Hi, welcome to Lab Talk Tuesday everyone. I'm Ashley Dudzik. I'm the chief marketing officer here at Income

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Lab. And today I am joined by Derek Tharp and our very own Ben Vega from our

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account team. Um, as you'll notice, Justin is not here today. He's on spring break with his family enjoying a

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well-deserved vacation. Um, but I will hand it right on over here to Ben and

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Derek to kind of kick us off for today. Hello. Thanks, Ashley. Good morning,

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everyone. Thanks for joining today's Lab Talk Tuesday. Yeah, we're excited to go over some questions that we have uh been

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presubmitted for us. Um, we have a line of questions. We'll try to get through most of them as we can. Um any that we

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don't get to, our support team can certainly assist and will respond with either an article or help, you know,

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video or maybe a scheduling of one-on-one um if that's more in detailed for some of those questions. Um I'll be

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ping ponging some questions off Derek here. So hopefully uh give some insight on on to how he would typically handle

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households in income lab and some of the questions that we've had. Um Ken, we've had quite a bit of these type of

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questions even through our training sessions. So, um, really good questions submitted through. Um, we do have

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actually a video that Justin provided, uh, pre, uh, pre him leaving. So, um,

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it's a question that comes up quite a bit around guardrails. So, that's been a really kind of flavor of the past couple

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months and really as far as when we started Income Lab. Um, just questions around how they're calculated, um, where

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are we getting those numbers, how to explain it to clients, and how those conversations are going. Um, so Justin

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put together about a 10-minute video. It'll take up some time here, but it'll be a lot better coming from him. I am

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trying to get over a cold right now, unfortunately. So, hopefully uh his voice is a little more clear for us. Um

1:52

Derek, did you have anything to add before I uh before I get into this video here? Nope, I don't think so. Nothing on

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my mind. All right, perfect. All right, let me pull this up

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here. And this is my first time doing it through Slack here, Ashley. So, I hope this uh this goes through, but let me

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know if audio is is going. We have a great community here. We're patient. All

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right. Let me know if y'all can see this.

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Yes, I can see it. Perfect. You might have to share your sound though, so maybe just make sure you do that through Zoom.

2:32

Okay. And

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Is there a setting under the uh share button? I didn't see anything pop up.

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Um I guess I'll just test it and if you

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know Yeah, just test it out. Let me know if it doesn't go through. Okay. All right. So, here's again another uh about

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10 minutes here just going to go over the guard rails. Um how again can how we're getting to that number. what's going to cause it to change. Um, so

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hopefully this video helps kind of answer some of those questions that were submitted on the guardrails.

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One of the key questions you can answer with income lab is given my resources and other things in my

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how much can I spend? And you get the answer to that in the retirement paycheck or spending capacity of a plan.

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And you also get information on when you would change either up or down the

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amount of spending. Those are the guardrails. We often get questions. Okay, that's that's great, but how are

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you arriving at that number? So, I'm going to go over that here and also talk about how you can talk about that with

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clients. So, how do we answer that question? How much can I spend? Well, in any kind of deep analysis of retirement

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spending, what we're really asking is given the resources of the plan, the

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length of the plan, um certain amounts of planned spending, given the assumptions about how um returns could

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work, inflation could work, and so on. What can I spend? And in figuring that out, we look at a huge range of how the

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future could work. So you could have high returns, low returns, high inflation, low inflation, and so on. And

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in each way that the future could work, there is an amount that you could spend

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um and exactly hit your your goals. And if we stack those all up, they might look something like this. So we'd have

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some scenarios where you'd have to spend very little to get through that world. In some scenarios, you could spend a ton

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and still get through that world. But in most of them, you're kind of here in the middle. And if I asked you, what's the most likely amount that you could spend?

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The the best answer to that question, what can I spend? You would say it's this one, the one right in the middle.

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That's the one where half the time you could have spent more, half the time you could have spent less. So, it's the the

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best guess. Another way to think about this is that that best guess is the

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dividing point between the chances that you're overspending and the chances that you're underspending. To the left of

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that dividing line is the underspending zone. It's the the spending capacity or

5:20

the retirement paycheck that is living within your means. Anything to the right is in the overspending zone. It's where

5:27

you're living above your means. So, I'd encourage you to adopt this way

5:33

of thinking about finding a spending capacity or retirement paycheck. You're trying to balance the risk of

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overspending. Of course, that's the one people worry about the most. We don't want to overt tax our resources, but

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you're trying to balance that risk, the risk of overspending with the risk of underspending. Typically, that means

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you're going to find an initial spending capacity or retirement paycheck that's

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within the underspending zone. how far within it will depend on the how much

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the spending matches up with the what the client wants to spend. So if they

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want to spend a ton, you may have to um creep up a little bit in the underspending zone and take on a little

6:15

bit more risk. You're still in the underspending zone. You're still living within their means. Uh or if they if

6:20

their resources support a lot of spending and they really don't need it, you can go further back in the

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underspending zone. So you might be able to choose a risk of underspending of around 90% only a 10% chance of

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overspending and that allows things to get worse. The risk of overspending to

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go up, the risk of underspending to go down and they're still in the underspending zone. You can find this

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overspending underspending concept in a plan on the main dashboard. So here we

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have a plan with, you know, two and $34 million in portfolio plus social

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security and lots of other resources. And altogether we're at an $18,600 a month retirement paycheck. And

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you might wonder where that comes from. You can just open these settings on the side, go down to income setting, and

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you'll see that here we're targeting an estimated 20% risk of overspending and an 80% risk of underspending. your risk

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of unspending is well above 50%, so you're well within the underspending

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zone. And so this is kind of a moderate setting. You can see that you can be on

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just these default income settings. You can be as high as a 99% risk of

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underpending. So only a 1% risk of overspending. Extremely conservative, but that that works for some people. Or

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on the default, you can go as high as a 60% risk of underpending. um sorry as

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low has a 60% risk of underspending and a 40% risk of overspending. So you're

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getting more aggressive. The other place you can see the effect of that is in the guardrails. So here again, if I ramp up

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my risk of overspending and I spend more, um that also means I'll have less space between

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uh now and having to potentially take a pay cut and more space between now and potentially taking a pay raise. Then for

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example, if I was way on the other side, now I have I could go down 29% before

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taking a pay cut and I have a very small um difference before I take a pay raise.

