0:11
I'm give everyone a chance to get into the room for our lab talk
0:17
Tuesday. See the numbers ticking up
0:23
here and there. Although I'm wondering if maybe Zoom has uh
0:28
you know widened the door or something. It seems like we got a lot uh a lot into the room all at once there. It's nice.
0:35
Um so hope everyone's having a good uh good September.
0:41
Last few official days of uh of summer.
0:49
though, I've always uh I gotta say maybe we could do as we're as we're uh getting people in here, we can vote on I I am an
0:55
advocate of like summer is when it's nice and warm, not technically until uh
1:01
September 21st. So, um you know, like I find it very hard to tell my kids that
1:07
summer doesn't start until the middle of June or whenever that is. Uh that doesn't make sense to me. Nope, it's
1:13
summer starting in June and uh it's I guess fall. Well, I don't know. It's also hard to say that it's fall that
1:19
it's summer and October. So, I'd say like, you know, May through September is se is summer in my book.
1:27
All right. And uh Shelby and I were just talking about uh the weather. Shel's in
1:33
San Francisco where it's uh always the same every day.
1:39
All right, we got everybody in here. Um, for those of you who are new, make sure you put your questions in the Q&A. Um,
1:48
not in the chat. Feel free to chat. Can chat with each other. I will try to take a look at the chat every now and then.
1:53
But, uh, this is our monthly Q&A webinar. So, uh, the easiest thing for
2:00
me is if you can, uh, if you can drop your your questions in the actual Q&A
2:05
section and then upvote those if you, uh, if you want to see the question
2:12
answered. And we'll try to get to all the questions. Often we don't. Um, but the way we normally do this is we'll start with kind of, you know,
2:18
announcements, how housekeeping, then we'll do presubmitted questions, um, and then take your take your
2:26
questions live. So, um, not a lot of housekeeping, um, this month, uh, except
2:32
to say that next week's, uh, retirement income intel is we're doing a a, um, a
2:38
webinar on more of kind of this the some psychological issues in planning. uh specifically talking it'll be a range of
2:45
things and we will touch on uh some of the issues we've talked about before, but we'll also go even farther and talk
2:51
about, you know, cognitive decline, how to um deal with that as as an adviser.
2:56
Um you know, connecting with other people in your client's lives, um you
3:02
know, spouses, kids, and and so on. and really have a good conversation um about
3:08
just a lot of those those issues that are a little bit less, you know, just kind of the numbers, which I obviously
3:14
we care a lot about the numbers at Income Lab as well, but but we equally care about um kind of communicating with
3:19
clients and really helping people, you know, have the best life they can through the whole life cycle. And that
3:25
includes, you know, um times when maybe we're not all as sharp as uh
3:43
norally do um some announcements on our
3:48
new um features coming out. um this
3:54
this month. I I won't do that except to say that we do.
4:00
Okay, hopefully I'm back. I saw that I was unstable there for a second. Uh except to say that we do have some
4:06
really exciting uh AI features coming out. Um some of you have already signed
4:12
up to be in the beta testing group for that. Um and you will see some uh some
4:19
communication on that. um very soon uh probably this week uh to get those tests
4:24
going and then we'll be doing some uh some uh more you know formal announcements and releases uh on those
4:31
features soon. So I know that's just a tease but uh
4:37
be on the lookout for that. Okay, so let's dive into your
4:42
presubmitted questions. So, I'm going to pull up the app here
4:48
and let's go to just a an example
4:54
example household here. Um, all right. So, the first question we
5:02
had um presubmitted was, "What's the best way to create a plan for clients
5:07
with lots of rental real estate?" Um, so this is a good opportunity. That's a
5:13
good question and you know often when I give examples of you know at income lab we often start the planning process by
5:20
um asking what are all the resources that a client can bring to bear on their retirement. So what are they going to
5:26
live on basically
5:34
and that is also really crucially things like social security pensions and um you
5:39
know rental properties are a big a big part of it. In fact, um, in this plan, I
5:46
do have $1,000 of, uh, a month of rental income coming. You can also see that
5:53
over here in Lifehub, if I expand it, I can see under other
5:59
income, I've got their pension and their rental income. Um, so this is a really, really common thing. And the way that
6:05
you want to enter rental income is um the the key part of it is
6:12
like everything in income lab, we prefer that you enter things as it's really received. Um and so that means um if
6:20
it's a monthly rental, enter it as monthly. Um that's often if you're new to Income Lab, one of the mistakes that
6:26
people often make um is to enter annual amounts. Um, and if
6:34
you do that and you say it's once a year, that's fine. The numbers will be roughly similar. Um, but your the
6:40
pictures that you see in the app will not be as nice looking because you'll see all these spikes every, you know, every January or something you'll be
6:46
receiving that. So people will sometimes say, "Oh, well, I'm making, you know, $100,000 a year." Well, are you really
6:52
making it annually or is it is it monthly? So, we prefer if it's really monthly, enter it as monthly. Um, so
6:57
that's one one tip here that helps get all of the numbers right. Um, inflation
7:03
wise, you could, you know, most of the time if you have a rental, you're going to be adjusting that somewhat um either
7:09
for inflation or maybe it's a custom rate that you're you're um, you know, planning for. So, that's another thing
7:15
to to do if you want to say, oh, you know, I probably will raise it, you know, 3% a year or something like that.
