User Webinar - Three Case Studies in Retirement Income Planning - December 2022

good get Justin in here as well

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all right good morning everyone thanks for joining our webinar today uh we will kick off in another minute or so as we

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give people a chance to join

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soon and uh yes for those uh in that question

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this recording will be available um after the webinar we'll send an email so you can view the recording

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and we will also host uh save a version of it in our uh knowledge base uh which you can access through the income lab

1:15

application as well um

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see if we can get Justin set up in here

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okay

1:48

good morning Justin looks like

2:01

morning Justin can you hear us yeah okay okay awesome well thanks for joining

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everyone uh we are looking forward to kicking off our user webinar for you this morning

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um before I turn it over to Justin and Derek um wanted to just go over a few things here you'll see in our Zoom webinar we

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do have a q a section so we'll have the first half of the webinar read the presentation and then we'll open it up

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for the Q a um and since this is you is a user webinar this is a chance for our users

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not only hear from our experts but really give you a chance to ask those questions you've had around the software and different things that we can help

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you out in this space um other than uh at the end of the webinar you will have a survey where you

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can give us um suggestions or if you'd like a team member to reach out you can also note that um in that survey as well

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and then we can set up onboarding so more one-on-one uh sessions as well

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we do have another webinar coming up uh December 9th which will be a cfpce webinar I will drop that registration

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Link in the chat for our users who would like to join that webinar as well and then you'll uh get an invitation via

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email for that webinar on the 19th okay that's all I had guys Justin I see

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you ready so I will turn it over to you great thanks everybody thanks for coming

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um I hope the end of the year is treating you well um yeah today's webinar is really a

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hopefully a very practical webinar um based around um you know kind of using some personas

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and typical situations that you might run into in retirement income planning and highlighting kind of how to handle

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those situations in your practice hopefully the actual examples will you

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know provide some really useful um case studies and information for you and your planning or bring up questions

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for um you know situations that you've dealt with that we can that we can address here so hoping hoping this will

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be really practical for people um foreign the way that I I uh designed kind of the

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cases that we'll go through is first we'll we'll spend most of the time on kind of an at retirement

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um Persona and really looking at um modeling a range of retirement factors

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um and then uh in toward the end we'll kind of switch to looking at a pre-retirement situation so adding some

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savings and pre-retirement situations and then a quick look at some tax planning

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um situations so the at retirement persona

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is um is you know fairly complex but really not you know we're talking about about

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eight little factors here um a roughly two million dollar portfolio

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um it's a joint household um both age 61 almost 62 so just before

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they could um file for Social Security um they still have a mortgage but that'll be paid off soon

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um and um they have some rental income and they're looking to spend about ten

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thousand dollars um a month We'll add in a few other um little things that are kind of both

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typical and also um places where we can talk about um some of the power of income lab to

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really um capture some of the ways that that people's lives can look so for example

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we'll throw in a downsizing of their house maybe moving to a condo in 10

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years we'll look at how to um evaluate different Social Security

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claiming um possibilities we'll look at a pension

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and uh uh a a specific expense plan in

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this case I used self-insuring for long-term care but that could be a stand-in for for any kind of um specific

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uh spending goal so with that I'm going to switch over to

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our software and we'll see you know the balance here

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um in this in this Baseline what I've done is what we find people will often want

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to do it's it's it's definitely not the end of the line and you'll see why but all I've done here is put in this

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household's portfolio um and you can see that they're they're

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spending possibilities with this portfolio are nowhere near um what they actually want with this

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which is ten thousand dollars a month um I'll use this uh we'll go over the assets first of all but then I'll talk

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about why um although I understand why people sometimes want to say well you know I mean put everything else aside just look

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at the portfolio and let's see what we can spend um and and I want to talk a little bit

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about why that's not a good idea um but just to to kind of highlight what

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we have um in the portfolio here we've got a joint brokerage account um of eight hundred thousand dollars I

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believe I put the yeah the basis is at 600. um both of the spouses have a workplace

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plan of 500 000. um I also threw in a non-qualified

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deferred comp plan um so for those of you who haven't seen this there are a couple of account types

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in income lab um where you can specify how that

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account is being um as being distributed okay so typically with the non-qualified driver comp you

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do have to say you know okay this is how I'm going to take this uh this amount of my deferred comp if you have you know a

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deferred comp plan with many different slices and sets you're going to have to enter each one separately it's basically

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you know for each chunk you know what is the distribution plan for that

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um that same those same capabilities are available for inherited accounts so the inherited retirement account in this

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case it's an IRA that's fairly typical of course um there's also an inherited Roth option

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but again you have these distribution set settings um in this case we've just set it to be

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a lump sum let's let's imagine this is sort of the end of the of the 10-year period and they're just hey we'll take

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it all at that point you could certainly do an installment um plan as well and it will

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automatically figure out you know how much needs to be taken out um in each year and each month

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um for for that inherited account so this is uh you know this is all

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that's in this plan other than just a set of Baseline expenses of of

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um of ten thousand dollars a month um and we saw that that's that's not going to be

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enough for this household um and a few things when people are trying

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to to look at these and say well what's what's the um you know what's the what's the withdrawal rate is often what people are

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after you'll see here okay well it looks like it's it's it's somewhat under four percent right

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um now there's a few things that are really important here in income lab it's what we're all about giving really

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customized advice to clients so there is no right answer to how much you can

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withdraw from a portfolio in particular it's going to depend a lot on

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um the length of the plan on the fees on the allocation and so on and any change

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to those is going to change how much you're able to take from the portfolio um but uh we can look here and ask for

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example well how long are we planning for these these folks are in their early 60s if we go to Power planning

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I can see okay we're already planning for a 34-year retirement um and that's uh you know that's that's

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longer than maybe you might you might be used to seeing um for for those cases where you're

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looking at you know the four percent rule for example um but one crucial thing and this is actually our default I switched it on

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here I I I'm planning for straight line you know adjusted with inflation

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spending um that's not typically how people actually behave