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So that's just the trade-off between my current risk of overspending and

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underspending and where these guard rails live. So that's an explanation of

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where the retirement paycheck or spending capacity comes from. Uh we're

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essentially helping you find a place where you have the right mix of overspending and underspending risk. And

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for those of you who have done the uh master classes in the past, you may remember that when we say risk of

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underspending, that is equivalent to probability of success. And we've we've spent a lot of time talking about why

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probability success is the wrong uh measure for retirement plans. Um, but if

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you're wondering kind of what we're talking about, that's a you can do that that translation in your head. It's much

9:12

better thought of as uh balancing risk of overspending and risk of under spending. So, if a client is asking,

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well, how did you get that number? One way to address that is to say, our role

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is to provide you with a retirement spending level that is living within your means. uh and that means not

9:32

overspending your resources, but we also don't want you to be undersspending and take on a high risk of regret where

9:39

someday in the future you look back and say, "H, I wish I had spent more." So, we're trying to balance those two

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things. And that's what this is. This we believe is uh within your means, but

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it's not massively underspending your resources. The next question people

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often have is, okay, great, but why are these guard rails what they are?

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Think about it this way. An upper guardrail is telling you when it's time to spend more or at least when you

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should feel comfortable spending more. When would that happen? It would happen when your risk of underspending is too

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high. It's just become incredibly high. And so in all of our defaults, um, this

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guardrail is hit whenever your risk of under spending hits 100%. What about the lower guardrail?

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That's the one people tend to care more about. When would you take a pay cut? It would be when your risk of overspending

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is too high. And it's probably not going to be, you know, a 51% chance of overspending. You need to be really sure

10:39

someone is overspending before you recommend a pay cut because people don't like to take pay cuts. So on all our

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bond defaults, this would be hit whenever your risk of overspending is 75% or more.

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You can see these levels in the advanced plan

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settings. If you go to income settings, I'll click customize just so

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that you can see them. And you can see, okay, our upper guard rail is when a risk of under spending is 100%. Our

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lower guard rail is when my risk of overspending is 75%. You actually can

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customize these, change where you want them to be. You know, for example, I can change my lower guard rail to be at a

11:27

risk of under spending risk of 90% instead of 100%. So to summarize, the retirement

11:34

paycheck spending capacity and the guardrails all come from measuring the

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risks of overspending or underspending for a particular plan. And these

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are specific customized levels for the particular plan you're looking at. So

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there are no rules of thumb built in here. They're using the actual plan with its particular sequence of return risk,

11:57

sequence of inflation ris risk, mortality risk, longevity risk, and coming up with a retirement paycheck

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that is living within someone's means, but is balancing the risk of overspending with the risk of regret.

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And the guardrails are the levels at which your risk of regret is getting too

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high in the case of the upper guardrail and the risk of overspending is getting too high in the case of the lower

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guardrail. And because we're constantly measuring these risks, the guard rails

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will actually change over time. Um, in fact, if you saw a plan where the guardrails are not changing, that would

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be that would be strange. uh just think about, you know, these are the guardrails today. In 10 years, they

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better be different um at the very least because these people will be 10 years older. So, that's kind of the the the

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magic of using overspending and underspending risk to to manage the

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retirement paycheck and the guardrails is that you're always taking into account whatever the risks are on the

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ground at that point. Um, so hopefully that helps explain both uh for advisers

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what the analytics are behind it, but also giving you some language to use with clients to explain where these

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numbers come from.

13:15

All right. Thank you all for uh for watching that

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one. I know it's it's coming from Justin. it's a little clearer and I think we've had that question just come

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up quite a bit um on just around the guard rails and um just really how to have a conversation around those. Um so

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there was a a moment in there when he talked about how the guardrails change and we actually got a follow-up question on that um in that space. Um there's

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several reasons why guardrails would change. Um when we're looking at um the retirement stress test and and how it it

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shifts through, you know, historical times, you might see it kind of um scatter throughout uh historical time

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periods. I'm going to pull it up here so we can actually see that going through. Um but there's several reasons why that

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actually will change as you're moving through. And um one of the main reasons is as time passes on, we're moving across that plan. Um the plan length is

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shorter. Um so there's there's as that aspect of the longevity setting and the

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other kind of reason we would see um that happen is as far as like economic

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circumstances so like inflation differences changing in mix of resources. Um there's quite a few um

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areas where the guardrails just will adjust through time and um looking at pull this up here. Realize I'm not

14:33

actually sharing it. Apologies there. So you kind of see what I'm talking about here.

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So, as we're, you know, looking at historical data, we had a question on, you know, why why these upper guardrails

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and lower guardrails are shifting on us as we're looking through these historical time periods. And as I mentioned, you know, longevity, you

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know, the the month passing through this plan, economic circumstances, and then

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we have um capital market assumptions. So, there's changes in asset allocations during those time periods. So, um,

15:02

Justin talked about the risk levels, um, that were changing, you know, from month to month as well. Um, so those are just

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some factors that why you'll typically see guardrails not stay flat or constant, um, especially through a

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historical time period. Um, so that's where again that ongoing engagement with income lab moving monthtomonth, how did

15:20

that plan update? How do those portfolio balance update? Um, that's where it's going to be really key for for tracking those for your clients. So, um, Derek,

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yeah, I might jump in on that, too, just because I know that the question was there in the chat as well, but the the

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tricky thing to think about because I know sometimes people look at the downturn, they're like, "Oh, it's the lower guard rail is moving down too."

15:41

Um, if you are taking economic context into consideration, so you are thinking about um, you know, you're using that

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more dynamic way of thinking about your assumptions. when we see valuations are

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lower, we can also think about, okay, well, at this point, expected future returns have gone up a bit as well. Um,

15:59

and so, um, you know, that's part of what's happening there, why you're seeing that guardrail go down is because

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even though we've seen the portfolio go down, if we've seen the broader market context um or environment go down as

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well, now we might project something that's a little bit different based on that. And likewise, same thing when we

16:18

see the market raise, then you might actually see the guardrail moving a little bit the other direction as well.

