that a higher that higher income so in this case i put the setting all the way to the most

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aggressive income setting and we got um see i think it was almost a thousand dollars more

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um yeah almost a thousand dollars more income um

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it it is something someone could choose to do um because again it's a dynamic plan so it it if if

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that turns out to have been overly aggressive it the the plan itself will will tap them on the shoulder or

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more accurately tap you on the shoulder to have a conversation with them if a downward adjustment is

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is being called for in this case over the lifetime of the plan

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um still 77 percent of the time um these folks ended up with more

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income than planned but you can see we've definitely increased the the chances of a down of not of not hitting

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our full planned lifetime income you know the average has gone up from two percent to six and the worst case is you

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know it's 23 lower um but this is the kind of thing that somebody you know maybe they're on the

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bubble with you know whether they can fund their their desired lifestyle or maybe this is sort of a toying with

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earlier retirement than otherwise they might have thought they could achieve you could say well look you'd be taking

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on more risk um you know 77 23 right um but if you can live with this kind of

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risk it's it's something i can help guide you through so it's not so much of a you know there's there's one right

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answer we've got to hit you know 90 95 chance of success it's really like let me i can paint this picture

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of you know the the retirement you could be traveling through you know is this is this kind of a map you can you can see

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yourself living in um again there's actually still a bit of a buffer built in

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on this income setting so on the preset uh settings and you're you're you're

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more than able to to adjust you know fine-tune these but on the preset settings the

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most aggressive income setting um still has a a 60 chance of

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of of um of an income increase so it's still more likely than not that you are you know

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kind of uh you're building in sort of a it's it's not a 50 50 it's it's you're building a little 10 buffer there

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um [Music] i think the last thing i wanted to touch on and then we can um open up to

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questions as a historical analysis tab so

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what we found is uh okay i'm on the higher setting here so

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the advisors use this tab when needed not every household or every advisor is

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seeing this every household is seeing this but it can help sort of provide some context for the

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level of income that you're that they're talking about so now again this is the the highest in

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preset uh income setting and you can what you're seeing here is for exactly this profile

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um so the same household with the same social security and the same uh you know longevity expectations and so on the

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same investment mix how much income could they have had

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at the exact same point in their retirement at every point in recorded history

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and we know what they could have achieved because it's recorded history so we actually know what what their investment experience would have been so

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you're seeing um sequence of return risk here basically so the high points had great

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sequence of return the lowest points had poor sequence of return um

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and so this will help you say hey you know maybe maybe this is a family who who needs that you know 16 8.

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um well let's look historically you can see why this is

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you know a riskier level than uh you know 14 000 for example because we can see

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that there were times in history that that wasn't achievable right we're looking basically the early 1900s and

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the 1960s is when that wasn't achievable um you also see on this graph that the gray

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periods were the periods that were least like today in economic terms and the blue periods were more like today and

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things like interest rates and you know stock valuations and so on

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um if i you know went to the and justin quick question on that last page um we had a

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one come in uh why does it end at 1990 and not the current year yeah that's a great question so um

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it will not always end at 1990 it will end at whatever year um

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was the most recent year that someone could have retired and completed

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their plan by now so this will change every every month we'll add one for these folks so i think this this plan

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was roughly 30 years it might have been just a tad under 30 years and so that's why it looks like uh we can get as far

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as july of 1991. um so um yeah it's it's only showing completed

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retirements um so if you had a 15-year plan then you know you would be seeing another 15 years or so on on the on the

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chart um and you can see for for this you know lowest income setting uh that never in

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history was there anybody who failed to achieve at least the black line um but

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it it it kind of helps give the clients an understanding of

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historically what risk level you know each income level would have would have been um so the green line this this for

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this family we actually did a full budget and this is the gross income that would be required to achieve

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their budgeted net amount um so you can see the green line as well below and then this is the pink line is

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the gross of tax amount that would have been required to hit their essential expenses um and so

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you know we can sort of put to bed the the you know financial ruin side of things be

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because we can see okay how much worse would the future have to be than the past in order for your

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you know even your essential expenses to be at risk well it would have to be just just really really bad compared to the

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compared to the past um and of course because you have a dynamic income plan um you know the plan itself will will

