Lab Talk Tuesday - User Webinar February 2025

forgot to start the recording so we we'll uh we'll get that recording going um so for new features one that you may

0:07

have noticed already is on the plan scenario page so for example if you're

0:13

if you're in you know if you're in your uh list of households um there's a bunch of ways to

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get there but one way is you can click these three dots and this gives you access to anything in the household you

0:25

can just jump right to a place I'm going to go right to the plan scenarios and this is a place where you know income

0:30

lab was built originally to really provide a lot of action on scenario

0:36

planning AB testing things like that so you can have as many um alternative

0:41

plans as you want in a given household um but one of them is always primary and

0:48

previously um you had this one thing called the household plan this one that's still the name of it but um what

0:54

we wanted to do is give you more flexibility and allow you to promote any plan scenario you make into being the

1:02

primary plan for the household and primary plan just means um it's the one that we'll go to by default um and you

1:09

know it's sort of you know the the most important plan the one that you would follow if you follow one um and so a

1:17

couple things that we've done here one is you can now promote any plan scenario to be the primary plan and you can do

1:23

that just by clicking this little star um and it'll just move up and now you

1:30

can see the household plan has been demoted so the name household plan doesn't have any special uh meaning

1:37

anymore um the those you know that's just the default plan name if you create a brand new household that's will will

1:43

be the default name you can change it if you want um so that's you can just move those around by the way now you can also

1:51

reorder the other plan scenarios just um and that'll reorder everything all the

1:56

plan scenarios wherever you see them for example if I go into this household plan um if I click here this is how I would

2:04

navigate between the different plan scenarios I have for this particular household and now you can see moderate

2:09

is number two and and so on um but going back there so and that'll be sticky so

2:16

you know if I logged out and logged back in it'll it'll still be there the other thing is there's always been a little

2:21

bit of confusion around um tracking and monitoring plans or we've called it

2:26

implementing plans in the past we're we're shifting more toward this kind of nomenclature so um Implement kind of was

2:34

a little confusing to people what we mean mean by that what we always meant by that was tracking and monitoring meaning um you want income lab the

2:42

software to update the plan automatically once a month we do it at the beginning of the month by bringing

2:48

in whatever new data we can for this plan um so if you have Implement if you have integrated uh accounts then we'll

2:56

bring in New Balances if you don't have integrated accounts or if some of them are manual we will actually project

3:02

where they've gone based on their asset allocation um so we do as much as we possibly can that includes um we know

3:10

you know we track CPI so inflation and we we step bus forward in inflation if

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if an account has Social Security that's either begun now or begins in the future we apply uh the cost of living

3:23

adjustments to those every January so the tracking and monitoring a plan gets a lot of work done for you without you

3:30

having to do the work and now in the past you've seen a plan could have a

3:35

primary plan and an implemented plan that was confusing because clearly if something is the primary plan that's the

3:42

one you intend to follow so now what you'll see is the primary plan can either be tracked and monitored or not

3:49

and and that's it so um if I click this it'll take a second so I'm not going to

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do it right now but if I click this it will set this primary plan to be tracked and monitored you'll see it'll be a

4:02

green button instead that says tracking and monitoring um and and then you know that that that that um is is happening

4:11

um and then you'll see there's a there's a bunch of other options once you once you have one tracked and monitored um

4:18

you can still do some promotion and things but like if I had this household plan was being tracked and monitored and

4:23

I tried to promote this moderate plan it would say hey hang on you know you're tracking monitoring that plan are you

4:29

sure you want to do this if so how do you want to do it you want to still track and monitor this new one or you

4:35

know do you want to get rid of having a tracked and monitored plan so it's it's really smart about trying to make sure you're you're keeping on track and not

4:42

accidentally um you know undoing work that you've that you've done in the past so hopefully this will be a really nice

4:49

uh nice addition to to the possibilities um few other little

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things that I wanted to draw your attention to that can be really helpful

5:03

um and actually this one um can actually help with a few of the

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questions that we've gotten so um as you probably know and if you don't this is

5:15

uh can be really helpful to you um you can in income lab set up particular

5:23

account level distribution plans meaning if you have a particular plan to take

5:29

money out of an account uh in some particular way that that you want to

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override the normal uh plan for the account you you can do so and I'm in I'm

5:40

in life Hub here which you can get to over on the left which is just a you know a visualization of the entire plan

5:47

across all the plan years but it's also a place where you can do a lot of editing so I'm going to click on this um

5:56

457b and click on account and distribution settings and then this one happens to

6:02

have some other settings because it's a 457b so there are some things we would need to know but you can see if I click

6:08

on distribution settings I've checked yeah I want to specify an account uh a

6:14

uh a distribution plan here and since this one has a

6:19

distribution plan you'll see a little D in the upper right here which is a nice way to um kind of remind you that this

6:27

does have a distribution plan um this little subscript a is there if it's an annuity so if it's kind of um you know

6:35

has a living benefit or some kind of particularities to that annuity so these little visuals can give you a cue there

6:43

um one thing that's really important is sometimes people will try to build plans with a lot of complex distribution plans

6:49

in it and that's great if if you need to do that but one thing we do get a question on often is if you set a

6:55

distribution plan for every account in the plan you will get strange behavior um because