16:25

Yeah, thanks for that, Derek. And I'm not seeing the questions through, so Ashley, Derek, if you in a

16:33

spot or in an area and we need to stop, definitely stop me as I'm going. So, appreciate that. Um, yeah, so the

16:39

guardrails, you know, that again, that's been kind of the the flavor of the year. So, we've, you know, definitely wanted

16:44

to spend some time on that. That video that Justin recorded, that will be available in our help center, so you can always refer back to it. Um, and then

16:51

you'll also have the recording of this webinar, uh, as you register for it. You you're automatically sent to video. So,

16:58

um, another question we had, pull up the list here, was around Roth conversions.

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So, we've had a lot of tax strategies and Roth conversion discussions. um get

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to Derek as far as like understanding, you know, how he models those and how he's um having those talks with his

17:17

clients. Um but really just wanted to show something, you know, something quick and simple on on a tax strategy

17:23

that I've built out here. Um just to kind of see how a Roth conversion strategy is applied. What are some best

17:28

practices in in the tax lab to, you know, kind of keep in mind um as we're looking at, you know, different, you

17:34

know, whether you're doing a Roth conversion or whether you're not doing a Roth conversion. um we'll go ahead and have the tax lab um feature here to to

17:42

really show us all the available strategies. So when we're talking about um you know are is there room to fill

17:47

with Roth conversions um does it make sense to with legacy you know having those early discussions with the client

17:54

just trying to find out you know what's their what's their trade-off right is it you know paying taxes now you know and

18:00

worrying about um you know Roth you know taxfree you know distributions of the

18:06

future or are we more concerned about holding on to our net income now and maybe legacy is more important right so

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um so those some some conversations you can certainly have here um using the tax lab functionality. Um some key features

18:20

if you haven't taken a look uh in tax lab before or you know you're you're trying to find some new ways to have

18:27

conversations around that. This view tax strategy heat map is probably our one of the most popular tools because it it

18:32

breaks out a nice table for you and it just shows all the available tax strategies and what their estimated

18:38

lifetime taxes would have been had they selected that strategy. So this can give you a nice starting point to you know

18:44

find that range find those you know bookends of of strategies that you may want to consider uh you know applying to

18:51

a strategy or just having that talk with your client of you know which bracket we would like to target whether it's ordinary brackets or whether it's your

18:57

Irma bracket. Um so you can view any of these strategies here and select them in

19:03

your tax lab and we can make changes to say okay what happens if we change it from 12% over to 22%. what what can be

19:09

an estimated lifetime taxes um compared to not doing a Roth conversion in a

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taxable tax deferred taxfree environment. So this first statistics landing page just breaks out just nice

19:21

and quick and simple for you. Uh some areas that you know the average tax rate discussion. We can see that if they

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stayed in the taxable tax deferred tax-free you know compared to a Roth conversion 22% just saves us about 7.3%

19:36

in average tax rates. Again these are assumptions. These are kind of that 10,000 foot view. You know if everything

19:41

stayed the same. So, we're not saying these are exact and going to be the exact numbers here, but this really

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gives you an idea of, okay, how aggressive can we get? Um, what type of net legacy was that going to anticipate

19:53

leaving? Um, are we in, you know, tax deferred money here? You know, if we did not do Roth conversions, um, and, you

20:00

know, having the the heirs have, you know, high earners in a higher tax bracket and those RMDs start to come

20:06

through, does that put them in a more difficult position from a tax perspective? So, just being able to jump

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through different strategies um and showcase them here in in the tax lab tool. Um just wanted to point out some

20:18

of those. The the heat map is is where you're probably going to focus on applying those, but lot to do in here.

20:25

We can certainly dive into more, but we did get a couple of questions on on that. So, I wanted to make sure I touch on that. Um Derek, do you when you're

20:32

having conversations with, you know, tax strategies and and applying, how um how does that conversation usually go? where

20:38

where you where you usually lead them to. Yeah. I mean for me I always like to use income lab as our tool for getting

20:46

that high level strategy. So what generally are we looking at doing in terms of you know managing the brackets?

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Are we looking at a 22% bracket strategy? Are we looking at managing to an Irma tier like what what are we

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trying to do very high level? Um and for me I kind of separate that. So, I personally also use Holista Plan, which

21:04

is where I would jump in and actually do the more fine-tuned year-to-year sort of conversion. So, I'd say, "Okay, yep,

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looks like we're targeting about the 22% bracket for this client. Now, let's go over and actually take a look at what

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that means in holistic plan where we can really build out a more fine-tuned tax type projection for

21:23

that particular year. Just make sure we're not overlooking anything, not um, you know, missing something particular

21:29

there." it. So for me, it's really those ongoing clients I'm actually working with that, you know, maybe we get to that level of detail where if it's a

21:36

prospect or somebody I'm showing an initial plan there, we're really staying high level on just kind of what what is

21:42

our long-term target that seems to make the most sense. Do you ever get follow-up questions for

21:48

like RMDs or, you know, how long we're doing conversions for and do you get at that certain level or do you just really

21:53

just focus on this maybe statistics page and and breaking out your different strategies? varies quite a bit by by

21:59

client, but it's nice that you can always dive in. You know, if somebody is wondering a little bit more about the strategy and what's assumed here, you

22:06

can get in and see, okay, well, here's actually where uh we're assuming those conversions are happening. Here's kind of a rough dollar amount. Here's the

22:13

time frame before somebody's fully converted, if they ever get fully converted. I mean, all those questions

22:18

are pretty easy to navigate just even while I'm having a conversation. you know, if I client can see my screen or

22:24

we're sitting in a conference room together and we've got things pulled up, I can easily kind of walk through, you

22:30

know, what that actually hypothetically looks like with the caveat that of course we know this is not how things

22:36

will perfectly play out. There will be market changes, there'll be everything else. So, we'll kind of fine-tune this

22:41

year by year. But yeah, I definitely love the ability to get in and look at some of these other charts um and help

22:48

explore any questions that might be more one-off that a client has. Do you provide reports ahead of time? I

22:55

get that question quite a bit like having you know the reports at the table or you sending ahead of time for your

23:00

clients or do you have more of that discussion with the with the software and your computer and your TV?