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so I'm going to change this to include the retirement smile

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by just going to retirement and changing it to age-based so now my

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spending will change depending on how old I am in

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in the retirement smile okay and you can see here if I go to my

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income scenarios I can compare all right I got an extra thousand dollars a month in spending just by planning for my my

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spending Behavior to change over time as I age um In This Very typical

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um kind of ski slope um shape so again this is the default in income lab

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um and you can see that the power of it especially for younger people is that you're able to spend more when you're

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younger and typically need it by not planning to spend so much when you're older when you probably won't spend that

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much anyway so this is all based on you know probably the most well-known research is is David blanchett's but

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there's there's other research on on kind of the life cycle of spending the

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the Go-Go's logo and no go years there's a lot of different ways of talking about this but you can see how how powerful

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that is and already now we've we can see okay that the withdrawal rate quote

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unquote is is up to almost four percent or actually probably is four percent um but but again this is not enough for

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this household because if you remember we actually had um had other things for example

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um they both have social security so so let's add Social Security we'll go to cash flows

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mark them both as eligible let me take a look at my notes and make

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sure that uh okay

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all right so we're going to assume uh 2500 primary Insurance amount for John

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and 3 500 for Mary um the primary Insurance amount is what you would find on somebody's social

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security statement which they can get from the Social Security Administration electronically it's the amount they

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would receive at um normal retirement age which is what the Social Security Administration calls

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it or sometimes people call it full retirement age um so it's the amount that's neither reduced for claiming early nor increased

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for claiming later for delaying um and and so it's always a monthly amount and that's how you would how you would

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find that there are other ways an income lab of of getting to Social Security estimates

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um this is a very straightforward way way to do it and now we can see okay if

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they both claim as soon as possible which is um uh you know in January in a month

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um the the amounts that they would get if they wait until full retirement age it's going to be the the full Pia right

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okay so now let's add this so we're adding um six thousand dollars

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in future inflation adjusted income

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and this is a okay so we added six thousand dollars here um and that added you'll notice more

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than six thousand dollars or let's see I guess we were we were close to eight

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thousand so um it didn't add uh quite a a dollar for dollar amount because

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what we've now uh put ourselves in is a retirement

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Hatchet situation so a situation where the withdrawals for the portfolio

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um have to make up in this case 100 of their of their income early in

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retirement until they hit Social Security right so this is the beginning of of the main reason why

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we really in in doing full holistic retirement income planning we can't just

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focus on portfolio withdrawals one reason is that smile right so okay we're

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drawing a certain amount early but we're going to withdraw less later on and another is this fact that outside

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cash flows non-portfolio cash flows are super important for most people and

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um in in this situation asking you know how much can I withdraw for my whole life um there's no one answer to that right

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we're going to withdraw a lot early on and then when Social Security comes in we're going to withdraw

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um less and then that amount is going to continue to go down through life so really the question that we focus on an

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income lab is what can I have right and and this is think of it as a

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full retirement paycheck which the makeup of which will change over time

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um so maybe initially it's all portfolio withdrawals and then later on we're going to get

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um we're going to get more and more uh other types so let's look at kind of this this full

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plan um so here I've added in

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the other parts of of this household so we have now a rental income

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um a single life pension self-insuring long-term care and a housing downsize

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um all within the plan so let's go over how you would enter each of those

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um for the housing downsides I've actually added the assets

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um so if you if you're looking to build kind of a full picture of someone's situation you will typically want to

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include their assets that will help lifehub have uh you know a richer uh

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Fuller picture of their full financial situation um and so adding the Assets in here

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can be really nice for for that even if they're not buying and selling assets but if they are buying and selling them

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this is the place to to put them in so let's say we we own one two three main street

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um and we're gonna we're gonna plan to sell it in 10 years for eight hundred thousand dollars uh and we're gonna

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estimate that at that point um you know because we get an exclusion on this as our primary residence and

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maybe there's some other reasons um our basis is is 600.

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and at that same point we're going to purchase

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um a condo for 450.

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um I also put uh the the mortgage on 123 Main Street in here they have a hundred

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thousand dollars left on it with a three and a half percent um interest rate

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um and they're gonna be paying that off in just a couple of years here it's a normal amortizing loan

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um this is a really nice feature typically expenses that um when they go

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away won't be replaced with something else um so they're not

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um you know groceries they're not gas they're not you know kind of ongoing Insurance they're kind of a special

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thing you'll want to call those other or variable expenses so a very typical

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situation is a mortgage that goes away so we're going to need to make sure to fund that mortgage but when that

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um when that expense goes away it's not that we're going to well let's make up for it by buying more wine or something

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it's it's just well once it's gone it's gone so that's why this is an other or variable expense typically if you have

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specific expense goals um that are notable

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um you know meaningful in size and will go away this is where you're gonna You're Gonna Wanna put those as other

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variable expenses and I did put um so so a mortgage or an a liability is

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a typical one of those and you can put that in right in liabilities if there's other ones

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um so for example here the long-term care expense you you'll want to put those under the expenses tab in other

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variable expenses um so here I put four thousand dollars a month um

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for um I guess that's five years oh no four years

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um uh toward the end of the plan um so there's a there are a lot of ways you could you could do this kind of

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thing um you could move it earlier you could make it bigger um in order to be even more conservative

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and and kind of see what it would cost to quote unquote self-insure for this long-term care but you know other other

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things might be um you know maybe maybe there's a big expense of wedding you're funding or kid

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you know grandkids educations right any kind of specific expense goals

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um that's that's where you want to put those okay

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so now we can look at the entire picture

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here and we've captured um the the two million dollar portfolio

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the mortgage payoff the housing downsize we've included Social Security we've got

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um rental income I forgot to show you that one uh self-insuring long-term care and a ten thousand dollar spending goal

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and you can see now um they're comfortably um meeting their their spending goal

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um we see the full picture here which includes the sale of one two three

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main street I'm going to click that off so I can see more of this okay we can see early on