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kind of tell you when things are getting worse than expected there um but did that

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any other questions on that that chart uh i think that was the last one and we

34:02

have about eight questions so if you're we can uh kind of run through some of the q a

34:09

um thanks for doing some of the presentation there justin um

34:14

uh first question then this one was also got a uh upvote so um how do you model a

34:20

self-insured long-term care event or is this already included on the right side of the smile curve

34:27

yeah that's a good question so i would say you know a a very large long-term care event um

34:35

is is not modeled on the on on the right side of the smile um

34:42

you know so if you want to look at kind of the the percentage growth so now we're looking at nominal here but that that's fine so you know we're going from

34:49

16 seven um you know so we're adding about two thousand dollars a month

34:55

um in expenses over you know about a five year period um that that may be enough to to cover

35:04

some of the things that um that you'll be talking about but but if you are looking at more like you know ten

35:09

thousand dollars a month or larger expenses um the best way to do that is to build in

35:16

a what-if expense and again this is probably a good place to do kind of a b testing and scenario

35:22

planning so you have one you know just with the kind of standard smile increases and one where you've

35:29

added a a what if expense you know so you might say

35:35

long-term care of ten thousand dollars a month um

35:42

you know maybe we'll just say it could be either person and we'll set it out to um

35:49

let's see maybe uh put it you know 25 years 24 years or so from

35:57

now this is kinda

36:14

hopefully i put those inputs in correctly

36:24

yeah so um you know kind of setting aside self-insuring is a good way to put

36:29

it um for a ten thousand dollar a month um expense

36:35

at the end of uh of this plan would reduce them it looks like by about a thousand dollars

36:42

a month awesome um next question what's the best way to

36:47

illustrate a static withdrawal plan so that you can compare to a dynamic plan

36:54

another good question so i'm going to make a copy of this plan

36:59

and we'll call it

37:04

static

37:11

and i'll uh leave everything else the same

37:19

and this is where um you're gonna have to go into the advanced settings um for

37:24

the plan so uh the the income setting slider is you know presets they're they're they're really

37:32

well thought through we did some um some optimization work for these but

37:37

um you are more than welcome to go into the advanced settings and

37:42

um in the income settings accordion you can hit customize income adjustment

37:48

plan and you can turn off either

37:54

income increases or income decreases or both so a fully static plan you would turn off both. It's important to note you can only turn off the income increases and decreases on a “what can I spend ” plan.

38:01

if you wanted to look at well you know what if i took my decreases but not my increases

38:06

then you could yeah sorry other way around you know you can leave one of them on but i'll take both of them off

38:18

you can see now there's no plan for income increases no plan for income

38:23

decreases right so we're just gonna plow ahead uh on that

38:28

and um run the test planets yeah as you i'm sure know there's a good

38:34

30 seconds of uh hard math going on here but what you'll see is

38:40

uh plans will or the scenarios will all be roughly the same and then some will fail

38:47

some will run out of well they'll run out of portfolio withdrawals they won't run out of uh

39:05

and while that's loading justin i'll kind of throw this next one out there too

39:11

um it says uh what suggestions do you have when it comes to focusing on proposed income versus focusing on after

39:20

tax income the proposed income shows up as the headline number under on the plant

39:25

scenarios page so it's obviously very important whereas the after tax income is important too um since that's the

39:32

actual money that the clients will be able to spend so it sounds like sometimes it feels like they're comparing apples and

39:38

oranges with the numbers yeah i mean that's good feedback um

39:43

i i think because i you know um tax rates change um oh why this isn't

39:50

loading here okay well maybe it did load but so you can see you know this is

39:56

on the averages by the way are just they're hitting exactly right so it's that's why um

40:02

there's just zeros there there's not much interesting to see in the plant um

40:08

well i'll wait for that to load for some reason it's taking a little while here um but your your point about you know one is

40:14

obviously in larger numbers and in uh a larger font rather and darker um

40:21

because tax regimes can change um and really the amount that you can

40:26

generate from portfolios you know we're kind of figuring that um post tax and

40:31

then we're applying taxes to it that that that was why sort of the the design decision here