23:06

Yeah, I I don't know that it's the best practice, but I do tend to have a little bit more of the discussion live. Um,

23:11

just because feels like every time I I do try and plan out one particular scenario and then there's one question

23:17

that, you know, changes an assumption or changes something else, now we're scrambling to go back, change it, and

23:23

the report itself may not be that useful. Um, I guess if I had a client that, you know, really there's an issue

23:29

with doing it um live kind of like this or sharing information, then then I'd

23:34

consider that. But in most cases, I'm really just kind of using the tool to dive in in meeting and explore any of

23:41

those one-off questions. Yeah, thanks Derek. Yeah, I think you

23:48

know with the tax lab we build out, you know, multiple strategies within income lab. You can create any type of

23:54

scenario. um having that tax strategy already available um by just you know creating a copy and that does help out

24:00

you know you running different scenarios and that way you're not really impacting your your base household plan here. So

24:06

um you know creating Roth conversions to a certain bracket Irma brackets you know if you wanted to see how those kind of

24:12

layered up it's a lot of scenarios that you can build but I think the best way to do that is really within the tax lab

24:18

and just comparing different strategies and just giving kind of that snap that high level snapshot as Dererick was

24:24

mentioning between any of the strategies here right so we can see you can really

24:29

compare any type of strategy here to say you know well what's the benefits of

24:34

maybe they're already doing a a certain bracket or they got recommended at 20 32% and you wanted to see the difference

24:40

here, you can do that here in the tax lab and it's just a really nice quick tool just to kind of show different

24:46

strategies versus having a full scenario laid out. Okay, where do I compare it? Um, tax lab is going to be the best way

24:51

to compare those here. So, I did want to touch on that there. Um, another cool functionality too when you're in the tax

24:59

lab is you can take a report a generate a snapshot here. So up here there's a

25:05

little soundbar button and generate report. So if you wanted to compare a 22% to a 32%. So any of our available

25:13

tax strategies, you can generate that report and it'll take a snapshot of this in PDF form. Reason I point that out is

25:20

the difference between having it through our reports here in our report center. We only default that uh compare to

25:27

strategy. So um the second strategy here is saying okay we're going to do a taxable tax deferred tax free. can't

25:33

change that. Um, so we do have advisors that requested, hey, you know, how how can I compare different Roth

25:38

conversions? Best way to do that here is the tax lab by generating report. And you'll see there's some different

25:43

options you can select here. Uh, to compare it would be the statistics page. You know, you have pretty much all the

25:49

modules and charts available that you could select from. Um, so just building out your report, seeing which ones you

25:55

like, and then just doing a snapshot of that typically gets that question answered.

26:04

Now, transitioning from the tax lab and and tax strategy questions, um we did

26:09

get some annuity questions. Um and that has been kind of a hot topic as well. Uh when we're looking at um you know, the

26:16

new tool that just got launched about, well, not not just back in August, I believe. Um so, if we're looking at um

26:24

you know, how to enter an annuity, I have another example here where I have one pre-built. Um, so just how to model

26:31

that, how to build that in your plans. Um, we do have that scenario here.

26:38

Starts. What's going on my screen here? Refresh

26:48

it. Okay. So, with an annuity now, to build that out, um, there's two ways you

26:53

could do it. Um, we're going to go to the edit pencil icon here under assets

26:58

and we have an annuities tab here solely for annuities. So, we have a space for

27:03

fixed index annuities. If you had a variable annuity, um, you can build those here under the annuity section. We

27:10

did have it under investment accounts before. You could certainly enter it there as well. Um, or if you wanted to enter it as an income source and just

27:16

like a cash flow, a fixed cash flow, you can certainly do that as well. but different account types that you can

27:21

select from, you know, how to build that um account type for tax purposes, the ownership, and this little gear setting

27:28

on the right here. This just breaks out in more details of the types of annuities you could um build out in your

27:33

settings. It really does help if you have that illustration um available. Um we certainly can help walk through with

27:40

our support team, but um it does help as you're kind of building these out um because it it does have some kind of

27:46

different bells and whistles in here. So, you know, just understanding the information here um is going to be best

27:52

from the illustration. But if you do know, you know, guarantee withdrawal rate, is it a growth annuity? Is it, you

27:57

know, more of an income annuity? Having those uh inputs ahead of time will help

28:02

as you start to build this out. So, just we do have a a another webinar and a tutorial that kind of dives in a bit

28:09

deeper on this, but here's some just examples of of types of inputs you could enter uh for an annuity. And we did have

28:16

this new feature for Roth conversions. So if you want to convert any of the annuity to a Roth, um you can certainly

28:21

do that here by scheduling out the start and and end dates here. And this is for

28:27

the FIA only, I believe that we do that. Um I'd have to check for the variable annuity. Um but just some different

28:33

options here for you to enter that through. Um custom plan. This is the

28:39

best use case if you are going to do a growth annuity because there's just a different uh level of settings here. Um,

28:45

if you're not wanting to use it as an income stream, but you're just wanting to see it as growth, um, we can see here that the difference between the the

28:51

initial FIA and the living benefit is this one, you can specify a distribution for this account. So, you can build that

28:58

out monthly, have a different start and stop date, but selecting this will continue it all the way through the

29:03

plan. And there's some different distribution methods here. Um, stretch is the default here, but if you had a

29:08

dollar amount or a percentage, you can certainly enter those and build that annuity out, you know, just for the

29:14

distribution phase. But if you're just looking at growth, go ahead and uncheck that. Make sure that's not selected and you won't see that that is an income

29:21

stream. This is actually another way we had a question come through about dividend income. Um, there is a

29:28

distribution plan that you could kind of segment these out. So, if I did have a

29:33

specific month and year that I wanted this to break out, maybe for the first, you know, 10 years here. If I save this

29:41

and we can see, where's my

29:46

segment? Going to do an angle. Um, we should be able to have a

29:52

layer of settings. I don't know why that's not going through.

30:00

And another way you could handle the dividend income is setting it up as an investment account. Um maybe it's

30:07

because I don't do dollars here. There we go. So having dollars, I had it on stretch. So having dollars or

30:13

percentage, this will allow you to include a second phase. So um you know whether you have a bucket strategy or

30:19

you wanted to put in um some type of uh special distribution. This is typically how we can handle um either putting it

30:26

under annuity phase. You can do that or you can also add it as an income stream.