7:03

often the software can't actually follow all of your instructions and produce the

7:09

income that the plan calls for um so it will override your distribution plans if

7:14

it can't follow all of them um typical situations would be things like uh if you have to take rmds and that's the

7:21

only account you could take rmds from it'll take more than your distribution plan because it has to in order to follow rmd rules um but if I set up a

7:28

distribution plan for every account here but you know this is still saying uh you

7:34

know we need $247,000 in distributions this year um even if you set these to you know be a

7:41

dollar a piece or something for that year it'll just say well I got to take more so it'll it'll override it so

7:46

that's a really if you ever see strange behavior in your plans um if you just see a bunch of D's here that's a good

7:53

that's a good uh hint that maybe uh maybe there's more going on in the plan

7:58

than you had intended and that you know it really we should Reserve those distribution plans for just the cases

8:05

where we really need them instead of trying to you know truly you know to to use those distribution plans as like a

8:11

like a paint by numbers like make the make life Hub look exactly as you want it to um you'll also see those if I

8:18

click on the little pencil icon go to assets um you'll see it in the little

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uh just over the gear icon here that little D you know plan has distribution settings so that's a reminder to you as

8:34

well um okay the last one is just a reminder of

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I believe I did share this new feature um last month because it was out already

8:48

but I wanted to uh just draw people's attention to it again in case you didn't see it so we've been doing some work in

8:55

tax lab uh as those of you who've been with us a long time know um this this looks a lot different than

9:01

it used to it's really kind of been cleaned up and so on and one thing we really wanted to do was help people have

9:07

a better conversation about um Tax Strategies in

9:12

retirement and distribution strategies um and so one and you'll see a few more

9:18

changes to this coming up soon but if you look at this view strategies

9:24

section um you'll see a few things one is it it opens up this uh this full list

9:30

of the account distribution strategies to help you look at there's 20 different

9:36

strategies the question of okay we have a plan we we know how much W in

9:41

withdrawals we need to take from our portfolio but how exactly should we do that should it be um you know which

9:47

account should we take it from should we do Roth conversions and this is about have helping you have a conversation

9:52

about that it's um it some of our questions today which we're going to get to really revolve around this the kind

9:59

of art of Roth conversions and and uh tax distributions but we wanted to let

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help you have more of a conversation about it and and treat it less as kind of a prescription for you must do this

10:12

so a few things that we've done you can now um re Resort this uh this table just

10:20

by clicking on any of the uh any of the column headers so if I click once on

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average tax rate I'm going to start see the one that has the lowest average tax right across the plan click twice I'm

10:31

going to see the it's going to be sorted in the opposite direction click three times I'm back to normal I've I've taken

10:36

out the uh the Sorting there and when it's unsorted it's in it's listed by

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strategy type so it starts with prata then taxable text for taxfree and every

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other ordering of those and then it gets to Roth conversions and so on um but

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you'll also see this heat map inside of the table uh and the one change you'll

10:58

see coming is that this uh this table will be a uh more of a pop out so that

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you can see more strategies on the page so that all this kind of white space above is is actually used to show you

11:11

strategies so that you'll be able to see you know 8 10 12 of these at once on the screen maybe more depending on the size

11:17

of your screen um but you can see here for each category it'll be in a darker

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green if it's you know quote unquote better so higher net income higher total net Legacy lower taxes lower tax rate so

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um the first two are low is good the second two or the third and fourth are high is good and you'll see as you go

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down here that um we're getting more and more dark green um what this helps you

11:43

do is although we do still default to the one that has the highest net income

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uh and if that's the same across the board then we'll go to the highest net Legacy um it gives you this this visual

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cue that actually a lot of these are really similar um really these are not differences that are worth writing home

12:02

about you know take a look at net income here you know we're talking about $7,000 across a 30-year plan um the one thing I

12:10

can guarantee you is this is not exactly right over the next 30 Years right I mean we don't know exactly what your

12:15

returns will be or what exactly tax rates will be in the future so a $7,000 difference is really hardly anything at

12:21

all really even down you know as you look through some of these others the differences are not remarkable and so

12:28

our goal here is is to help you have more of a Art and Science discussion

12:34

about Tax Strategies and sort of help clients feel okay about you know maybe

12:40

yeah this one if you really look down to the last dollar it's projecting the highest value but but really any of

12:46

these are are providing value because they're in that kind of Darker green range um and so that's often an issue

12:54

people will look at you know this one's particularly common where maybe the 32%

12:59

bracket will be slightly better than 24 but only by a few dollars or a few you know basis points and just not not

13:07

really worth um uh making a huge deal over and so this helps you have a conversation with a client that says

13:13

yeah yeah we could we could Target 24 we could Target an Irma bracket um and we're still going to get a lot of

13:20

value okay so I think that's that's everything for um

13:27

new new um features um for those of you who have missed a few of these lapt

13:32

Tuesdays since I'm here I'll just point out another really valuable feature that we we added last year which is if you're

13:38

in tax laab this little um tool menu

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which you'll see throughout the app this little looks like an equalizer to me uh you know from Aereo

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um it it contains tools on pretty much any page in the software um it'll have

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things about you know how you want to view the values you know do you want to round them and so on but in a few places