40:38

but everything else that you that is kind of linked to either a

40:43

desired or an essential expense we're going to show the net amount

40:49

so for example on the income goals section you're seeing the proposed income in in

40:55

net dollars so that we're we're always comparing apples to apples in fact even in the historical analysis

41:01

section now in this case we we're comparing gross to gross so

41:07

um you know i'm not gonna be able to land right on it here but you know 93 15

41:14

and um you know 12 8 42 um

41:20

12 8 42 not 11 800 right so it's basically it's grossing up okay if you needed to produce

41:26

you know exactly your desired monthly income what would have to be your your gross um monthly

41:32

income there so um we're always making sure to compare apples to apples but as for

41:38

you know what to what to focus on um i think it may just vary on the on the

41:44

situation you know taxes are a really big deal for these clients or maybe you're doing roth conversions and things then probably the net amount is

41:51

important um if they're not in particularly high tax brackets and things

41:57

it may not be as as important to focus on i think um and then next one following

42:04

that one is uh if a client is still working is it important to enter their income and pre-retirement expenses into

42:11

income lab or for pre-retirement does income lab only use the savings contributions that are entered

42:18

that's a really good point so for pre-retirement planning um there's there's kind of

42:24

the retirement date is this key point within the platform where it starts

42:31

figuring out how much you can afford to spend um and actually we're just on with um

42:38

somewhat earlier you know if if these were set and uh

42:43

you know joe is retiring in july of 22 and mary is retiring in you know july of 23

42:50

the date at which you're going to get a proposed income is july of 22. so the earlier of these two

42:55

and before that date the system is assuming that

43:01

you know if you didn't tell me you're saving some money i'm assuming you're spending it um so

43:06

for pre-retirement account contributions it's really important to put those in

43:12

as account contributions so have a savings plan and make it explicit here

43:18

once that trigger happens though and um and retirement for at least one of the

43:24

the spouses has happened then the system is assuming that anything above

43:30

the um the gross income is reinvested so you know you might have a situation

43:36

where there's a large incoming cash flow maybe the downsizing of a home or the sale of a business or you know maybe

43:42

one uh one person is still working and that income is is more than enough to cover

43:48

their lifestyle at first it will take the excess and plow that into the portfolio

43:55

automatically so you don't you don't have to um do account contributions for post retirement it

44:02

will basically say anything that the plan doesn't say you're spending we're assuming you reinvest so that's a really

44:08

key point if you don't say that there are account contributions pre-retirement even if you're making a

44:13

million dollars a month the the system will just assume you're spending a million dollars a month if you don't tell it that you're making some

44:18

contributions perfect and while we are on this page justin um question here on

44:24

how can you show annuity income as part of the plan um so there's lots of kinds of annuities

44:32

it's very simple to do kind of fixed annuities uh or you know speas diaz and

44:37

things like that with the other income section um so maybe i have a

44:44

um you know like a a deferred annuity starting in um

44:54

you know sometime in the future here um and we'll have it tied to

45:00

joe maybe it's even uh

45:05

well we could we could make it a variety of things we could make it uh you know if it were like a q lakh or something we could make it 100

45:12

um ordinary income um or if it were non-qualified you could do a um an

45:18

exclusion ratio um here so that's that's the easiest way for other annuities um

45:24

you know ones that have a contract value um generally people are still entering them

45:30

as a cash flow in order to get the guaranteed income [Music]

45:36

represented correctly but i would say we're actively working on an annuity

45:43

module so that you can [Music]

45:48

it'll have variable annuities and fixed index annuities in order to kind of give them a little bit more

45:54

full treatment both as a portfolio item and a and an income stream with you know step

46:00

ups and so on um so that's that i we're hoping for early next year um but

46:07

in the meantime i think cash flows are the main places that people are are modeling those

46:13

right um next one is uh i can't change the income setting what am i doing wrong um

46:20

maybe speak a little bit about the uh solve for this encode yeah

46:25

so i mean this may be just a ui tweak that we need to do so um if you hit um

46:31

okay well let me step back a little bit so the the kind of default way that you'll see um the

46:37

the system work is you tell it everything about the family

46:42

and it will say you know at a given risk level how much they can have an income

46:48

and that's a you know a perfectly reasonable way to go about planning it's the way that a lot of