30:32

Um so let me cancel this out. So the dividend income simplest way

30:40

is just add it as income. Just add a line item call it dividend income you know either a monthly or an

30:47

annual amount. Just be aware the software is moving monthly. So best practice is to put those inputs monthly

30:53

but you can certainly enter it annual if you needed to. um you know either if you have that percentage of income that's

30:59

coming through you can put that there. If it's investment income this allows you to break out a percentage if there's

31:06

any gains or if there's a portion that's not taxable or tax exempt um you can break that percentage out to see for tax

31:13

purposes on that dividend income coming

31:19

through. Another way you could do dividend income is through the investment accounts. So I do see

31:26

advisers using the distribution settings for this section. So say we have a taxable, we'll call that a stock

31:32

account. You can go back to these distribution settings, specify a distribution for this plan. Again, you

31:38

can select percentage of the draw down if it's for a particular time period. You know this the difference between

31:44

using it here as an investment accounts is it will show for the first 10 years. So if I did a percentage here, the first

31:51

10 years, it would take out that percentage and any remaining balance, it would just continue paying that out as a

31:56

stretch out uh in the plan. So that's the difference. Doesn't allow you to kind of phase and segment those payouts

32:02

here under the investment accounts versus if you put it under the annuity, all the account types will will

32:08

basically play out the same way, but you can really bucket those out um if needed.

32:16

Okay. All right. And Derek, do you I mean the bucket strategy comes up quite

32:21

a bit on the calls. Do you um run a bucket strategy on your end? Do you kind

32:26

of have conversations about how to model that in income lab? Yeah. So I I'm in

32:32

the camp with Michael Kitses where um he has a good blog article kind of looking at it should buckets be the way

32:38

somebody's actually approaching managing a portfolio versus more of just kind of a psychological framing and tool and way

32:44

to think about it. Um, so just personally in my practice that's kind of how I approach things as well. So I will

32:50

talk to clients in terms of buckets, but I don't necessarily like actually I mean we always could if we needed to, but for

32:57

the most part I'm really just trying to say okay like here's your um I like the protection bucket kind of term. So

33:03

looking at any of those um fixed lower risk type assets that we can put in that protection bucket and kind of

33:09

calculating out how many years of expenses that's covered. Um, one little

33:15

bit different than here, but when you actually go to the cash flow chart, um, for a particular plan, I really like to

33:22

use that to get to the, um, number of, you know, help figure out what

33:28

somebody's actual assumed spending would be based on their unique hatchet or

33:33

other type of shape to their spending. So, um, you know, I can actually go up, you know, find kind of an actual number

33:40

for here's how much we have for plan distributions for the next five years, seven years, whatever time frame we want

33:46

to apply to the bucket. Um, or uh, and then I like to just express that like, so, okay, if somebody has X amount of

33:53

dollars in their protection bucket, how many years of planned expenses does that get them? So, does that get them seven

33:58

years of expenses? Does it get them 10, 15, whatever that number is? And I communicate like that. So, a little

34:04

different than like the the way I think many advisers would use a bucket strategy, but I use it more as a

34:10

psychological tool and just help somebody understand that if we absolutely needed to pull from it, we could pull from the protection bucket.

34:16

Here's how much, you know, that would entail, but when it comes to actually modeling that out in income lab, it's

34:22

not I'm not assuming that we're actually pulling from that. I'm assuming we are maintaining more of the constant target

34:28

allocation assigned to the portfolio.

34:34

Yeah. And I think with the I'm not sure how you you model it in income lab. Do you do the other income way? Do you do

34:41

um I know the annuity kind of feature that kind of segmented uh annuity piece? That's a new uh a new tool part, but um

34:48

have you usually entered it as an income source or do you just really have that conversation of hey here's the breakout

34:53

of what we have available and you have a way to model that? Yeah, I I take the very simple approach where I'm just

34:59

talking about it as a psychological tool. I'm not even kind of showing that uh building in an income stream or

35:05

anything like that from that particular um bucket. I'm just talking about very high level if we want to treat this as a

35:12

I know people use war chest or whatever set type of term we want to use right that's available as a resource it would

35:18

cover x number of years of spending um and that's really all the deeper I'm

35:23

going with it uh it is something that if you were drawing from that um you know

35:28

kind of and you have your accounts synced and otherwise I mean that's going to be updating in kind of real time if

35:34

you did actually have separate accounts for fixed income and stocks and really had it built out that way. In a way,

35:40

that risk level will be reflected in the plan. But, um, yeah, for me, I like to

35:46

keep it simple. I realize I'm not I'm never going to build a tool or a long-term projection that's going to

35:52

100% map to exactly how we're managing the account. So, I just stick with the high level allocation for for mine.

36:00

Okay. Gotcha. Yeah. Yeah. And we and we look at when we're looking at portfolio withdrawals, a lot of times, you know,

36:06

advisers will will think like how we're distributing that in Lifehub. Um, for example, um, if we were to go to we'll

36:13

just stick in this annuity one so we can see it. But in Lifehub really is this just showing kind of that high level,

36:19

right? That that 30,000 foot view of what their plan would look like if no changes were to occur. Um, but I do see

36:26

advisers, you know, focusing on this portfolio withdrawals and if we don't have any type of strategy applied, you

36:32

know, we're not saying that it's going to exactly come from the taxable or, you know, this fixed index annuity, a lot of

36:37

times the the default tax strategy applied is the prata approach. So, it's just going to proportionally take it out

36:43

of all of accounts. And so it really is just showing at this level that the spending of what they could do. We're

36:49

saying that the targeted spending that we're showing is 222,000 would come from portfolio. However it is distributed,

36:56

however it's paid out um can certainly doesn't have to follow this strategy here, but um just gives you that

37:02

recommendation of what portion uh of that uh you know income source is

37:08

feeding into how much they could spend in their total income in that year. So um that's usually the approach I see uh

37:14

with with adviserss on you know working through year through year here and we see you know how that impacts you know

37:21

if no changes were made. So let's see we had a few more questions

37:30

here. I'm not sure how I'm not sure how the questions are

37:36

coming through Ashley. Um but uh do we have time to kind of go over a couple more here? Yeah, we absolutely do. We

37:44

definitely want to leave some time though. We have eight submitted questions in the Q&A at the bottom.