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we're taking out extra so again that's a good reason to um not to focus on portfolio withdrawal

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rate right because here we actually need to withdraw even more in order to in order to handle the

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um in order to handle the mortgage and then later in the plan we're also funding some long-term care now it may

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turn out we don't need to fund that right um but we're planning for it in order to be conservative here and saying well

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what you know how would I need to adjust my spending today in order to make sure that I have a reasonable chance of of

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funding that liability in the future so now we can see kind of this this richer set of

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um of income sources and why just focusing on portfolio withdrawals is is not a

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great idea okay so there's a few other things we could do um with the plan now

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um we could for example explore

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different funding levels for Social Security so let's let's say we want to

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we want to look at taking social security as early as possible

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now what this should do is change our our actual spending rate and you can see it did it went down as expected because

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we have less in Social Security um

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so Social Security will start next month now

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right um and uh and because of that we're also

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taking less from from our portfolio um and so the income adjustment plan

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will have changed as well so this is a another crucial thing about income lab and the income adjustment plans

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so um we're not just after kind of an answer to the question of what can I

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spend although that's a really important one and that the default way that we we had approach retirement is by saying

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okay let's build a picture of a household including their

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um kind of risk uh profile right so so how willing are they to adjust income

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down in the future and we say well how much can we spend given given this but we also want to plan for what would

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change that spending so what would cause us to to adjust our our income so here

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by by moving retire by moving Social Security earlier it's going to take a 25

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drop in our portfolio uh to trigger an adjustment

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but if I go in and now push these later

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so now we'll delay to 70 for

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for both uh both these people and of course you know I've made them the same age if they were different ages they

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would be staggering things um and all of that's handled if there were spousal

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um okay so now in this situation um actually there's there's not a huge

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effect on um on moving their um on moving their uh

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Social Security later so it does um it does put the the downward

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adjustment a little closer um you know two percent closer 23 instead of 25.

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um and that's you know that's to be expected um the reason is we have more portfolio

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withdrawals that the blade of the hatchet is is larger um

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because we've delayed Social Security right because you see a lot more pink here and that means that there's more

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sequence of return risk in this plan than in the one where we take uh Social

24:02

Security much earlier so that's the trade-off between Social Security um claiming early and and late now for

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for a lot of households you'll also see a a large change in the amount they can spend by delaying for this household not

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as much um but that's that's the key trade-off and it's a trade-off you see an income lab because you have that income

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adjustment plan right now for this family this may or may not be important

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to them that that small difference in their in their guard rail their lower guard rail if it's a more risk-averse

24:36

household um it certainly you know could be an argument for taking social security earlier just to push their income

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adjustment plan out a little bit

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okay now let's switch to um I think I already had it in here so

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let's switch to a um a situation where they're delaying retirement so let's imagine that instead

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of ten thousand dollars um all right here let's go back to the the

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main income plan let's say instead of ten thousand dollars um they actually want fifteen thousand

25:13

dollars in spending

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so the the current plan isn't going to hit that right it's uh there's gonna be bad news

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um for this family what did I do oh I must not have saved it in here we'll just do it here

25:54

okay so now I'm I'm not quite not quite hitting it now I'm fairly close here so there's there's some small changes I

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could make in order to in order to hit my spending goal but let's imagine it's a bigger Gap here um

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one option is clearly to delay retirement right the news might be well we can't we can't afford to retire right

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now um let's let's push it out a few years so um

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what I've done in order to um in order to to switch this plan to a pre-retirement plan is

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um they were set to currently retired which really says um okay well then you know I'm already

26:31

retired I retired in the past right um but I can set the actual retirement date let's say we're going to retire

26:36

three years from now um and right now

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um the the system will take the earliest retirement date you set and say okay

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that's when I'm gonna start um building this retirement income plan so now in this case I have them set at

26:53

the same date um so that's that's one thing to do

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um another one is if I'm if I'm in pre-retirement um I I if I want to have that kind of

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full picture with with full tax estimates and and for Life Hub to really you know uh display what's what's real

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in this this family's life I want to go ahead and put um the

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the amounts um for their pre-retirement

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um for for any salaries or or you know income that'll that'll uh that'll go away at retirement I want to make sure

27:34

that that is that's in here um so other otherwise you're going to

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see some strange things in life hub for example if you have a a a savings plan it's going to look like you have a a

27:46

shortfall because it's not going to know where to where to take your savings from um so the other thing is I want to make

27:53

sure that I put my account contributions in so uh I've got them both saving fifteen hundred dollars a month from

28:00

their from their paychecks into their workplace retirement plans okay so

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um those are the those are the main uh the main things to change if you're doing a pre-retirement plan so

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um set the retirement date make sure you have the pre-retirement income uh in the

28:20

plan and add your account contributions

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um so now let's uh

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okay um so now they're they're still not quite

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uh not quite getting there um another thing you can do

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is uh is change the income setting the income

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setting is uh is basically saying how what's my attitude toward the trade-off

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between um between current income so how much can I

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spend right now uh and the chances I'll have to pull that back in the future so

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now if this is where a household that is maybe a little bit more um willing to accept some some

29:21

variability in their income then you could you could push that income setting up

29:37

okay so they're getting a lot closer here we're only a few hundred dollars out um you know there's there's a lot of

29:44

different things you can do um and and test what what changing those

29:49

goals would do um to the the income so for example if we got rid of the Legacy goal that

29:55

wasn't a huge Legacy goal but um you will see okay that that did it right so you can

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you can kind of see because we're always building a holistic um custom plan for a given household you

30:10

can see what each portion of the plan is doing to the proposed income so that 250 000 adjusted for inflation Legacy was

30:18

costing us you know a couple hundred bucks a month um and and so you can really see the

30:23

effect of of that over time okay

30:29

um there was uh there's there's a few other things I wanted to go over before we we go to questions

30:35

um one was this plan has a um

30:40

extra let's go back to the to the main income plan

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this plan has a um has a pension in it um and it's a it's a single life pension