46:55

households um want to have planning down right it's uh we've had it's sort of a funny conversation where

47:01

you know you say well how much do you need and they'll say well how much can i have well how much do you need well how much can i have so this is the how much

47:07

can i have but if they know how much they need and they're really firm on that um you can

47:12

say well what would life look like if that's what you spent so you can click on solve for this income

47:17

if you do that you saw how the income setting disappears well it goes gray like i said there's

47:22

probably a ui tweak a user interface user experience tweak that we could do here to kind of

47:28

sort of eliminate it or put you know you're you're solving for income so you're not specifying the risk level

47:34

anymore you're specifying the income level and the system will figure out what risk level will produce this income

47:40

level um the calculations take longer when you're solving for income

47:45

because it has to back into the taxes and the tax system is so complicated that

47:51

there's there's just a lot of work there so you'll you'll generally see it'll take maybe a few seconds longer to get you

47:58

a result um and here now you'll see the proposed income

48:04

is enough to produce your 11 8 after taxes

48:10

um and of course proposed and desired are going to be exactly the same

48:15

by design so yeah generally when you see this it's either because you've hit solve for

48:21

this income or um i don't remember if there was if i left oh you know probably here

48:28

in this case you won't um no maybe i change something again but usually if you've if you've overridden

48:34

it with a custom setting then you also won't be able to

48:40

use it um this one just got uploaded but is

48:46

there a way to see what accounts the income is coming from

48:52

yes so that is the um that's within the tax center

48:58

um so and and we don't go down to specific

49:05

accounts we go down to um kind of the uh

49:11

the uh oh you know this one might have been

49:18

we'll go down to the account type right so if you have multiple you know in ira and 401ks and things um you know

49:25

if if those are all sort of equal from a tax perspective then you know the system won't tell you which which account to

49:31

take from but it will tell you account types so for example let's say you were you had decided to do bracket management um to

49:38

the 24 bracket um you would go to the explore section

49:46

and in the income tab at the bottom you'll see okay now these

49:52

folks are doing aggressive roth conversions so they're taking you know almost three hundred thousand

49:58

dollars from tax deferred accounts putting them in tax free accounts and they're funding

50:04

other income from their taxable accounts um you know if we change this to

50:10

the you know taxable tax for tax-free

50:22

not over the long term not as kind of tax efficient of a way to do it but you'll see

50:27

you know they're taking their taxable withdrawals and that's enough um and so they don't have to take text free or tax free but

50:35

over time you know if they ran out of taxable farms which i'm sure they

50:41

have by well actually there's still a tiny bit um

50:47

uh okay so in this case they're actually uh by this point they would have rmds that were high enough that they actually

50:53

would be rolling some of their excess rmd back into taxable accounts um so projecting

50:59

out so you'll kind of see it um in terms of buckets rather than you know

51:04

individual line item accounts perfect and then um we're about

51:11

10 minutes here so i'll uh compare these three kind of together um

51:17

but any thoughts on adding some additional asset classes for actual data for example u.s small companies value

51:24

and international sounds like this advisor uses a lot of dfa returns data

51:32

and then just kind of a follow to that is you know considering that the mid 60s was a tough time to retire the addition

51:38

of other asset classes could have greatly improved the results and i think that's when we were talking about the

51:43

historical analysis page yeah so there we are actively working on that as well um so i was just working

51:50

with some developers this morning on that um we're adding i think seven asset

51:55

classes um [Music] uh see if i can come up with that

52:01

let me go to the uh

52:16

okay so if i go to even any of the asset um sections you'll see

52:21

there's 15 asset classes right now um we're adding all cap

52:27

growth and value mid cap blend growth and value a short-term government bonds

52:33

commodities i'm trying to remember if there are any others

52:40

there's definitely been some talk about how to add some

52:45

you know uh maybe esoteric is not the right word but you know more more specified specific uh

52:52

you know newer asset classes to the to the list as well um and we're certainly open to those

52:58

possibilities because we consume data on these asset classes we we generally need an

53:04

index to to tie it to certainly it would be easy enough to add

53:10

asset classes where you know advisors firms provide the

53:15

capital market assumptions but there are parts of the platform that require also that we consume