37:50

Um yeah, so if you want to maybe touch on another one and then I can uh I can start queuing you up with some of the

37:56

Q&A that's been submitted. And for those of you who have submitted um some questions in the Q&A or would like to

38:02

upvote those, please get in there, upvote those so when Ben does uh start touching on the ones that were submitted

38:07

on the call today. Um we know which ones to touch on

38:16

first. Thanks, Ashley. All right. So, there was a question on um the

38:22

guardrails if So, the question is when transitioning from how much can I spend

38:27

um to a how can I spend net of tax, why are the guardrails not 8020? Um so, I

38:33

have a couple scenarios here um on our base plan. So, the default question here

38:39

that income lab is answering is, you know, well, how much can I spend based on my income resources? And when you see

38:44

that, you're going to see retirement paycheck or spending capacity is another uh view option that you'll have down up

38:50

here. Um so this is really showing at a gross of tax level. So I have a setting

38:56

here that says net of tax, but as a default um if you come over here to this little soundbar button, um we tend to

39:02

line those up at a gross number. Um so you'll see a gross of tax to start with, but you can save those display view

39:09

settings here. you know, if you like to work net or annual, maybe, you know, future retirement date if you want to see nominal, adjusted for inflation. So,

39:16

just different view options for you that you can select. But as a as the software is running, you know, as the default

39:22

here, it's going to gross up all your income sources and then figure out the taxes through the tax lab. So, that's

39:29

where you're going to really see the difference uh between scenarios that are solving for income. So, what do I mean

39:35

by that? If I go to the advanced plan settings and under income settings, um,

39:41

these are pretty common. We have a lot of resources that go through each of these that kind of explain it. But, um,

39:47

again, what can I spend? That's our default. That's letting us know, well, how much could I afford to spend? Um,

39:52

but if you wanted to solve for a specific spending level, maybe how can I spend, you know,

39:58

18,456? This would have to be entered as a baseline expense um, in order for you to target a specific net number. Uh but

40:05

you can make the setting change here um in your advanced settings. You can also make the change up here in the edit

40:12

pencil icon under expenses. And again, there's a little

40:18

message here that again that says this plan's primary question is how much can I spend? Enter baseline expenses. Um so

40:25

if you wanted to change this up um at all, if I just deleted my 10,000 and I

40:30

just hey that 18,000 that's well overspending. I'm not going to solve for that. And even the 14,000 of what the

40:36

software says I could spend, I'm not going to spend that. I want to target maybe what I'm currently doing and

40:41

showing that model here. That's 84.56. Um, this at the end of this gray

40:48

message here, there's a change this button. And this is where you can also make that same income setting change from. What can I spend over to now I

40:55

made that, you know, deleted that 10,000 for retirement expense. Now we're solving for 8,456. So if I were to make

41:02

that change there, that really is going to change my net income to this 8456. So the software is only going to gross up

41:09

to net at this target level. So that's really where the difference will be um you know running that scenario on what

41:16

can I spend to how can I spend. So that will change your guardrails because that you know in the the case where we were

41:21

solving for um what can I spend we could spend 14,000 and now if I'm solving for

41:28

8,400 and I come back and I run that plan now and let's take a little calculation

41:43

here. So now I'm solving for the 8,000 in gross here. So my

41:51

8,456 that's my net value that I'm targeting. And you'll notice the shift here. Instead of retirement paycheck or

41:57

spending capacity, now it says budgeted spending because you told the software now you're needing to solve for that net income. Well, that is going to impact

42:04

your guard rails because this is now targeting a lower risk, right, of of spending levels compared to the other

42:11

scenario where we were hitting, you know, 14,000 of what they could spend. So, that's really why the guardrails

42:16

will shift and they won't stay at 8020. Um, when we're looking at the guardrail

42:22

settings here of, you know, this one is customizing. So, I'm solving for a

42:28

target income. So you're telling the software this is the net income I need to solve for. Whereas if we made that

42:34

adjustment to what can I spend then you would see the range of income settings available targeting a specific uh risk

42:40

level as we saw in the video earlier. So hopefully that helps answer that of why they would would change when you're

42:47

changing your income setting here. Derek, do you usually stick with

42:53

the the kind of the spending capacity? Here's how much you can spend. Do you have that conversation with maybe those

42:59

clients that are more focused on a current expense plan and they want to stick to that and what's kind of the I

43:04

guess the the volume of each of those you typically get with your clients. Um for me I mean one thing I I do have a

43:12

lot of people who are just starting to retire wanting to figure out how much can I spend right and so that's a pretty big question that we can go ahead and

43:18

you know get an answer to. I do find in practice to just probably the particular clients I work with a lot of times that

43:26

number that they can spend is higher than how much they actually want to spend. So that is a anytime I'm running

43:32

a plan, I really try to make sure I get a rough, you know, highlevel estimate. What does somebody think they're

43:37

spending per month? And if they think it's $5,000 a month would be a very comfortable retirement and we see that they could spend $8,500. Well, you know,

43:44

now we're talking about, okay, what might they want to additionally do? Um, that is a time when I might play around

43:50

with the risk settings as well. So, um, you know, if I know that somebody maybe

43:55

is a little bit more on the risk averse side and we could bump those down to the conservative guardrails settings, um,

44:02

that's going to bring that down. But in many cases, you know, just making up numbers, but maybe it says, okay, they can still spend 7500 a month. Um, when

44:10

their target is only 5,000. And so, yep, you could could go in there or even just

44:15

the like the default risk levels. Um, if you go back out and you click on the uh,

44:23

yeah, I'm going to remove the the limitations I had with I will arrange that. Uh, yeah. So, that

44:30

kind of guardrail setting here. Um, the Yeah, now we can see it. So, yeah, if I

44:36

Yeah. And then also like the view if you click on the guardrails themselves and you can see kind of that full spectrum

44:42

of you know what the spinning levels would be and going from the most conservative to the most aggressive. And

44:49

most the time I am using one of these presets and just you know oftent times

44:54

I'd say you gravitate towards is it the most conservative setting for somebody who just really isn't going to be able

44:59

to want to even spend at that level and we want to reduce that risk they're ever going to get a downward adjustment. Is

45:05

it kind of the middle of the road assumption for just maybe your more typical retiree that wants to balance

45:11

those or on the more aggressive side? Is it more of a die with zero type approach

45:17

where somebody really wants to make sure they're not leaving anything extra on the table? Um, and those are the three I

45:24

gravitate to, but it's nice you can fine-tune it a little bit further if you want to.