7:20
Um, or you can just say, well, just follow inflation. Uh, and then probably the most important part is the tax
7:27
treatment. So um for these sort of you know cash flows that
7:34
are coming in right income lab has this concept of of an an item of income and other income um and the tax treatment is
7:42
is really important. So the options you have are investment income not taxable
7:49
um which just will be treated as not taxable ordinary income self-employment
7:55
um which is and and wages those are both really important because you'll get FICA attached to them social security because
8:02
social security income has special taxability um uh rules and then tax exempt. I I know
8:09
this was not the question, but just to point this out, uh sometimes people will choose tax exempt when they meant not
8:16
taxable. Tax exempt is a way for you to put in if you wanted to um you know,
8:21
municipal bond interest as a separate item. Most people don't do that, but if you wanted to, like if you had a bond
8:27
ladder or something like that, that's what you would use that for. So tax exempt is different than not taxable.
8:33
But back to rental income, most the time you're probably going to want to choose either ordinary income or investment
8:38
income. Uh investment income is the one that I've chosen here. Um there's two
8:44
good things about that. One is you can then state
8:50
how to break that income amount, in this case that $1,000 a month, $12,000 a year
8:56
into ordinary income and not taxable. or you know if this were some other kind of investment maybe some of it's long-term
9:03
cap gains and so on. Um and so you can state that and then the other thing is
9:08
this will be treated as investment income as opposed to earnings and so it would be considered with um you know net
9:16
investment income calculations. Um, so that's that's really the crucial
9:22
thing here. And then, you know, if they have a lot of properties, a lot of different um different types of um of
9:29
rents coming in, you could choose to either just state it as one line item, and that, you know, would keep your life
9:35
hub kind of simple and nice and easy. You just call it rental income. Um, if you wanted to list every single one
9:42
because maybe uh maybe some properties will be sold in the future and so that income will stop and you would want to,
9:48
you know, tie that to a a sale of a property or something, you could you could do that as well. So, up to you on
9:53
whether you want to, you know, kind of show a client lots and lots of detail here or just roll it up um and do some
10:01
kind of, you know, rolled up estimates on uh on the tax treatment.
10:07
So that's the uh
10:12
first bit there. Um okay, next question uh was about um
10:20
how to show Roth conversions in the uh in the strate in the uh in the tool. So,
10:28
um, there's a lot of ability to to model
10:34
Roth conversions in income lab. Um, so if you're new to Income Lab, probably the first place I would go is um is Tax
10:42
Lab. And actually, I think I have some uh some good tax lab examples here that
10:49
I was just running. So over on the left is where you do all of the navigation once you're inside of a plan uh or
10:56
inside of a household even. Um and so I'm going to choose tax lab.
11:02
And what this is doing is taking um the the core plan
11:09
which has all of the resources already set and it has all of the um uh you know
11:16
the if you have special um target expenses and things like uh paying off a
11:22
mortgage or buying a you know a rental property or buying a vacation home and things like that. Um and so that's
11:29
already in there. Oh, I do see a question about that last piece. The difference between ordinary income and
11:35
wages. Really good question, Jeff. Um, so ordinary income will be treated as
11:44
uh, you know, subject to ordinary income taxation at the federal and state level. So, it's not long-term cap gains. Um, so
11:52
it doesn't get special treatment. Um, but it also won't be subject to FICA, so
11:58
Social Security tax and Medicare tax. Um, that's only actually earned income.