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in tax lab and in life Hub you also have this generate report option um which

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will allow you to generate customized reports from in this case tax lab it

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would be life Hub if you were in life Hub uh including choosing which exact um

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views you want to show um and you know some of the reference materials a cover page and so on what's great about this

14:30

is uh let's say for example you actually wanted to show um you know a particular

14:37

year of the plan maybe it's not the first year of the plan which I have here maybe it's you know 2027 um I can just

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click on 2027 um maybe I want to show you know

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nominal instead of real meaning future dollars instead of today's dollars um and I want to show them rounded okay

14:57

great I'll hit generate report and now any values in that report that are of a

15:03

particular year will be in 2027 um looks like I I messed something

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up there but if I add it on 2027 it'll go um to 2027 it'll be nominal it'll be

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rounded and so on um if I'm wanted to look not at Roth conversions to the 32%

15:21

bracket but a you know 24 okay great it'll it'll um it'll pick out the data

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that you've chosen there looks like that's not sticky so be careful of that one we can get that

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fixed but um all right so that's a really valuable little tool if you're uh

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if you're looking for kind of customized um uh reports PDFs for your

15:47

clients all right so um that's it for

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new new features um

16:00

now let's go to some of the uh the pre-submitted questions and um Derek was not able to

16:08

to join us today um but I I this would have been a really good question for him but I'm gonna I'm going to address it

16:14

myself and I'd actually love to see some discussion of this on the uh on the

16:19

community so I'm just going to read a fair amount of this question because it it it has to do with what we were just

16:25

talking about on the Roth conversion so um the question was uh big Roth

16:31

conversions early on promised to generate enormous tax benefits later in life you know at least for for some

16:36

plans a lot of plans that is true but there's an inherent risk that neither partner will live long enough to reap

16:43

the full value of the benefits and uh a certainty of a huge upfront tax bill

16:49

early in retirement um versus that is a you know that's a big deal um those bills come with a high psychic cost for

16:56

some behavioral Finance problem um the stress it creates is real right writing stroking a big check is that

17:04

that just it can hurt um so it can affect kind of health and happiness and and and so on um so the question is how

17:12

to think about um that potential future benefit

17:18

versus those kind of hard or so versus those soft costs um so a few things here

17:26

just to there's more to the question but I'm just going to to address it so um even just on the hard cost side we

17:34

do try to provide um a feel for that uh

17:40

in the break even tab so I'm back in in tax lab I'm still on the compare section

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and I go to break even and here all we're doing is showing cumulative taxes

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uh projected through the plan and where they cross and you know in this case you can see that the projected taxes we're

17:59

not projected to break even for for 18 years sorry 19 years um now for some

18:05

people that that may be fine but for others that will that will really determine they'll say well that's just I

18:12

can't do it that's too far out in the future doesn't seem like it makes sense to me um maybe that will mean they'll

18:18

back off and we hey we'll do some small Roth conversions the reason that feels too long for them will will be really

18:23

important right if they think well that's because I'm not entirely sure we'll make it that long um then that's

18:29

one thing if it's because they're not entirely sure what tax rates will be so maybe they sort of disbelieve the

18:35

projections right well I think taxes are going to go up or I think they're going to go down and so on so each of the

18:41

reasons for that kind of um unease I think would be really important in determining how you take the soft side

18:48

of this into account so for example if it's because uh they're not sure they're

18:53

going to make it that long one thing I would do is make sure that we really have that discussion and look at the

18:58

longevity assumptions of the plan maybe the plan should be shorter um another thing to really understand would be the

19:05

tax situation of the airs so for example this is a break even on the um on the

19:11

cumulative taxes paid by this couple um

19:17

it's not a break even for the airs so uh if you have very high tax heirs who are

19:23

going to continue working you know maybe they're um Physicians or attorneys any any kind of high higher income

19:29

individuals the break even on the amount um received net of tax by the by the

19:38

airs maybe much earlier um depending on you know the tax brackets and so on so

19:44

in that case that that would be worth a discussion if someone is thinking well

19:49

tax rates could go up um one thing I would say is this is then a kind of

19:56

understatement of potential even in tax savings because if tax rates do go up

20:02

then the Roth conversion strategy will actually be more in your favor because you're locking in uh lower tax brackets

20:09

so those are just a couple things on the um on the hard side of it on the science side of it that we do have a break even

20:17

graph and again it's not a um you know we've solved it all for you here's the

20:22

perfect answer it's about a conversation of you know does this make sense to you

20:27

um another thing I would use is again this idea that they're sort of a sweet

20:33

spot um and yes there are you know numbers that are the lowest or the highest but because these are

20:40

projections decades into the future um we know that they're they're a best

20:45

efforts but not perfect and so choosing something in this you know darker green

20:51

range is still providing more value so for example here you know a prata or a

20:56

taxable tax deferred taxfree are in the you know 15 almost 16% range whereas

21:01

even if we do some um Roth conversions we're getting at least down into the 11s

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and 12s um for the for the average tax rate for the plan um you know still

21:14

dealing with a lot more net income and net Legacy so again it's an it's an art not just a science and then finally I

21:21

would say plans really are only um valuable if if people follow them so if

21:27

there are um kind of psychological issues with stroking a big check um I would take