30:57

okay and this one I actually have said not adjusted for inflation so this is just 500 a month that John gets

31:04

um whenever he's if he's alive um and you can see kind of it's in Gray

31:10

because it's not editable here you know if if John Dies this is going to go to zero if if Mary dies it's unaffected

31:16

um that's what a single life pension looks like if you had another kind of a pension you know maybe it's uh

31:22

um you know full joint life right now I switch it to it ends at the second spouse's death and

31:29

um regardless of what happens it stays at 500 000 500

31:34

um if it if this were a fifty percent survivorship this is where you would edit you know I'd set both of these at

31:40

250. um this is also a place you know sometimes especially with maybe a smaller single

31:46

life pension like this you might wonder okay okay when I when I said it

31:53

um as you know fully single life what what the software tries to do is say okay well given that this 500 might not

32:01

be around um for the entire life of the plan um because John might pass away before

32:06

the end um it's it's it's trying to adjust for that mortality risk right and so

32:14

um you know this isn't gonna uh have a huge effect on the overall plan because it's only 500 out of you know almost

32:21

fifteen thousand but we're at 14 8.50 right now

32:26

you might actually say well uh you know the expenses are going to go down if if

32:33

John were to die so um rather than adjusting for this this

32:39

fact that 500 could go to zero so doing sophisticated you know mortality uh

32:45

adjustments in the background you could say well actually if John Dies Mary will just spend less

32:51

and and take the full hit right forget about the 500 000. um I can do that by

32:58

um by switching to um to kind of pretending this is a joint uh life pension

33:05

and now this will stop doing those mortality adjustments because they're you know it thinks there

33:11

is no adjustment on on John's death and now we can see

33:17

it probably won't be a huge difference because it's such a small um yeah so this is a very small increase

33:22

but this this says okay fine if you're willing to take a 500

33:27

um cut when John Dies um this is how much you can spend so with those pensions which are they're

33:34

fairly typical to see kind of a single life pension in a in a household situation that's how you would

33:40

um how you would compare um you know planning for that mortality risk versus fully accepting the the

33:48

mortality risk so fully accepting you'll just set it to last for both lives and

33:53

and and the point then is okay if this goes away it goes away we stop spending that money if I set it to be you know

33:59

the way it really behaves where it goes away when somebody dies and I'm saying okay this is how much we'll spend and

34:04

this will give us a chance to just continue our spending um at that uh at that particular rate

34:12

um okay uh the last thing that I wanted to to go over

34:18

um was looking at uh looking at some of the

34:23

um the tax planning options um so let's go

34:31

to the tax Center so these folks had you know a decent amount of

34:38

um of I think it was about a million dollars in uh workplace

34:44

funds um so the question and they're fairly young so the question is would it make

34:50

sense for them to to do any Roth conversions um in this in this plan early on

34:58

um so we're just subjecting the um that that base plan that includes

35:03

everything right and that's really important because any change you know to

35:09

Social Security claiming or or to timing of things will affect

35:14

um the the tax calculations and we see in the tax center right away that

35:19

um it's saying uh bracket management to the 24 Federal bracket

35:24

um comes out from a tax perspective to have the most attractive profile

35:30

um so that one's marked with the star here and you can see you know it's it's got

35:36

um the highest net income the lowest total taxes the lowest average tax rate and so on now

35:42

um in your work process when you're when you're doing um tax planning it's important to remember

35:48

this this table isn't determinative of what someone's going to do so choosing

35:54

the one that has the the lowest you know estimated future taxes is not necessary necessary

36:00

um it could be that a particular uh client profile doesn't lend itself to

36:06

huge um Roth conversions maybe you want to limit them maybe you're balancing the

36:12

the Roth conversion profile with the fact that for example it's going to take some time for there to be a break even

36:19

so for these folks the estimated Break Even is as in um 19 years right now

36:26

that's well within a lot of people's life expectancy but it could be something that is you know not as

36:32

palatable to people and they say well let's you know let's head to our bets a little bit and and

36:38

um you know do some smaller Roth conversions so um this is a it's there's a there's

36:44

um there's a lot of Art and Science too um to tax planning um so to don't feel that just because

36:50

you know the 24 bracket comes out with the the lowest estimated taxes that that that's what you have to do uh you know

36:58

in the estimates here these are very small differences right even the 22 bracket you know we're talking about

37:04

basis points and difference over over their lifetime so if that's

37:10

um if that's more palatable to a client um you know please uh kind of go for it

37:17

um so for example if we decided that well the 22 bracket is what we want to focus on here

37:22

um we can then dive into what that would mean in terms of our um our actual

37:27

actions right so we can see for each year um you know how much we would be doing

37:35

in Roth conversions this this still involves you know almost a two hundred thousand dollar uh Roth conversion

37:43

um another great place to kind of look into how to implement a particular plan

37:49

is in um in life Hub oh and I didn't uh

37:54

I actually didn't edited that so um

37:59

let's go ahead and I'll show you another place to to change

38:05

we're going to go ahead and do the 22 bracket so it's in the advanced settings in taxes there's a lot of you know

38:12

fine-tuning you can do here you can you know we're automatically applying text uh cuts and job back sun setting but you

38:19

could turn that off to see what it would look like if that didn't Sunset you could set uh dollar based caps on Roth

38:25

conversions you can specify which years um Roth conversions are allowed I'm not

38:31

going to do any of that here um

38:37

okay so now I can see for my Roth conversions now because I this is a fairly simple plan

38:44

um uh we're doing equal conversions on both of them but if let's say for example you

38:50

know John we're we're retiring a few years from now and so he didn't have access to his 403b you would see all of

38:57

them coming from Mary's and and so on so you'd see some some interesting differences here but this is a a great

39:03

place to find kind of the um you know the implementation details for how to do this

39:11

um this approach um and over time you know we're going to see that uh you

39:18

know we're doing a bunch of Roth conversions those are those are going to go down um basically because they're they're

39:24

going to move all their money from the 403b here and then um eventually the the brokerage account