12:04
And so that's the the key difference is if you're stating it as ordinary income, it's going to get taxed um or it'll be
12:11
subject to tax. You know, whether whether it's taxed or not will depend on lots of other things. Um, but it won't
12:17
be taxed for FICA. Um, and it won't be subject to net investment income tax.
12:23
So, so that's the difference. So, it's a very typical thing for ordinary income would be a pension. Um, that's, you
12:30
know, you're not um you're not continuing to pay FICA on that. Um, but
12:36
it's also not an investment. Um, so, and then the difference, as long as
12:41
we're on this, the difference between wages. So, I'll go back here. We were looking at it in LifeHub earlier, but
12:46
um, we can look at it in the uh in the other income tab here.
12:53
So, if I go to the little gear icon, the difference between self-employment
13:00
income and wages is um wages are paid to you from by someone
13:07
else. Um self-employment you're paying yourself. And the key difference is um
13:14
you have to pay your own employer share of FICA. So, Social Security and and
13:21
Medicare. Um, and that half that other half is then deducted from your income
13:29
for sub for the purposes of ordinary income tax. So, like imagine I I don't have on the top of my head that the
13:35
percentages that people pay, but imagine it's, you know, 12% or something um total between you and your employer. Um,
13:42
I think it's more than that, but we'll just use that number. Um, you know, I uh for wages you would
13:50
actually be if you had $100,000 it's only half of that that you'd be paying in FICA. For social for self-employment
13:56
it'd be the full $12,000 but 6,000 of it would not be taxable as ordinary income.
14:02
So there's a there's a deductibility built in there. So that's those are the differences. There are three yeah I
14:10
think three here that are all ordinary income. ordinary income, self-employment, and wages are all ordinary income. They just have
14:16
different treatments for for FICA purposes. Um, so hopefully that
14:23
that takes care of it. Um,
14:30
okay. And then, uh, Barb was wanting just clarification on the, uh,
14:36
investment income side. So only the ordinary income or if there were
14:42
long-term cap gains, you know, maybe you maybe there's some kind of a an investment where you get, you know, a K1
14:48
or something from it and some of it's ordinary and some of it's long-term cap gains. This is meant to be an
14:53
all-purpose uh kind of uh category here, investment income. But in the case of
14:58
rental income, it's only the income that would actually be, you know, taxable
15:04
that would be considered for net investment income.
15:09
So great great questions.
15:15
All right. So going back to
15:24
where we were before. Um so again the the question that people had or somebody
15:30
submitted was uh you know just wanted info on Roth conversions in the software and how to create a plan with scenarios
15:37
of that sort. Um so the first place we usually recommend people do that is is
15:42
in the tax lab. So you'll have already built the plan with all of its resources. So investments, rental
15:50
income, pensions, social security, all that stuff. And then the tax lab will
15:55
then run it through 20 different ways that you could source withdrawals in the
16:03
plan and those include doing Roth conversions. Um so you'll see PR rata
16:10
which is proportional withdrawals. It's our best you know it's kind of the pay no attention to taxes um uh approach. Um
16:18
so it's going to follow you know RMD rules and things like that but otherwise it's just going to take in proportion to the size of the account. Then we have um
16:26
six that are just based on first I'm taking from you know taxable then tax deferred then taxfree and so on. That's
16:32
usually the default that most people you know use as kind of a baseline. Um, and
16:38
then down here we have all sorts of places where you'd be um doing Roth conversions
16:44
uh either to fill up an ordinary bracket. Um, so filling up the 0% bracket, there technically is no such
16:50
thing as a 0% bracket, but it's it's filling up all at least using all of your deductions, right? Uh, so if you
16:57
have very low income, this would be a place where you'd say, "Hey, let's do some Roth conversions at least to to use
17:03
make use of our deductions." But then 10, 12, and so on. Or you could be keeping your income just below um
17:10
particular Irma brackets where Irma is the extra um
17:16
premiums that people pay on Medicare uh each month based on their uh their
17:24