21:33

those extremely seriously we can't kind of force people into a particular strategy just because you know a a

21:39

particular projection looks really good um it does have to be something that that someone could follow um so this

21:47

question went on to ask you know if there's some kind of way imagining some way that you can kind of balance these

21:56

considerations um in the software itself um and that's that's definitely something for us to to think about I'd

22:02

love to see some conversation about this in the community about how people deal with this are there um you know

22:09

conversations that work and so on um that to help people kind of deal with both sides of the Roth conversion

22:16

issue um let's see here there's a bunch of Roth questions today so we'll we'll

22:21

stick here um okay this is a a um a really great

22:28

kind of Baseline question that we get a lot um which is if you're doing Roth

22:34

conversions often what you'll do is you'll you'll end up um projecting a

22:39

bunch of tax early in the plan so for example I mean this is a this is going to be a really high um tax plan because

22:46

we're targeting the 32% bracket if I go to explore and then

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taxes I have these huge tax bills early on you know even if I'm targeting a a

22:58

lower strategy we should see that they'll just extend for longer um you

23:05

know so now instead of 160,000 we're having kind of 50 to 60,000 but it's for a long long period of time um if you're

23:12

doing a plan that is asking how much can I spend um that is not the answer to a

23:20

how much can I spend plan is always gross of tax so this is a little can be a little confusing if you're coming from

23:26

a different kind of software um the default in fact the only way to build a plan in most software is to specify how

23:35

much you want to spend and then ask the software is that a good idea or not

23:41

um asking that question is fine it's just that it's often not the first question you want to ask so with income

23:47

lab by default what you do is you create you you tell the software all of the

23:53

resources that somebody has that they can use to live on and then ask hey given this how much can I spend and

24:00

because a lot of that for um people who have uh investment

24:06

accounts a lot of that money is going to be in IRAs 401ks and so on um the amount

24:12

that can be withdrawn from those accounts is a gross of tax concept so you can't

24:18

um whether you have zero tax or 25% tax does not matter to your IRA it'll it'll

24:24

only produce a certain amount of kind of sustainable withdrawals adding given risk level so if you take out more gross

24:30

of tax it's higher risk you take out less it's lower risk whether that ends up netting you the same amount or less

24:36

doesn't matter to your IRA and so that's just a a challenge that retirement planners have financial planners have uh

24:42

is that those concepts of sustainable withdrawals and so on are gross of tax

24:48

Concepts and so um you know even though I don't like it for example the 4% rule

24:54

that's a gross of tax uh you know quote unquote Rule Do not don't don't follow that rule right but that's that is what

25:00

that concept is it's a gross of tax rule um so what people end up having to do is

25:05

you you first if you're working with kind of a new household or maybe you don't have a great feel for what they

25:12

truly can afford you build that plan with all of their resources in it and

25:17

then you ask how much can I spend you get a gross of tax answer that will then give you a feel

25:22

for the range of spending that they that they can support on a gross of tax level so for example here uh if I go over to

25:31

the settings I'm I'm right I'm actually a little aggressive here um so I'm at a

25:39

I'm targeting um a 30% risk of overspending a 70% risk of underspending if you're

25:46

interested in this kind of concept of overspending and underspending uh I wrote an article for kits.com couple

25:52

months back that is that outlines this kind of uh language but the goal in

25:58

asking how much can I spend is you're saying what can I spend so that I'm living within my means that's basically

26:05

what what you're asking but you don't want to be living way below your means unless you just don't need the money so

26:10

you're asking what can I reasonably spend what's the most I can reasonably spend taking the risk I'm comfortable

26:16

with um now there's a range though because uh you know not everybody has

26:22

the same attitude toward that question uh some might say hey I want to spend as much as possible if I have to pull back

26:28

from that later no problem um and so in this case we can see this this family

26:33

could spend 21,100 a month or if they're a lot more conservative they would spend

26:39

$19,100 so it's a $2,000 a month difference $224,000 a year that's not

26:44

nothing um that's kind of a big deal um so this gives us this range now once I

26:50

know that that's you know the range of things I can spend I can ask okay how

26:56

does that compare to what I would like to spend and one thing you can do is click on

27:01

that spending capacity or retirement paycheck um and click on income

27:08

goals and if in my plan I have established a uh a level of actual

27:14

desired income so kind of a budget this will show me do I have a surplus or a shortfall in this case I have a surplus

27:22

and it's actually a pretty big Surplus it's 4,000 plus a month um and now I can

27:27

ask myself okay how do I deal with that um should I use it should I change my

27:33

plan so I'm spending less meaning taking out less from my portfolio uh how what

27:39

how should I um address this and you can see these are actually net of tax

27:44

numbers right so the the gross of tax was actually 20,000 plus um at this

27:50

point you could decide to spend the Surplus by doing Roth conversions right so essentially this is this is monthly

27:57

um it's going give you you know $48,000 in uh in extra money you could

28:04

spend on taxes every year um and so you could do Roth conversions to to fit in there if you want to do larger Roth

28:11

conversions though and you still want to spend this amount of money typically you you're not going to just apply the Roth