53:21

index data so it may be possible to kind of uh work on a way to you know have some

53:28

distinctions between those sections but for now that's um that's the plan so if you certainly if you have asset classes

53:34

that you're um in particular interested in um it's an area that we're looking at as i

53:40

said we're adding seven right now and you know hopefully that that list will continue to grow yeah i'd say shoot us a quick email and

53:46

we'll definitely add it to the list as we're looking into the expansion

53:52

um so next question uh does the smile curve work equally well for a younger

53:57

retiree uh for example someone who retires at 50 as for someone who retires

54:03

in their mid 60s yeah it's a really good question i i um

54:08

well there's two ways i would address it one is i i don't think that the research on

54:14

um spending patterns that led to the smile um really looked at younger um

54:21

retirees i know derek you may have some ideas on that um and then i can address how we addressed

54:27

it within the platform which is yeah the i mean the smile itself is all post retirement so i mean that's going

54:34

to be that you're seeing that curve come in after somebody's retired um there are some dynamics based on where

54:41

somebody's at in retirement and how far they are potentially along that that would be relevant

54:47

um pre-retirement i i have done some work with michael kittses on that topic looking at

54:54

specifically some some dynamics there and the fact that we actually see real spending

54:59

or real income declining and if you're using a replacement rate real spending declining

55:05

going along as well in those later years of retirement often peaking around 50 or 55 but as far as i'm aware i don't i

55:11

don't think that's factored into the platform is it right now is it justin it's not we did talk about um and i

55:18

would like to at some point build a um i guess you would call it an earnings curve you know instead of an income

55:24

curve um into some of the social security estimation um you know sometimes all you know is what

55:30

somebody's making right now right maybe it's a prospector or something so it's nice to get a little bit more accurate so security estimations and i think

55:37

using a curve would be helpful there instead of assuming that they've always made what they make at 50. um

55:43

but what we've done on the platform because um the smile research was all you know

55:50

for people kind of in their 60s and later um we just don't apply the smile uh before 60 so it's just flat before

55:57

60. so that's sort of how we how we solved that i mean

56:02

and and we have about uh five more questions um in the queue um

56:09

i know folks who have to hop off at the end of the hour we will record this so if you if this is your question and we

56:14

didn't ask you yet um you can watch the end of the recording but um justin if and derek if we're good to go a little a

56:21

few minutes over i'll keep the questions coming sure i actually have to hop off right now okay leave it well no problem derek

56:27

well hey derek we appreciate you joining um yeah so next question uh say a client

56:35

has a substantial mortgage payment for the first eight years in retirement if that's in your budget does income lab

56:42

amortize that over the life of the retirement or will it show higher spending over eight years and then drop

56:48

off it'll show the higher spending over eight years and drop off um

56:53

there's a couple kind of ways you could address it i get you could um you could certainly include it as a

57:00

budget item and and um when in particular if you're solving for income

57:05

that will exactly get it you know where okay i need the higher income early and then eight years in i actually don't

57:10

need as much income and so it'll do that correctly another way to do it if you're kind of looking at what's the effect of

57:16

this mortgage would be to add a what-if expense and say hey like we're gonna we're gonna pay this mortgage no matter

57:22

what so um kind of net of that mortgage what does my

57:27

retirement income look like so i think both those ways are perfectly reasonable ways to do it perfect and then um question around

57:34

economic context is the economic context now perhaps worse than it's ever been

57:40

even worse than the 1960s i think yeah so

57:45

for for this kind of uh blue gray thing what we're doing is we're saying um

57:50

okay show me in this case we're showing you the one-third of time periods that are most like today

57:58

so now how do we define that it's things like cape interest rates and and and so on

58:05

you know unemployment and so any one of those things could certainly be well outside it could be the

58:11

you know the extreme value that we've ever seen you know for cape it's not yet but it's certainly getting there um

58:18

we you know new unemployment claims were briefly i mean like so far in the tale that you know it

58:25

was definitely like nothing ever seen in history we form a composite of those things though and then say

58:31

show me the periods that are most like today so i mean the answer to your question is yes there are things that could that can be at the most extreme