39:30

will start uh we'll start funding a lot of their a lot of their withdrawals

39:37

Okay so that's the uh we've kind of gone over now

39:43

um this this Baseline um you know how to how to include all of

39:49

these these you know kind of typical elements in a plan um we've looked at uh you know how to to

39:55

look at delaying retirement so income lab can be really useful if you're you know a couple years out from retirement

40:00

and we've looked at Roth conversions and bracket management how to find those

40:06

sources and destinations um for for conversions we didn't spend a lot of time on

40:12

um on life Hub here but that can be a really useful way to um to walk clients

40:17

through what um what the actual plan looks like and

40:22

see you know when different things are happening so for example um up here I see okay this is when

40:28

John's pension is beginning in 2025 and that's also when we pay off our mortgage um you know we're both starting Social

40:34

Security in 2031 um we're purchasing a condo and selling the main house in 2032 and then rmds are

40:43

starting in 2033 right so all of that is is visible in the timeline here and as

40:49

we um okay as we go through

40:55

um the plan we can kind of show for example that the taxes early on would be you know quite large

41:01

but that once we're done with our Roth conversions we we get taxes um really under control

41:10

okay so with that I think we've probably got a lot of questions um

41:16

uh take those along with uh and Derek and can jump in since I'm sure he's done a lot more real planning than uh than I

41:22

do I just play a planner on TV um so uh I would just say real quick for before

41:30

he jump to the questions we want to get to those I do on that last piece the life Hub you know for me that can be a

41:36

really great place to just actually sit down and review the assumptions of the plan even if it's a client you worked

41:41

with before and you you know it's more of an update meeting uh walk through make sure nothing's changed uh you know

41:48

walking through account balances that maybe aren't uh you know automatically synced um if

41:53

it's something that a client could tell you wait that that account's actually now about a hundred thousand dollars whatever it might be

41:59

um I do find that this like fully fully blown out view where you can see all the different pieces can be really

42:06

useful just for like a check-in meeting and as kind of the primary discussion point to walk through

42:12

yeah and the other thing is I I used the the normal kind of uh stepper to to

42:18

change data as we were going along here but you can actually do everything I just did um in life Hub so for example if you

42:26

wanted to change you know Social Security claiming for you know maybe one but not the other

42:32

I just hit save recalculate values and now everything in life Hub will will reflect that change

42:40

everything that I did can be can be done from within life Hub so if you're the kind of person who prefers this more

42:46

visual uh data entry um that's uh that's a good option for

42:51

you perfect thanks guys um we do have quite the quite the

42:58

questions here so I will hop right into it um first question is uh what is the rule

43:03

of thumb for portfolio allocation uh should it be set as the current allocation or the anticipated allocation

43:10

during retirement um any thoughts on on there

43:16

I would say it's definitely your target allocation so um now sometimes especially if it's a um

43:23

maybe it's a prospect situation you might want to do just two scenarios one with the current allocation and one with

43:29

the target allocation you think is appropriate for them and then you can compare hey you know this one provides you more income or it provides you more

43:36

uh appropriate guard rails and a better risk profile right so you can do that side by side planning but for the plan

43:43

you're actually going to follow make sure it's the target allocation and there's

43:48

um there's a bunch of ways that you can do that um I don't know if I'm

43:54

logged in as uh no I'm not but as a firm admin you can actually build model

44:00

portfolios as many as you want um and so maybe you have 10 portfolios

44:07

that you use in your practice um and then you can just pull those in to a plan and then if you if you change

44:14

the allocation kind of at the at the model portfolio level that'll trickle into all of the plans that have that

44:19

model so that's a that's a really nice way to use it for Target allocations Derek do you have thoughts there

44:27

I do think it can vary a little bit depending on um I mean if the question was getting at

44:34

like how say you're planning for an accumulator who's still away from retirement I think for me the

44:42

the retirement period is often so much what I'm looking at so even if somebody's 55 they're not going to

44:47

retire until 65 maybe they have a little bit higher stock allocation today than they would have in retirement in that

44:54

scenario I probably still lean with the retirement portfolio is what um I would model in that case just

45:00

because that's going to be the portfolio that's in effect for the longest period of time throughout the plan yeah and

45:06

that is a feature that we're we're working on here I know we've had some um some requests for kind of maybe it's

45:13

a pre-retirement post retirement portfolio um that's a very uh very much on the on

45:18

the roadmap for for income lab perfect um next question guys is uh why doesn't

45:24

Social Security amount increase due to colas

45:29

yeah so actually it does um there's throughout income lab

45:35

um there there's an interplay between uh real or today's dollar

45:41

um views and um and uh nominal or future dollar views

45:46

now in life Hub everything is nominal um that we may at some point offer you

45:52

the option to toggle between them but the reason is life Hub is is kind of meant as a client

45:57

um to be to be used with clients of course for your for yourselves as advisors as well but

46:02

um people tend to understand things better in in nominal um even though you know we actually

46:09

don't know what spending you know a hundred thousand dollars in 20 years means um but it's it's at least those are the

46:15

dollars in our pocket right um and so as you as you click through here for example

46:21

um you see me uh this social security amount going up every year um and and that is the that is the cola

46:28

um but if you're looking in you know the income plan

46:35

in cash flows

46:41

now this is set at real meaning today's dollars so don't show me inflation

46:47

adjustments is basically what this is saying and so here the Social Security amounts are are staying the same so

46:56

um 1750 you know in today's in today's dollars but if I change it to nominal

47:03

they'll go up and then for an implemented plan we will actually apply the actual Social

47:11

Security Cola in January to your implemented plan um so it'll it'll automatically adjust

47:17

in the right way perfect um next question here is uh how would

47:23

you model a mortgage that is paid off when the home sells

47:30

um yeah so that is a we we have some uh uh some further small features to kind

47:36

of continue to connect pieces of the plan so that you don't have to kind of

47:42

enter dates in multiple places um so in that situation

47:49

um uh I think you're gonna have to do some some multiple manual entry still

47:56

um so set a uh said the mortgage um to be paid off at that point

48:01

um I'm gonna have to think through it a little bit uh um yeah you probably would have to