28:18

convergence to this plan and say yeah I'm taking 20,000 out 20,600 out um and

28:24

you know if I've got to spend $100,000 this year I'll just you know spend less on my my lifestyle I want to keep the

28:32

lifestyle the same but also do the Roth conversions in that case you'll go to the plan's expenses

28:41

um and you can see here I have $112,000 a month in uh in living

28:48

expenses and at the top of this tab it says this plan's primary question is how much can I

28:54

spend if I want to instead of asking how much can I spend and getting a gross of tax answer if I want to build a plan

29:01

that specifically spends $122,000 a month I'll just click it over to changing the primary question to how can

29:08

I spend $112,000 um and then uh it'll build me a

29:15

plan that targets that amount uh plus any other special

29:22

expenses that I have in the plan so income lab plans don't require you to

29:27

itemize your budget or anything like that but typically you will see in a plan some specific we call them other

29:34

variable expenses other SL variable expenses so those are kind of notable um

29:40

big expenses might be the most common one I see is paying off a mortgage um so

29:46

you'll you'll list that one and it's and it's temporary right so it's a so it's a variable expense um it'll go away at

29:53

some point um so now we want to Target that and um gross up the withdrawals to

29:59

handle any any taxes that we have in that year um so you can see here

30:06

um if I go to net it's 12,000 I'm grossing up an extra 2700

30:12

bucks a month to pay for the uh the taxes this plan didn't have Roth

30:18

conversions but if it did I would probably be grossing up quite a bit right if I were targeting the 32%

30:23

bracket I'd be tar I would be grossing up you know $10,000 a month uh 10 rarily just for the period when I am uh doing

30:31

Roth conversions and then after that it would go down so to answer the question how do I deal with Roth conversions when

30:37

paying the taxes would reduce my net income too much um the answer is change

30:43

your plan to Target a particular net of tax spending level um it's still helpful

30:48

to start with a what can I spend plan because then you at least get a feel for yeah this is this is an area I can I can

30:54

Target right here um targeting 12,000 is clearly within our budget targeting

31:00

40,000 would not be it just it's our resources don't don't support that no matter if I do Roth convergence or not

31:05

that's just that's just beyond our our ability um we've T talked about this

31:12

little uh dance between net and gross of tax on some of our um our master classes

31:18

as well I think the the master class we did with Jason juwel uh in sort of the

31:24

early to middle part of last year um would be a really good one for that um Ashley I don't know if you can drop

31:30

the uh the master class uh Link in the chat but that's a a helpful one to look

31:36

at sure thing

31:44

okay um yeah and somebody also asked you know if the spending capacity exceeds

31:50

the identified expenses the difference is essentially a funding Surplus um where can I see that Surplus

31:58

so I just uh I just shared one of those I'm going to go to one that has a uh

32:04

that actually will have a difference here um so I'm switching to this plan that has a different portfolio and is a

32:09

little more moderate um I can click on this retirement

32:14

paycheck card and for those of you who don't know we this is a new feature as well you can change what this is called

32:21

so uh I forget what the default is now but it can either be called retirement paycheck or spending capacity so if you

32:27

just have a preference with how to talk with clients that's a a place you can change that so one is there and then on

32:34

income goals so now I'm seeing the Surplus if I go to annual it's going to

32:39

show me the annual Surplus uh the other place is in life

32:45

Hub so if I go to life

32:56

Hub this plan was still running here we go um oh yeah this one has Roth converion

33:02

so this is a great example of a plan that had um a lot

33:09

of a lot of excess a lot of surplus um so you know we can see here

33:15

the expenses we can see the medicare premiums living expenses the mortgage payment and so on and does this

33:24

income support the expenses and the Roth conversions uh you can just do the

33:30

numbers in your head there or if you want to view it um go to this upper right you have an option of going to

33:36

either this mind map view which is the default or this flow diagram these are

33:42

called Sand Key diagrams but U just thinking of those flowcharts um and you

33:48

can see okay if I stack up all of my portfolio withdraws other income and so

33:53

on and I compare it to my itemized expenses my Baseline expenses and my

33:58

Roth conversions so and this includes the taxes I'm still netting 20,000 a

34:04

year in this case these are annual numbers um so I still see the Surplus um I don't know if this one will have

34:11

any so this plan you know it it basically can self-fund the Roth

34:17

conversion you don't actually need to do a um targeting of of that net income um

34:23

but if I had you wouldn't see a surplus here because it would be hitting it exactly and if I built the plan you know

34:28

if I added another uh you know $50,000 in Baseline expenses I would see a a shortfall here instead of a surplus so

34:35

that's the way that you can see um you can kind of connect the dots between that core question people have what can

34:43

I spend in retirement given my resources given um my goals given some other

34:49

things about me like how long I think I'll live or my spouse will live um you

34:54

know what can I spend it's a way to connect that to the what would I to spend um and and have a conversation

35:01

about that for this particular family they had a lot of surplus and one way to address that is to be to say well let's

35:07

go ahead and embrace the Surplus and just do some Roth conversions you know you're essentially spending your Surplus on the Roth conversions there are going

35:13

to be other people who can't afford to do that and you'll have to build a different kind of plan there will be some hard conversations where even

35:20

without Roth conversions there they would be overspending um but this is a a place you can do that in in life hub