modified adjusted gross income. So, you know, you got all sorts of options here. And then we'll we'll pick out for you
17:31
one of the good ones. you know, we're looking at a way to to maximize the net
17:36
uh in projected income here. So, but you'll notice that often there's very
17:42
small differences um among a variety of of options. So the the one that we start
17:47
here is 24% bracket but you know the difference between that and Irma bracket 4 is I mean you know laughably small and
17:55
really even down into Irma bracket 3 or up into uh 32% bracket you know very
18:01
small differences and that's one reason that we use this green shading to kind
18:07
of say hey just to draw your eye and if you were to show this to a client draw the client's eye too oh there's sort of
18:12
a zone where there's some value um to doing Roth conversions rather to than to
18:17
imply that there's some perfect uh Roth conversion level which is you know we
18:24
all know no one knows the future no one knows what tax rates will be in 5 years 10 years 20 years um so these are
18:30
projections based on you know what we what we know today but it's uh we want to make sure clients aren't under the
18:36
impression that you know these basis point differences are really um you know they're definitely going to come true um
18:42
but that's the first place I would go and Then you can see and what you're doing here is you're looking at what ifs
18:48
so that you so far I I have done nothing to the plan itself. I'm just looking at well what if we ran this plan and did
18:56
Roth conversions to the 24% bracket. Um and so I can see oh okay in in 2025 that
19:04
would mean I'm doing a nice hefty you know this purple stuff is the uh is the
19:10
Roth conversions. I'm doing a nice hefty $400,000 Roth conversion. uh and we can start to click through the years. We can
19:16
start to say, oh, you know, could is the is the client really comfortable with that level of uh Roth conversion. We can
19:23
look at other options here just by clicking to a different level. So maybe I go to 22
19:31
and I can see what the uh you know what the size of the Roth conversion is uh
19:36
this year for if they focused on 22. See if it's
19:42
why it's not uh loading
19:53
and that's often an important um consideration. you know, clients will,
20:00
you know, even if technically the numbers, you know, say, "Oh, 24 looks good for you." They may just have a um a
20:07
certain appetite for Roth conversions. Um so, for example, if I go down to the
20:12
22% bracket now, my Roth conversion is around 217,000 and that might just be
20:18
more palatable to them. So, this is a good place to start exploring that. You can also see kind of the number of years
20:24
it would involve. So now if I go to 22 um whereas before it was kind of I think it was the first six years um instead
20:32
I'm going to tack on you know another eight years of smaller Roth conversions.
20:38
Um of course the further out into the future we go the less certain we are that those actually will be the tax rates and so on. Um and you can see even
20:45
in the last year right that we don't fill the whole thing up because that's that's the end of it. So this would be
20:50
the the place I would go to start exploring Roth conversion options. Um and then
20:58
once you have uh if you have one that you really like, you can apply that
21:03
strategy to the plan. But again, if you're just playing around in Tax Lab, you haven't changed the plan at all.
21:10
You're just looking at whatifs and and um kind of exploring exploring different
21:15
options. Um, so hopefully that that helps kind of on the general um
21:22
on the general question. I think there's another question in here that will return me to this. Um, but I want to hit
21:28
some of the the easier ones um first here.
21:34
So, okay, this was a quick question. Um, go back to
21:42
that kind of general household we had at the beginning. So, someone was asking about um integrations.
21:50
And so, if you're building an income lab plan, um
21:56
part of it is to enter the um the the accounts that people have, right? Um and
22:02
there's a variety of ways to do that. You can do that manually. Just, you know, type it. Um hit add new asset
22:11
and, you know, start typing. Um, or you can add a linked account. Now, I don't
22:17
have any. I don't think. Let me check. Oh, I do have precise FP. Okay. So,
22:22
maybe I can search for Smith here.
22:28
I don't remember if I have a Smith. Oh, great. Okay. So, then I could say, oh, okay. I want to pull in John's IRA or
22:34
something like that. Um, and there we go. Um, so that would add
22:41
it down here. You can see behind here I've got John's IRA is now part of it.