58:37

level they've ever been at um in this graph we're just asking okay you know

58:43

even so show me the periods that are most like today it may be that they are you know not exact correlates because

58:50

some values could be at you know more extreme now

58:55

next question um how would someone show what would have happened over the last 20 years with current withdrawal rates

59:04

um so i think the way to you would do it if you wanted to see you know the most recent 20 years is you

59:10

would make a plan that had a 20-year period right so you'd have to kind of

59:15

you know monkey with the birth dates or the longevity settings to get the the plan to be short enough

59:22

um and then you would do a back into income solve for this income so that you could get exactly the

59:28

income level you want and then this chart would show you how those things have worked out um

59:34

since then and actually that last piece i'm not even sure you would need to do because this chart is always going to show you

59:40

what what was possible it's actually the other lines on here are kind of independent so uh really all you need to

59:47

do is make sure that the uh that the longevity settings which are found under

59:54

retirement and power planning um you know these folks are probably too too young to make it um

1:00:01

yeah see i can get it down to 26.7 years but you if you made them a little older you could get it to 20 years

1:00:08

this is an area that we've we've talked with some advisors about you know adding some more capabilities on the longevity and um

1:00:15

you know kind of plan length um so definitely

1:00:21

maybe some things uh some tweaks there in the future down the line um perfect uh next question in the tax calculations

1:00:28

are you assuming the tcga rates are return restored to 2017 pre-tcga levels

1:00:36

in 2026. yeah i mean it's a really good question we're not we're assuming continuation of

1:00:42

of current rates i i recognize that that's you know that's certainly not current law um but

1:00:48

it makes things more conservative um so there's a bunch of things that would

1:00:54

make roth conversions look even better and they may be realistic things like um you know rates

1:01:00

going up in the future um certainly you know assuming at some

1:01:05

point that uh joint rates go to single right if a spouse passed away and so on um

1:01:12

we're monitoring kind of the the legislative situation um and and uh

1:01:17

we're certainly open to other other ways of modeling taxes in the future or offering you know the ability

1:01:24

to kind of toggle the tax um projections that you want to use

1:01:32

and last question here um and i and this is going back to the question about pre-retirement

1:01:38

and so it's a clarification question it says are they understanding correctly that they do not need to enter income and

1:01:45

expenses that is income lab only cares about income and expenses once the first

1:01:50

retirement date is reached prior to that date only savings contributions matter

1:01:56

if that's correct you know what happens if the advisor enters pre-retirement income and expenses

1:02:01

does income lab ignore them so in one sense that's correct you could you could if

1:02:08

you really wanted to not put current income and expenses and their retirement plan will work

1:02:15

perfectly fine however there are some sections that might look a little funny if you are presenting it to clients um

1:02:22

and the main spot is in cash flows um so what you would see now these books are already in retirement but you would see

1:02:29

a big giant blank period here for income sourcing so if you wanted to

1:02:35

present this to clients you probably would want to include current earnings so that they see how those earnings shift to other things once retirement

1:02:42

gets hit

1:02:49

perfect um and i will just give one more minute or two to see if there's any last

1:02:55

questions um before we wrap up and again the meeting is the webinar is

1:03:02

being recorded so um it's a long one so i think zoom will take some time before i get the

1:03:07

recording uh but if not by the end of the day we'll send that recording out to uh everyone tomorrow um and this is a

1:03:16

monthly recurrence so please also be on the lookout um beginning of october we'll schedule the next one for october

1:03:22

and um and send out the invites for that as well um feel free to reach out to your account manager to me or to our

1:03:28

info box and send us questions or future topics that you're really interested in and we'll make sure that we account for

1:03:35

those as well um outside of that uh justin thank you so much i appreciate

1:03:41

your time um and sounds like um perfect yeah sounds like folks thought this was

1:03:47

helpful so i'm glad we got this started and we'll keep it going um otherwise really appreciate everyone um thanks so

1:03:53

much for being on the platform and and for coming along this journey with us we are super

1:03:58

excited to keep this community growing um and just to keep providing you all more value on how to keep uh doing

1:04:04

better retirement for your clients perfect and with that i will stop the

1:04:10

recording and close out the meeting i hope everyone has a wonderful day