35:32

all right um somebody was asking how we project

35:38

tax rates into the future and I think the question was specifically about um

35:44

well what if tax rates are different than we expect in the future uh it's a really good question um currently the

35:50

only options you have in income lab are whether or not you're you're projecting um tax cuts and job act um

35:58

sun setting so if I go to anywhere in the in the software and I'm on looking at a plan if I go to this little three

36:05

dot menu there's a lot of options here and I'm going to go to Advanced plan

36:11

settings and taxes and then you'll see here apply 2026 C tax cuts and jaob back sunsetting

36:18

so by default it's sunsetting those uh tax rates or the current tax rates um to go to a higher

36:27

tax rate next year um I remember when we uh first launched this was far in the

36:33

future and now it's next year um if you want them to be lower you can uncheck

36:39

that um and and those are the only options I definitely understand um you know the

36:45

desire to sort of state state your own Choose Your Own Adventure on that um if that's something that in the community people are really interested in it's

36:51

definitely something we could do uh we probably have to think about sort of the easiest way to do it maybe it's you know just add a couple points

36:58

to each bracket or maybe you state your own brackets uh we'd have to see but if that's something people are really interested in we'd be happy to to

37:04

address that um but yeah currently that's what we do and we're also we are applying your inflation assumption to

37:11

the thresholds for those brackets so the bracket thresholds do go up over time so if you're looking at them in future

37:18

dollars you'll see the brackets are going up if you're looking at them in today's dollars they won't because we're stripping inflation back

37:26

out all right I know we got a bunch of questions in

37:32

the uh in the Q&A so I'm gonna hit some of those now um okay allbridge um I do not

37:44

I'm gonna have to get back to you Dave on the Albridge integration I don't have that like at my fingertips on when

37:49

that's coming so uh apologies on that but we can uh definitely get back to you on it

37:55

um can you track and monitor a before retirement or does it have to be at retirement this is a great question so

38:02

the if you're tracking and monitoring a plan no matter what the plan is we will update all the values so we'll step you

38:09

forward one month in time we will um update the account balances either

38:15

through Integrations or through your stated Target asset allocation and so on the difference between whether you're

38:22

doing that in retirement or pre-retirement is just that in if it's

38:27

before retirement we're doing all of that but we're also updating what your

38:32

projected retirement paycheck would be and what your projected uh balance at retirement would be um so and we're

38:40

updating what your guard rails would be in the future um so essentially it's

38:45

kind of like coming into a plan and hitting rerun uh it's just that you don't have to do that so the plan is

38:50

always rerun for you so that if you look at it uh you know on the first second third of the month depends when the data

38:56

comes in you'll just have an updated plan so it's it's totally worth doing um it works

39:02

well if you're in retirement the the software is doing all

39:08

that updating but it's also saying instead of how much can I spend it's saying should I change anything that's

39:16

the the key difference once the incom plan itself begins is should I change anything instead of what can I spend

39:22

that it changes the question um so the reason for that is once someone is

39:28

into their income plan and you've kind of set them up with you know whatever it is $10,000 a month or something um at

39:34

that point people don't want to make changes every month especially if they're not really worth doing um if

39:39

they're small right so you you kind of shift to a um like an inertia right like

39:45

like just let things keep going unless it's really important and then we'll kind of hit a guard rail or do an

39:51

inflation adjustment and so on so that's the key difference is if you've implemented a plan if you're tracking

39:56

and monitoring it and pre-retirement that's great you'll see all these numbers be new every month if you're

40:01

doing it during the income plan the uh the retirement paycheck will not change every month it'll only be if you

40:08

actually hit a guardrail you can see an example of how that works in the stress

40:13

test um so I just went over on the left here you got retirement stress test um

40:19

even if I shift it to view it in nominal meaning you know the dollars that exist

40:24

in the world right the real ones in your uh in your wallet um you can see that

40:30

the number of actual adjustments this plan would have had starting in 2007 there's only one two 3 four five six

40:37

there's six since the beginning of of the plan um you know in in almost 20

40:42

years it's made six adjustments um four of them were hitting a guard rail so

40:47

these green ones when it hit the upper guard rail and said hey you can spend more and it has had two that were

40:53

inflation adjustments the blue ones are inflation adjustments um and you can

41:00

see behind this in kind of that light blue is showing the plann income

41:06

adjusted for inflation and we all remember you know 20212 bunch of inflation and so that's

41:13

what led to those inflation adjustments um so this is what a plan looks like if it's in retirement it's not making

41:20

changes to your spending every single month it's it's saying you know hey let's only make adjustments when it

41:27

really seems Seems necessary

41:34

um okay let's see

41:40

here okay somebody was asking uh if a plan is set in track and monitor mode

41:46

what's the best practice for changing the income if a client is changing their spending either spending more or less um

41:52

so I think my answer to this would be would depend a little bit on how much they're changing it it um if you have a

42:00

plan that's being monitored you're essentially always telling them hey here's how much you you know you're

42:08

eligible for um very few people are going to spend exactly the same amount

42:13

every month um I think we all know from our lives uh it's the uh it's the

42:19

non-recurring uh expenses that can kind of get you and so if someone's spending a little bit below their Target and then