22:46
Um there you go. Um and then I could hit recalculate values and so on. The
22:53
question was you know what do I do? Can I manually add an account and then later link it? Um so we do have lots and lots
23:01
of um integration options and we add more over the years. So um this is
23:06
definitely a good question. Currently, what you would have to do is do what I just did and add linked account and then
23:12
delete the manual one. But we are working on a way to just sort of click on one and say, you know, link this
23:17
account and then just tell us which one you want us to pull the uh the numbers in from. Um, you know, that's not a
23:25
major savings in in in time really because even just pulling it in the way I did and then deleting the other one is
23:30
not very hard, but it'll be a smoother, nicer uh uh way to go once we once we
23:36
have that option. So that's that's currently what you would do is just add a linked account which you can do either the way I just did or if you are in the
23:44
if you click on I clicked on the uh little pencil icon go to assets and then
23:50
you have this add linked accounts um and that's that's the other way to do it.
23:56
Um, and then currently you would then just delete the one that is uh
24:01
is now duplicated because you All right. Um,
24:08
okay. We had a question about um
24:14
the way that income lab does here. Let me go to the one I had a bunch of examples here. Uh, does
24:22
multiple plans. So, um, this is a little bit different from a lot of software that you will have run into before. Um,
24:30
so in a lot of software, there really are not multiple plans. There's just one plan. And then you can typically go to
24:36
some kind of a, you know, what if or a playground or a sandbox or whatever and
24:41
sort of look at, well, what if I change the plan this way or that way? Um, Income Lab does have some of those
24:47
tools. It's in Decision Lab and we'll be launching some more of those soon. Um but you can also build as many um plan
24:55
scenarios as you would like. But still the household has one primary plan. And when you build a a new household, you're
25:03
just starting to work uh on an income lab plan. Of course, if you only have one plan, it is the primary plan. Um but
25:10
the question was about, you know, what about when I create new plan scenarios?
25:15
um you know is there any way so that I could make a change and change all of my plan scenarios at once um and
25:23
unfortunately there is not. So as soon as you copy a plan which you can do
25:28
anytime you see these three dots you'll you'll actually get a menu if you click on them. So if I copy the plan I'm going
25:34
to get everything that was in the household plan what what's called the household plan here. Um but then it is
25:40
now it is cloned but it no longer has any connection. Um, and that's for good
25:45
reason because um, typically if you're copying a plan, you want to make a difference between those two things. Um,
25:51
and we but we don't have sort of um, you know, version control on that afterwards where you could, you know, merge other
25:58
changes into other plans. It would be an incredibly complex um, system. Uh, if we
26:04
had you do that, but I do recognize that sometimes you'll have made a copy and then you'll say, "Oh no, I got something
26:10
wrong." and now you have to make changes on two plans, both the primary plan and the plan scenario. Um, and I recognize
26:16
that can be that can be a little bit annoying. Um, but but that is the way that it works. So, one thing that's nice
26:22
is with the new decision lab features coming out. Um, well, we already have one which is social security. Um, but we
26:30
will soon have a pre-retirement, you know, saving for retirement and when should I retire and we'll have an
26:35
investment strategy tool. Essentially, this will help you do some of that work um without having to create copies of
26:42
plans because creating copies can be cumbersome for exactly that reason. So, we want to give you the opportunity to
26:49
explore plan options kind of like in tax lab uh without actually making new plans
26:55
uh so that you don't have to manage um you know versions and copies and things. There still will be reasons to have uh
27:01
those plan scenarios. Um but this will give you a nice way to uh to avoid a lot of that a lot of that work. U and for
27:08
those of you who haven't seen this before, um you can also um promote a
27:14
plan to be primary just by clicking the
27:20
the star. Um, and then any primary plan can be set
27:26
to be tracked and monitored, which means that once a month at the beginning of the month, Income Lab will pull in new
27:31
data. If you have integrations, we'll pull in data from the integrations. If you don't and you have manual plans, um,
27:39
we will use the asset allocation to um to estimate what the new alloc the new
27:46
um, balances are. We'll move you one month forward in time. We'll apply inflation as it actually happened. will,
27:52
you know, you'll get older or the people in the plan will get older, right? Um, so all of that will be done automatically for you if you've set it
27:57
to to track and monitor. All right.
28:05
Uh, another couple questions. Uh, I think somebody asked if we could have RMD standalone charts. Um, I think the
28:14
concept there was that maybe it might be nice to see um, you know, a chart that
28:21
has the RMDs as a separate item um, just on
28:26
their own. I do like that idea. We've had we've had it before. Um, currently
28:31
we list them here. So I've gone to tax lab explore.