48:07

adjust the mortgage amount and then put a big lump sum uh payment in your cat in your expenses

48:14

yeah right that's that's sort of an unsatisfying uh way to to do things so

48:20

we we do have you know we've made some progress already with those automatic liabilities so tying that to the the

48:28

asset sale is something that we're that we're planning on doing and uh here's a follow-up question on

48:33

the kind of the mortgage entry as well um I thought the mortgage would show up

48:38

under other variable since you checked the box in the mortgage entry section um so I could just maybe clarifying when

48:45

uh you do kind of check use this other variable on the mortgage entry where that shows up and how the user can see

48:51

that um yeah so the easiest way to see it is in is in life Hub um I mean you'll see

48:57

it in the expense graph as well but uh you'll see here other variable expenses

49:03

the home mortgage payment um and you can see it being you know paid off uh in a

49:08

couple years uh that'll that'll be tied to the liability

49:13

um which also is being slowly paid off

49:18

perfect okay and then this next one kind of has a few parts to it so I'll kind of walk us through the the scenario here

49:25

um so the desired income figure is essentially uh my core ongoing expenses plus income tax yet income taxes can be

49:32

lumpy or uneven how do we account for that um and what happens uh if income taxes

49:37

are 5 000 annually now they're 7 500 annually later then my desired income

49:43

will be list misleading and am I able to see future taxes and income lab for reality check purses purposes

49:50

um if the taxes are uneven uh should the advisor enter taxes under variable expenses for example

49:56

yeah so typically the full workflow if you're really dialing in a plan is first

50:02

to run um you know to build build the profile like we like we did here um you could even do it by kind of layering on the

50:08

onion like we did put the portfolio in add the other income flows uh and so on

50:14

and that will give you a feel for um okay what is a reasonable uh income

50:20

Target for these folks um you may be you know kind of Lucky like in this case where hey the ten

50:25

thousand dollars that was actually fully achievable um with within a variety of settings

50:30

um but then if you're doing anything where taxes could be lumpy and that's like you said that's that's fairly

50:35

typical though not all waves um then you would um then you would switch to

50:44

so maybe I'm in this income plan um and I forgot to change this one so

50:51

[Music]

50:58

and now I want to say well okay uh you know I know that I have this um this Surplus at least in certain years

51:04

but we're really not going to spend more than ten thousand dollars so then what you'll do is you'll switch to a um solve

51:13

for settings so instead of asking um you know what can I have which is a

51:19

really natural normal first question it's okay well you you we think you can have ten thousand dollars

51:27

um so now let's solve for it and what you're asking the software to do now is instead of solving for a um you know

51:35

kind of a gross income level and then netting it out uh for taxes every year it's saying all right

51:41

start me at ten thousand now gross me up um to handle the taxes

51:46

um in in any given year um and so now what you'll see in the

51:51

cash flows is a um

51:57

you'll see a portfolio withdrawals profile that is grossing up

52:03

you know in the Years where it needs more to handle the taxes

52:08

and you'll also see that really nicely um in life hub

52:14

um in particular now this is still in beta but should be coming out of beta soon um you'll see

52:21

you know kind of this this match um and and it's it's matched perfectly uh

52:30

we this is a one reason it's in beta uh when there's no Surplus we shouldn't show you anything there

52:36

um but you'll see okay we've got exactly the right amount of portfolio withdrawals to handle our expenses handle our taxes handle our other

52:41

variable expenses handle our Roth conversions and so on so the kind of the full workflow

52:48

um especially if there's a raw converting strategy is is to eventually go to solving for income

52:54

okay um next question here is um Caesar's noticed a big difference between uh

52:59

first month uh less and the following year uh income when someone oh looks like

53:05

they've noticed a big difference when they have the person retiring in the first month um versus when they're retiring mid-year

53:11

um and I think they're kind of talking about the net uh yeah and those situations any kind of insights on that

53:17

yeah because in income lab we're really trying to give

53:23

you good estimates for taxes um if uh you're retiring this does often

53:30

come up when you're retiring mid-year but frankly it can even happen if you're retiring in January if there are any

53:36

kind of lumpy income sources that are happening in that year we do have to

53:41

reflect the taxes that are related to that thing so like maybe you're doing that housing downsize in the first year

53:47

of retirement um or maybe you're selling a business um that will increase the um the taxes

53:55

due in that year now if if that happens um before retirement and you have a

54:00

mid-year retirement we do adjust for that so let's say you sell the business in March and you're retiring in

54:07

September um the the taxes you'll see in the um

54:12

you know in kind of this net number um they won't reflect all of that you

54:18

know the the taxes due on the business sale um they they will only reflect the taxes that are that are relevant to the

54:25

retirement period but even so that actually will be different than if that business hadn't been sold in that year

54:30

because uh you know that will have pushed us probably into higher tax brackets and so on so in a way there is

54:36

no um I I understand what people want probably is a a gross to net that

54:42

reflects sort of the ongoing expected tax burden during retirement

54:48

um but uh in order to do that we would sort of have to ignore a really relevant um

54:55

thing to your to your tax situation so you won't typically see such a big difference if there aren't those lumpy

55:01

um expenses but if you're retiring mid-year and let's say you know you had high salaries and then they went away

55:06

um there's almost no way to to avoid seeing that a slight difference between year one and year two one thing you can

55:13

do is push retirement to January um and that will you know at least ignore kind of pre-retirement tax

55:20

situations like high wages uh Fike attacks things like that but

55:27

um but there really is not a perfect solution that will both accurately um show you taxes and give you kind of a

55:35

better long-term feel that ignores pre-retirement and then um next question here in the

55:41

income setting example when you moved it to more aggressive um how would you explain to the client the specific trade-off you know

55:47

aggressive may be ambiguous for some clients so maybe if you can offer just some pointers there I'm kind of