45:30

No, that's that's very helpful. Thank you. Um, Ashley, that was I mean I have

45:35

one more, but I know we want to leave time for for other questions, too. So, Sure. Well, it looks like we have a

45:41

couple of um questions here that have a couple up votes. So, the first one coming from Patrick Masso, and it reads,

45:47

why do the guardrail widths change upon switching from how much can I spend plan to how can I spend X net of tax plan

45:54

using the same monthly spending number in each case? Shouldn't they be the exact same when you make the switch?

46:01

So, when you're solving for a net income, you know, the baseline that we had there, uh I think I did it, but it's

46:09

um there's variables you'll have to check too once we look at the income

46:14

path. So, I actually had mine on an age-based income path. So, that is showing a slowdown still in income um

46:19

even though you're solving for it. So, we're solving for expenses slowing down eventually. Um, if you're looking to

46:24

solve for a net income um, that was equal to uh, say that 8,400, but you're

46:31

looking at it flat all the way through, which is this income setting, that's going to take on a lot more risk. So,

46:37

it's going to impact your guardrails accordingly. Um, if you're looking at

46:42

the what can I spend, which is this retirement paycheck, if you're trying to solve for this net number, I think

46:49

that's what you're I think that's what Patrick's asking. um solving for this same

46:54

13,840. Um the agebased income path is probably impacting that because we're not saying 13,840 for the entire plan

47:02

because again I have that age-based income path here. We'll really see that with the today's dollar. So I'm starting

47:09

out total spending. See how it just kind of slows down here. Well, the the guardrails are playing a part in that.

47:15

We're we're expecting that to that slow down spending path to occur. But if you're solving for a net income, you may

47:22

be grossing up higher in your taxes. Um, if you were solving for, you know, say

47:27

if you didn't do a tax strategy, your RMDs are kicking up, you may be actually spending more in those later years. And

47:32

that's where it might shift uh the difference in those risk levels across a plan doing sulfur income versus spending

47:38

capacity, especially if you're targeting that initial starting net income because that that may be too much risk if that's

47:44

what you're uh maybe looking at. Patrick, I'm not hopefully that answers follow up with me. I we can definitely

47:50

walk through that if if that didn't answer your question. Okay, great. The next question comes from James Holland

47:57

and he he asks, "How would we illustrate an accumulation annuity and then annuit

48:02

annuitizing it at a certain point?" Yeah. So the the growth annuity that we

48:08

had here under assets um you can start that at a particular time. So, um, we

48:14

call this growth and then we'll call it a variable. Just throwing some numbers

48:20

in here. And select the custom plan because

48:26

this will allow you to start that um that benefit date um later. You can do it at living benefit as well, but maybe

48:33

you wanted to break out um a different portion of it as we saw. You can segment that out. Um, we'll select No, I keep

48:40

selecting that. There we go. and then specify a distribution and then if your

48:45

monthly annual payouts and then just selecting a future date when you plan to to have that start we'll start that you

48:52

know 2035 for instance if it continues through end of plan if you had a specific dollar I'm just going to

48:57

stretch it um across this one here but building that out and then

49:03

seeing the annuity in play is going to be through uh two areas so life hub is a

49:09

good visual just to kind of see year-over-year when that annuity is going to start at what benefit balance are we going to be beginning with um

49:15

when it annuitizes. So we can um see that play out in lifehub. There's also a

49:20

feature in the stress test where you can see how that annuity um performed. Um so

49:25

if we click open lifehub here, open up investment accounts, there's my growth.

49:31

Shouldn't see any withdrawals, but it's projected out I think 2035. So we'll see. Oh, and I'm looking

49:38

at uh don't think I put any growth on it. Hold

49:43

on. Go back here. So, there's just crediting methods. Um you can cap it and believe

49:52

we have let's see should be 4%. Maybe that's just not

49:59

keeping up with inflation now that I think about it. Let's see.

50:07

[Music]

50:19

Customize probably wasn't keeping up with my inflation. I must have a setting in my

50:25

uh Carlo and we are looking nominal. Okay, so the annuity benefit balance.

50:32

Yeah, that's 100,000 still. We're paying out in 370 here in that

50:39

first year. So that's uh the stretch out that's going to be year-over-year. And

50:44

we'll see this go through the entire time. That's at fixed income. And then

50:50

we saw a little bit of a bump there with inflation. It should go to zero almost

50:55

almost got it. So that's one space you can see in Lifehub. In the stress test,

51:00

we can look at click into there. this little A that's going to pop up here. This can

51:07

let you know, okay, how did that annuity look um year-over-year during a particular time period and we see that

51:14

this balance is going down, but the income is staying flat. So, we see the withdrawal starting and the reason it's

51:21

starting like looks like uh 10 years out here because that's that accumulation phase that you're going to see. So, we

51:27

don't actually start paying that out until 10 years into that plan. And in this case, it's 2015. Um there's a table

51:33

down here at the bottom too that shows kind of that the breakout of start date if we were to retire during this time

51:39

period. If we looked at uh maybe stagflation, did it keep up with it? Um

51:45

you can kind of see now the benefits at zero, but we still have income. So that's another way you can show uh the

51:52

annuity playing out during a particular time period. So hopefully that helps. Great. All right, we have another

51:58

question here. This one comes from Nicole Farer and she asks, "If we have a client who is taking consolidated RMDs

52:05

from just one IRA, is there a way to exclude the RMD distributions from their

52:11

other account?" Yeah. Uh, good question. Let me see.

52:17

Believe we have particular account types. Oops, not that

52:24

one. So, we have some different options in our distribution settings. Um, believe it's don't think it's going

52:31

to be under that one. Did they say it was a 401k? I'm not

52:37

really familiar with that type of um I know 401ks have special distributions.