42:26

you know they need to uh whatever have a big car repair or a roof on the house or

42:31

whatever that's just kind of the way things work so if if all we're talking about is some months we're at th000

42:37

2,000 below some some and then occasionally we're 5,000 above that kind of comes out in the wash so I wouldn't I

42:43

wouldn't make any huge differences if there are major life changes though um

42:48

especially if those relate to the uh other variable expenses in the plan then

42:54

you can make the changes um I can actually see if I can do it here let me go to

43:04

uh I'll hit track and monitor this

43:10

plan and then now if I make any changes right now because this plan has no history uh it's it's not going to do

43:16

much interesting but if this plan had been implemented it was being tracked and monitored for you know years for

43:21

example and then I wanted to make a change this is how I would do it um

43:27

let's just wait till it uh gets ready and while we're waiting for this uh can you track and monitor multiple plans no

43:34

just one per per household

43:41

um okay so now there's a couple ways to um to affect this plan if all you're if

43:48

all you need to do is update the values of the plan I can hit hit reconcile and just uh change some of the the value

43:57

using the plan if I'm making major changes one thing I can do is copy the

44:05

plan and maybe I want to get rid of you know some expense maybe you know

44:10

what this travel thing it's not happening we had a health thing or we decided we don't like traveling get rid of

44:19

it I'm going to finish the plan wait for it and now this plan is ident to the

44:28

plan I had except that it is missing that one expense so now I can say it's

44:34

going to tell me hey you already have a monitored plan what what are you trying to do here are you trying to just start over forget about that plan or do you

44:40

want to treat this as a continuation of the previous one but just make these adjustments typically this is what

44:46

you're going to want to do um and I'll say reconcile the monitored plan and proceed now as I said in this case all

44:53

I'm really doing is implementing a different plan uh because this had no history whatsoever uh but if you had a

44:59

plan that had a bunch of history now you would you would see the effects having gotten rid of that expense uh you know

45:07

this this plan will look quite different um it's it's a very different plan you can do the same thing for any differences you can get rid of accounts

45:13

Add accounts change a legacy goal you can do any changes you want and then

45:19

treat it as a continuation and and that's that's how that'll work so if there are major changes in the in the

45:25

household resources are spending that's that's the way to address

45:31

those all right see here let me look for and uh

45:38

feel free to it looks like people are doing it but if you hit the little thumbs up uh in the Q&A then I'll know

45:43

kind of which ones have a lot of folks wanting an answer to that

45:49

question okay okay is it best practice to switch

45:56

from how much can I spend to targeting a particular net of tax spending before looking at tax lab Roth conversion

46:04

strategies um that is a really good question um I think you certainly could

46:10

I don't think there's anything wrong with doing that um I often see people actually peing at

46:18

tax lab beforehand just to get a feel for whether this is a a household where Roth conversions are going to be helpful

46:25

um ahead of time but I would say if you if you know you're going to end up uh and and one reason to do it beforehand

46:31

would actually be uh if the family seems to have a big Surplus you may actually

46:36

just be able to spend the Surplus on Roth conversions and keep it as a how how much can I spend plan um so that's

46:43

that's one reason you might want to do it that way um if you see a nice big Surplus find a Roth conversion strategy

46:48

that fits within the Surplus and then you're you're good and then once they're done with Roth conversions I don't know spend it on something

46:54

else maybe they're charitably inclined or something like that so so that's one reason to do it otherwise if if they

47:00

definitely don't have a big Surplus I think you would be it would be well within kind of best practices just to

47:06

Target a net spending level and then explore tax lab from then

47:12

on um okay uh another question here on

47:17

assuming plans are not linked meaning I think um that they uh I'm assuming you

47:23

mean maybe not integrated I'm I'm not sure exactly but do changes to

47:29

assumptions affect other plans so this is a really good question the the the

47:36

changes to a particular plan settings will not affect other plans so anything that you see either in advanced plan

47:42

settings or um I'm going to actually

47:53

unimplemented itss you do in in uh life life Hub that only affects this plan in fact it doesn't affect any copies of the

48:01

plan even or plan scenarios it's only this one plan however if you make changes to your Capital Market

48:07

assumptions then that affects any plan that has that that uses those Capital

48:14

Market assumptions um the reasoning there being you know if if you have an

48:20

assumption and for inflation you have an assumption for you know large cap returns presumably that's an assumption

48:26

that you you have for all of your clients um so so that changes to

48:33

assumptions that are kind of global like that will affect any plan

48:38

um income lab does have three ways you can do the plan analysis we have um a

48:45

historical setting which will use historical sequences of return and

48:51

inflation um and then there's two Monte Carlo uh approaches one is

48:57

traditional the other is regime based so here if I go to settings Capital Market assumptions I see my traditional um and

49:05

I see my near-term and long-term regime based assumptions uh if I change my regime

49:13

based assumptions any plan where I'm using regime based Monte Carlo will be affected uh if I change my traditional

49:19

any plan that has the traditional chosen um will be affected the way that you can

49:25

find that setting is in advanced plan

49:32

settings I go down to plan analysis this one's using historical if I change it to

49:38

regime to traditional it would use the traditional assumptions uh and so

49:47

on okay

50:00

he this was a good question like I said so many questions today about uh tax lab and really good ones um how should we