28:37
Um, it's a little bit tricky. we've had to so RMDs there there aren't any RMDs in this plan but if I if I go to another
28:44
one here taxable tax defer taxfree should have some
28:50
there we go so the pink is uh is RMDs
28:55
um so you will see it there but yeah I think it's a nice idea maybe for a comparison chart actually to see how
29:01
RMDs would differ between two two options um one thing that's worth pointing out for RMDs is Um
29:09
if you have QCDs, so qualified charitable distributions in a plan, um
29:15
those will show up as um where is it here?
29:21
Non-T taxable qualified distributions and the RMDs will just be lower. Um so
29:27
you know whenever you're creating a graphic uh you know a visualization of something you end up having to make
29:33
these kinds of decisions. Obviously, QCDs can count as RMDs as well. Um, and
29:39
so we could either put them in the RMD bucket or we could put them in the non-t taxable qualified distributions bucket.
29:44
We chose non-t taxable because it helps to point out, um, hey, these are not,
29:51
you know, these are not taxable. Um, so that's just a little wrinkle if you have QCDs in the plan.
29:59
Um, how is the OBBBA integrated into the software? So, uh,
30:05
great question. Uh, and this was, you know, back in July now, um, we did
30:11
integrate, um, the, uh, the changes into into the software. So for example, if I
30:19
go back to tax lab um and go to I don't know tax brackets for example here I get
30:26
a comparison of um of the tax brackets in this case between
30:32
converting at 24% and convert and not doing any conversions and uh you can now
30:38
see well out into the future we still have you know 24% tax bracket whereas before that would have been I believe it
30:45
was 25 I'm trying can't remember what the the um the brackets would have been
30:52
uh with a sunset. Um so we we eliminated the sunset. Uh we did have some people
30:58
say, "Hey, could you bring back the sunset as an option and we could just give it a year uh and we'll sunset it
31:04
back to what things were before just to have something to play around with." I liked the idea and it wouldn't be hard to do. So um it's not imminent or
31:11
anything, but I did did think that was a an interesting idea. Uh so that's the biggest um thing to note is that. But
31:18
some of the smaller things that are for a more you know short period are um for example the what people are calling the
31:24
senior bonus which is an extra $6,000 deduction um which is uh only until
31:34
I believe 2028. So it'll be gone in 29. Don't quote me on that. It could be till
31:40
29. um things like that, things like higher salt deductions, so the uh state
31:46
and local tax deduction up to 40,000. Um all of that's uh only for a certain time
31:52
and all of those have um AGI related or MAGI related um thresholds that will
31:59
reduce them. All of that is is now in the software. So So you'll see you'll see all of that. Um,
32:08
okay. Medicare premiums. How do I include those in the plan? Great
32:14
question. So, Medicare you can find again in the three dot menu is a great place to go if you're looking for
32:19
something a little bit more, you know, specific or quirky. Um, and if I go to
32:26
adv advanced plan settings, I have all of these sections and I can open any one of them, including Medicare, and I can
32:33
say, hey, let's, you know, let's let's state some things here, uh, related to Medicare. Um, sometimes you want to
32:40
include the premiums in the plan as an expense item if you're the kind of person who likes to show a plan with a budget or maybe this is just a
32:47
particular focus. Um, in and I've done that here. So, I've said include base
32:52
premiums as an expense item. Um, and so then I will actually see a line item for
32:59
Medicare premiums in this case for both people. And it'll be a combined part B and D um, uh, premium. But you might
33:07
have somebody who is, you know, going to do uh, you know, part C or there there are lots of reasons somebody may or may
33:13
not be covered by uh, these things. There might be a time when someone begins Medicare at a later age because
33:18
they're still working. So, this would be where you make all of those changes in the plan. By default, um we would have
33:26
them starting at 65. By default, we're having them covered by parts B and D. We have a default part D premium base
33:33
premium. Um but you can change all of that even if you do not include the base
33:39
premiums as an expense item. So all all I'm doing here is deciding whether it's going to appear in in my you know cash
33:47
flow graphs and and lists as you know Medicare premiums. It doesn't mean that
33:53
they wouldn't have them. It just means you want to call them out as a as a special item. But even if I turned that
33:59
off, I would still get my Medicare Irma calculations done for me because I've
34:05
said I'm covered by parts B and D. and in income lab Irma which is the income
34:10
related oh incomereated monthly additional amount I
34:17
believe is what it stands for uh for my premium we treat that as a tax so it
34:22
appears on all of the tax um graphs and so on so you would still see it there so
34:29
so if you if for whatever reason you're just trying to make a simpler plan a plan that doesn't have as many line items on it if you turned off including
34:36
it as a including it as an expense item, we still would show you Irma in the tax
34:42
section. You have to actually say, "No, I'm not covered by these uh in order to not show Irma at all." Um,
34:52
all right. Um, last two presubmitted questions. And I see Derek has uh joined
34:59
us now. I know it's uh middle of uh the uh the semester. So, um
35:07
the last question uh for Derek is, you know, we had an adviser wanting to send
35:12
monthly or quarterly reports out to clients from Income Lab. Um are there a few that you like? And I would actually
35:20
expand that to say just like are there visuals in the software that you like to
35:25
use? Maybe it's even in meetings and things because the fact is for most visuals in the software there is a
35:32
report you could use that has roughly that that visual. So Derek, what do you what do you like on an ongoing basis?