55:52

explaining that yeah um and actually we're working on some really cool features to to help you tell

55:58

that story more um so we're expecting those um next year hopefully q1

56:04

um but but for now what I would say is whenever you move um income settings

56:09

um to the more aggressive uh stance what you're saying is hey I I would rather

56:15

spend more now and accept the possibility that I'll have to pull that

56:21

back later um now I'll be pulling it back from a higher level right so a certain amount

56:26

of pullback would just put me back where I would be if I were to be more conservative from the beginning right so it there are people who will just say

56:33

well look that that sort of gravy I'll I'll take that and be willing to to pull back there are other people who whose

56:40

lifestyle and and financial resources are such that they can afford to be more conservative

56:46

um so actually that was kind of the situation we were in with these folks is they wanted ten thousand maybe that's

56:52

really all they needed and maybe their full plan was giving them 14 000 or

56:58

something um or I forget what the net was 12 or 13. um you you one thing you could do

57:04

then is just pull the uh the income setting back and say well look you don't have to be so aggressive and that's

57:09

going to have a payoff for you in the sense that uh there's a lower chance that I'll call you you know

57:16

counseling a reduction um and income I know Derek do you have ways that you kind of talk about that

57:22

trade-off yeah so for me it

57:27

um I I actually often find myself in a situation where many of my clients don't even want to spend what they could spend

57:35

um so a lot of times I am pulling that back to like a conservative setting just because whether you know if their target

57:42

is really to only spend ten thousand and it's saying they can spend 14 000 even at a conservative setting

57:47

they don't really need that but for me um I think what you said it first is is

57:52

exactly right it's all about uh are you willing you know what do you prefer do you prefer to spend more now with the

57:59

chance that you're would have to reduce that spending in the future or do you really want to

58:05

um go the other direction and estate planning is relevant there as well you're going to preserve more estate pass on more Legacy

58:12

um the more conservative of an income setting you use and so really how important are those competing goals for

58:18

a given client yeah and if you want to see what those

58:23

um settings mean um like I said we're actually building some some cool um visualizations to to see how the

58:31

guard rails move as you move that slider um but uh it is

58:37

to the extent that this this helps any given client if you go to the power planning

58:42

um you'll see okay so the conservative setting is targeting an income level

58:50

that has you know an estimated zero chance I ever call you with a reduction obviously you could still get a

58:56

reduction right this is within the the model that you're using whether it's your Capital Market assumptions or or

59:02

historical right if things turn out much worse than our assumptions then you could still get a reduction but it's targeting a zero percent chance

59:10

um you know moderate is targeting a 20 chance still relatively low um that's why it's called moderate

59:17

um and aggressive is starting targeting a forty percent chance so almost a coin flip you're saying well give me give me

59:23

an income level that there's a almost a coin flip that you call me and tell me to reduce right

59:28

um and so these are just these are different like personality types um it also there's there's an effect on

59:36

depending on how this person is is um is sourcing their income right if they've got a lot of Pensions a lot of Social

59:42

Security compared to their overall income being more aggressive that could still have guard rails that are fairly

59:48

wide right because if if you have a lot of non-portfolio income um it's going to take a bigger move in

59:54

your portfolio to force you to to make a change in your spending whereas if you're finding most of your spending

1:00:00

from a portfolio um being more aggressive also probably means that that

1:00:05

um that downward adjustment guard rail is a little closer um and and for some people it might be too close for comfort

1:00:13

perfect I know uh we are up on our time uh we do still have a few more questions

1:00:19

in here um if you guys don't have a few uh hard cut off we can work through a few of

1:00:24

these um for our users um we will send the uh recording afterwards so if you have to hop off and and we're getting to

1:00:31

your question after you can uh definitely catch the recording um to get the question and then um if we didn't

1:00:36

have a chance to answer your question you can also drop your question in the survey after and then one of our team members can also reach out

1:00:43

um but Justin uh next one here as I'm um just looking it out to see what other people have voted up on oh um in the uh

1:00:50

if the Legacy amount is leaving the condo is being left in the condo of the house should the um the user still put

1:00:57

an amount in the Legacy field if if that's enough then no you can go

1:01:02

ahead and set a zero in the what that Legacy field is really how much of my portfolio do I want to leave behind so

1:01:08

if there are other assets that that can cover their legacy goals go ahead and put it at zero

1:01:13

um the it's the um the software is always trying to balance

1:01:19

um the goals Legacy goal being one but know that if you're actually following an income lab plan and you'll see that

1:01:25

in the plan Test Section as well you know there's no point at which the software you know assumes that you're

1:01:31

that you're dead so you always have some life expectancy even 30 years from now if you're still alive it'll it'll still

1:01:36

assume you have some life expectancy so there's no there's it's always trying to keep you you know north of zero it's

1:01:42

never saying well good next month let's spend all our money right um so setting a zero Legacy goal is

1:01:48

perfectly fine um you'll you'll still see in life Hub you know they're not going to zero in those situations because at the end of

1:01:54

the plan they're they're not assumed to to you know know that they're you know passing away tomorrow

1:02:01

and the next one here is uh does income lab account for medicare premiums and is social security adjusted for those

1:02:07

premiums it does so you'll see medicare premiums split out

1:02:13

um so the Irma portion so the income related uh let me think

1:02:19

something annual amount um uh you'll see that inside taxes so it

1:02:26

may be that there is no hell yeah there's there's some Medicare Irma here you can see some years it's on some

1:02:31

years it's off right depending on there's a two-year uh staggering of your Magi calculation

1:02:37

that goes into this if you want to include the Baseline medicare premiums in the

1:02:44

plan explicitly just go into the advanced settings and say include base

1:02:50

premiums as an expense item um I wouldn't say that there is a particular reason to go between Baseline

1:02:56

and uh and other variable but it's really up to you in that case on how to how to include them

1:03:02

this is also you know you can put in what the part B base is a preference Part D base for for the particular

1:03:08

client we we do kind of an average as a default and that that tends to work for a lot of people