50:06

think about minimizing total taxes versus maximizing net Legacy which is more optimal to focus on so the reason

50:15

we um we we do put these four um measurements in in in front of you and

50:23

you can use them in a conversation with a client but not all four are always

50:28

super important to the client so by the way you can click on these to leave them open um so maybe you just want to focus

50:34

on two of them um you can also decide not even to show certain ones and you

50:40

can actually save that settings so that whenever you're in here this will be the default and you'd have to turn them on

50:46

to show them so in answer that question you'll probably want to decide which

50:51

which stats are really the most important to have that conversation with the client and and only show those

50:57

um we use the total net income and net Legacy as the primary um values here

51:05

because that's kind of those are real dollars um that someone can spend either you or your heirs um I do get the the

51:13

point though that total taxes you now often they're all in the same direction in which case this is just a great

51:19

conversation but if you ever see them in different directions um we Show net

51:25

Legacy and net income as being more important than total taxes there may be a client who just hates paying taxes and

51:31

in which in which case um they're just more focused on this um and and so you

51:37

know you may have a conversation with them about um paying more taxes but you know maybe that would result in a uh

51:43

still a better net Legacy that's fairly rare but it does it does happen and we have a an an article in our help center

51:50

on that um but that's that's really the the thinking is okay we'll focus on these which are dollars that actually

51:55

hit somebody's bank account as opposed to these which are how much goes to the government um it's not that

52:01

these are unimportant and as I said typically they go in the same direction but if they don't then we are preferring

52:07

preferring these by the way another feature that you might find useful um the default is that we'll show the

52:14

difference in green as sort of a savings or a better life but if you click this

52:19

little left right arrow um we'll just switch the sides uh and so now you can talk about it as a cost instead of uh a

52:27

benefit some people just prefer to think of things as you know cost this does

52:33

also get to kind of uh behavioral Finance which is we you know we feel costs more harder than we feel gains uh

52:41

uh so um that could be a useful a useful setting for you

52:47

there all right we only have three more minutes so

52:55

um Justin do you want to touch on the the green star so like since we're on this screen right now and if you switch

53:01

right back I know there was a couple of questions around that sure yeah so the uh the green star is really just it's

53:08

the default that we're showing you when you go to to tax lab um and the way that we choose that is we simply find the one

53:15

with the highest total net Legacy and then if every strategy has

53:21

the same total net Legacy um which by the way if you're targeting a net um not

53:26

net Legacy the highest total net income so if you're targeting a net income they

53:32

will all be the same that just because you've told us to make them the same until then we'll go to total net Legacy

53:38

um so it's just a sorting of the of the table and then we'll just Mark the one that happens to have this number be the

53:44

highest if that doesn't choose a unique one we'll go to net Legacy it almost would never happen but

53:50

if all the net legacies are the same then we'll go to Total taxes and and total uh or average tax rate but it's

53:56

it's really just a way to kind of get you started uh as I said uh we're hoping

54:02

that this new treatment will kind of help people understand okay well this is the you know the one down to the dollar

54:09

that's best but you know going in either direction is uh is totally

54:18

reasonable all right got two more minutes so I might be able to hit one more here

54:24

um and by the way if you do maybe I'll just continue addressing the one we were just talking about if you just have a

54:33

client who's particularly focused on net Legacy that's fine maybe they just don't spend much and they're not interested in

54:39

spending that much um you can for example use the uh the Sorting function

54:45

here and start looking at them just in terms of net Legacy and you can see actually you know you're going to be

54:52

paying a lot more taxes but uh the the net Legacy is not bad in these approaches um and you can actually see

55:00

you know slightly lower um yeah I mean it's actually it's kind of all over the place um in terms

55:06

of the the projected net Legacy again we have a um an article on net Legacy and

55:13

total taxes paid um in our help center to kind help help you understand this weird interaction of total taxes versus

55:19

Net Legacy so if they're just truly not that interested in their own income that that is one thing you could you could do

55:27

um again it that's only at the end of the plan so going back to that first

55:33

question we had today if someone's really concerned about not having one person not live to the end of the plan

55:38

you'll want to think a little bit about uh The Heirs and you know maybe getting

55:43

money into roths actually is valuable to The Heirs if you know if if somebody's uh thinks they may path away in the next

55:49

you know 10 or 15 years instead of 30 um so really like tax planning of this sort

55:55

is such a rich area um we're providing a lot of great data to help you have those

56:00

conversations but it's it really is a conversation and understanding what what the clients care the most about um and

56:08

then helping find a strategy that that matches that and what we've tried to do with this new treatment is not sort of

56:13

say well there's one approach and that's the one you should take we want to allow you that conversation that leeway to to

56:19

choose one that really works uh best for the client so with that um we will take a

56:25

look at any of the questions we didn't answer and try to get back to you um from our customer service folks uh to

56:30

answer any of those questions or we can push them to next month if they're more general questions that are worth a conversation and hopefully dererk will

56:36

be back by then and um and we'll get get those answered so uh really appreciate

56:42

everybody uh coming to lab talk Tuesday and we'll uh see you hopefully next week

56:47

at retirement income Intel till then take care