52:42

Um, let's see. I think this is the only RMD. That might be something we have to take back

52:48

to Justin there. uh just just to get to um you know the RMDs because how I

52:54

understand it with the RMDs is it just proportionally takes it out of all the available accounts of to fill up that

52:59

percentage of RMDs. Um so there's not really a way to designate you know only take this amount uh uh from this account

53:06

and and leave maybe a balance left over in another. I don't believe there's a way we can do that currently, but you

53:11

know we can put on the road map if it's something we can tackle. All right, I'm just sending Nicole a

53:18

note here. We'll follow up with her. Great. Um, let's see. I'm just going to go down the list here. Uh, Micah France

53:24

asked uh I'm not sure which which uh view he which plan he was referring this to, but he said, "Are we factoring in

53:31

COLA for this retirement paycheck?" It will. Yep. So, Social Security, all

53:37

of the uh the inputs you enter in here do have an option. Um, so Social Security will add COLA in automatically.

53:44

any income source that you add in here if you're adjusting for inflation. So, if you have an inflation treatment here,

53:50

that will adjust for the inflation treatment we have applied um into your analysis here. But you do have options

53:56

here. If it's not adjusting or if you wanted to customize it, you can build those out from an income level, from an

54:02

expense level, you can do that as well. If you want to see expenses going up um with inflation, you should be able to

54:08

have under a variable expense. Um you'll have the option to do that as well. So you can control that and to see

54:15

inflation impact your plan just be sure you are in nominal. So any real you're

54:20

backing out inflation but nominal will show those inflation adjusted numbers.

54:26

Awesome. I'm going to throw this one to Derek u because I'm curious from an advisor perspective what his thoughts

54:31

are. So this come this question comes from Thomas um Guska. How important is it to align the appropriate spending

54:38

level with Roth conversions? In other words, how does someone someone's projected spending level impact the

54:44

accuracy of modeling Roth conversions result in the tax center? Yeah. So the there's some important

54:51

nuance when you're trying to actually model that out. And so going in um if you just apply the Roth conversions that

54:58

might kind of mess up it has to do with gross versus net and how the software is going to solve for that. So one thing I

55:04

like to do is kind of a multi-step process. Um, so if we're like, okay, yeah, we want to do this Roth conversion

55:09

strategy. We know how much we want to spend per month. Now, let's go in and actually build that out. That's kind of like a final step uh implementation for

55:17

me. And there you would go in and you'd want to change the how much instead of solving for how much can you spend to,

55:24

you know, giving it an amount where you say here's how much I want to spend. Um, so yeah, right here. So, how can I spend

55:31

a certain amount here? and you're going to want to apply that if you want to see those two um you know paired together.

55:38

Now in practice how important is that? Um I I think it you know in some extent

55:44

will depend like if you have an integration set up and anytime you do a Roth conversion those new balances are

55:49

getting updated or you're manually going in and you're updating those balances you know that's going to be reflected in

55:55

your projection going forward. So there's really a question of do you want your projection to you know assume the

56:01

full kind of Roth conversion showing that or do you just want to step by step say here's where you're at today we'll

56:07

continue down this path. Um I I can see arguments on both sides and personally I

56:12

lean a little bit more towards um you know I don't know for sure if we're going to complete a Roth conversion

56:17

strategy. Maybe tax rules will change. Maybe the client will have a change of heart on whether they want to go down

56:23

that route. So, I do kind of just like to say, here's where we're at today. I don't necessarily need to force that

56:28

into like an implemented plan. I'm okay with just letting that update as assets move from the traditional IRA to the

56:35

Roth IRA. That'll all be reflected in the total spending amount that's available. So, personally, that's the

56:41

direction I go. But I can see why an adviser might want to go one way or the other. Um, I like it's a little simpler,

56:47

a little cleaner, a little easier to explain than trying to actually force the Roth conversion into the plan and

56:53

deal with all the client questions that might come as they're navigating their own plan.

57:00

Great. All right. Um, Ben, do you mind if I share real fast? Yeah.

57:09

Okay. I just dropped it in the chat here, but I'm going to share my screen. Um, just want to make sure we have just

57:15

like a minute or so left here left in Lab Talk Tuesday, but I just wanted to make sure I touched on this before we um

57:20

concluded the the call for today, but I wanted to share my screen here and talk about an announcement that we just um

57:26

just announced this morning. And I wish Malcoly was in in office today. Unfortunately, I guess fortunately for

57:31

him, he's in Miami at uh Future Proof Citywide. But Malley and Ben and their team has put together um an awesome

57:38

curriculum and we launched today the Income Lab Academy. And what this is, and as you can see on my screen, it is a

57:46

hands-on workshop. So, we're really taking the best of income labs education and training, and we're bringing it to a

57:52

city near you. Um, we're starting off with launching it here in our hometown of Denver, Colorado. And you'll see here

57:59

on my screen, the first one we have is on May 8th. Um, again, at in Denver,

58:04

Colorado, you'll see a little bit of like a highlevel um agenda here. And we

58:10

are super excited to launch this. I we've heard so many so many of our users just asking more for like hands-on

58:16

in-person training. Our team does a fantastic job of doing the virtual training and doing everything remotely

58:21

here. Um but there's no no substitution for in person and being able to see um

58:27

see and talk with somebody face to face and having them kind of walk you through different scenarios and real life client

58:33

cases. So again, this is on May 8th. It is our very first income lab academy

58:39

hosted here by our team here in the Denver, Colorado area. You can find out registration information here. Um if

58:45

this date and time and location doesn't work for you, um we have a wait list

58:51

here that you can sign up for so you'll be the first to hear where the next training event will will take place and when. So make sure you sign up for that.

58:58

You'll see a couple of the experts here. Ben Vega, who is so gracious to be leading our lab talk Tuesday today,

59:03

along with Malcollea, our chief experience officer, and Justin Fitzpatrick, who you see every Lab Talk

59:09

Tuesday. Um, so again, please check it out. There's um some FAQs here if you'd

59:14

like to, you know, just check that section out for some common questions we've already started receiving. Um, but

59:20

again, if you have any questions, please don't hesitate to reach out to our team. And thank you for joining us for Lab

59:25

Talk Tuesday. Thank you, Ben. Thank you, Derek. Thanks, Ashley. Thanks, Derek. Thanks,

59:30

everyone.