1:03:14

but if they don't have Part D or they didn't have Part B you can turn those off as well or if they're maybe they're not claiming

1:03:22

at 65 maybe they're going to continue working you can turn that off and set the set the begin date for for Medicare

1:03:30

if sex sounds uh interesting uh first time we've gotten this question um how do you show Roth conversions of fixed

1:03:36

indexed annuities over several years prior to turning on Via um glwb income

1:03:44

I'm not specifically sure yeah I'd have to think it through

1:03:52

um yeah maybe we can take the hello yeah

1:03:58

you got the name uh Rodney will will look into that one for

1:04:03

you uh and then we could take one more um is the total on the income sourcing net of tax

1:04:11

so income sourcing um

1:04:17

depending I guess where you look so so if you're in the income plan

1:04:23

and looking at the cash flows then the total is gross of tax so you know here's

1:04:30

income sourcing um

1:04:35

and the table will be you know we there's a there's kind of a subtlety here we call it gross spending to kind

1:04:43

of say okay this is the amount that's going to fund our our spending when it's gross of tax

1:04:48

okay um there are other Concepts uh you know in particular if you're in the tax tab

1:04:56

um here what you will see is a total gross income the reason that's a slightly

1:05:02

different term is for the IRS certain things matter to your tax bill right

1:05:08

like things like maybe it's reinvested dividends or um you know kind of things that count as IRS income but aren't they're just you

1:05:15

know sort of passive things that you're not actually using to fund your your spending so that's why there's a different stare and you'll sometimes see

1:05:21

these numbers be slightly different on the tax tab you're looking at total gross income from a IRS standpoint for

1:05:27

income sourcing you're kind of saying hey okay but what's the stuff I'm really using to fund my lifestyle and what's

1:05:33

the gross amount here we've had have had some requests to kind of add in a tax amount here um to kind of bring those

1:05:39

tables together a little bit more so so we'll probably do that at some point perfect and our last one uh here dick I

1:05:45

think you might actually um you previously kind of talked about this on another webinar but around implemented plans um so if the proposed

1:05:51

income is based on the idea that the plan will be implemented on a monthly basis what if as an advisor I want to

1:05:57

only review and make changes on an annual basis uh does that mean the plan does that mean the proposed income with

1:06:03

the adjustment trade-off is not as reliable um

1:06:09

yeah I personally wouldn't be hesitant at all to um you know even if you did just want to

1:06:14

do an annual check-in right the plan is going to be if it's implemented it's going to be updated monthly it's going

1:06:20

to tell you if a guardrail was hit I mean at that point in time you could decide do you want to reach out earlier you know sometimes we hit a guard rail

1:06:27

and the market comes back and you know it turns out that an adjustment wasn't actually needed so I do think if you

1:06:34

were waiting just to check in annually um you know you're going to evolve or you're going to avoid some of those

1:06:39

false positives sometimes it might drift further into adjustment territory but um

1:06:45

I think that's definitely a feasible thing that you could do just realize that I guess some of the you know the

1:06:50

notifications in terms of like triggering now the Automation in terms of uh knowing that now's time to make an

1:06:56

adjustment you're just gonna have to go into the client's plan look and see where they're at are they Beyond where

1:07:02

the guardrail would have called for an adjustment and then you can make that adjustment at that time so yeah I really

1:07:08

don't see any issue with that just know that the implementation on the back end just

1:07:14

means that it's still getting updated monthly no matter what your actual meeting

1:07:19

frequency is with a client yeah I mean we do it monthly so that you you know at least monthly things are

1:07:26

updated um you know your particular Cadence your surge time of the year anything like

1:07:31

that any any business processes you have in place like some people might be doing you know meetings in May some people

1:07:38

won't be in September um so that's one reason we do monthly automatic updates um the other thing I

1:07:44

just wanted to point out is you know through a combination of of plan factors you wouldn't expect there to be

1:07:51

adjustments every single month um in fact you in this plan it only even sees

1:07:56

an upward adjustment every two years um on average right of course there could be situations where maybe there's

1:08:02

out of control inflation and so you have a lot more inflation adjustments or you know um

1:08:07

markets are really tanking right and so you might see multiple in a row but um you know typically you're not I

1:08:13

wouldn't have a lot of anxiety that if I'm not talking to my client every month about this I'm missing adjustments you

1:08:18

you won't be perfect yeah and to give a good practical example I mean you look back to what happened with covid

1:08:25

um if you didn't make an adjustment and maybe a plan would have been calling for an adjustment at the front end of the decline from covet

1:08:32

um chances are with the recovery by the time you know didn't take long for that to go down and come back up

1:08:38

you wouldn't actually need to make an adjustment uh so or if you happen to make the adjustment you know things were

1:08:44

covered and then you know you could get out to your annual meeting and make an adjustment later but um I don't think anything here is you

1:08:51

know precise enough in terms of you know that's not what we're going for we're just going for the general strategy of is it time to to cut things back uh

1:08:59

based on where the market's at overall yeah that's right so like these these guard rails they're in a typical plan

1:09:05

like this one there's an asymmetry right which is reflecting people's preferences that they would they would just like the

1:09:11

downside to be farther away than the upside I mean that's a that's a very natural you know human uh preference

1:09:17

um but yeah maybe this portfolio in in you know February March of 2020 maybe it would have gone to more down more than

1:09:23

24 right um and it would have triggered a guard rail in that situation um

1:09:29

then you know the next month it might be right back so um yeah I again I don't think it's a

1:09:35

when you get the notification on your dashboard well you know I need to make sure I call everyone today

1:09:42

well thanks guys and uh thanks so much for all of our users who uh participated for your questions uh for

1:09:48

those who hung on uh after um the time here we really appreciate just all the engagement

1:09:55

um and just all the feedback as well on the software um please keep them coming and uh Derek and Justin appreciate all

1:10:00

the work you guys put into the webinars as well I'm excited to keep those going up for our users next year as well

1:10:07

yeah thank you everybody thanks man have a wonderful day everyone take care