35:39
Yeah, I mean I do think for you know ongoing touch points obviously the guardrails make a lot of sense in terms
35:45
of like where are we? You know is somebody just a reminder where that upper lower guard rail kind of is. Uh I
35:52
think there are different ways you could go about communicating that but that could be one visual that um you know is is there. Um you know I think you know
36:00
the the stress test those types of ones I I usually prefer to have that as a conversation rather than more of a
36:06
static type of thing like explain somebody what's going on why we're looking at that. Um but I think lifehub
36:12
as well as long as things are kind of automatically updating and you know accurate. LifeHub can be another one
36:17
where people just like to see, okay, here's my my total picture in one place. So, for me, those would be the two I
36:24
would personally go to as more of a if I was trying to set up a kind of recurring contact,
36:29
right? Yeah. And there is a uh a report item that is the guard rails. So, for
36:36
those of you who don't aren't as familiar with the reporting capabilities in Income Lab, it's up here across the
36:41
top. So the way to think about the navigation is, you know, stepping back, finding households, reports, settings,
36:47
all that stuff's across the top. And then once you're within a household, you're going to do your navigating along the left. So I'm going to reports I can,
36:55
the way that you do it is you create a template that has certain um modules in
37:01
it. So I can just search for um
37:07
guard rails. Pretty
37:13
sure we have them in here. If maybe I'm wrong. Uh, let's see here.
37:19
I think they're at the on the income plan at the bottom right there.
37:24
Oh, income plan. There we go. Cardross. All right. Well, apparently, uh, our search isn't working very well there. So, I might need to tell somebody that.
37:30
But, yeah. Uh, and then you can either show it with or without variable expenses. We can go into what that
37:36
means, but without variable expenses, just saying like, hey, just show me kind of the long-term stuff. You know, if I
37:42
happen to be spending an extra $5,000 this month, don't include that. So,
37:47
yeah, there there's your there's your piece for guardrails. And then, um,
37:52
for, uh, LifeHub, you actually have a ton of ability to, uh, to customize. So,
38:03
I don't know why this one's running again, but uh up here in the upper right where you see the little download um if
38:09
you click that um and if you do custom onepage report, it's going to basically
38:16
be a report of whatever you actually were showing over here. So, if you wanted to just show, you know, investment accounts or something, um and
38:23
then I went and ran the report, this is actually what the report would look like. Um or you could, you know, show the whole thing and and so on. a lot of
38:30
customizable stuff there. Um, yeah, and I agree. I think those are if if it's an ongoing basis, like if you
38:37
have already sort of um introduced somebody to the concept of guard rails and you
38:44
know, this is the thing about financial planning. Really, a client doesn't come in knowing ahead of time what they
38:50
should be paying attention to. You're you're going to tell them. Uh, and so if if you're using income web, then it's
38:56
really all about, well, what can I afford to spend and how close am I to needing to make an adjustment to that?
39:02
And so that's what those are all about.
39:07
All right, let's see here. I don't know, Derek, if you've had a chance to uh look through some of the
39:13
Q&A or the uh see if maybe I want to do some mopup if people had other questions on the things I've already talked about.
39:22
Oh man. Yeah, lots of For some reason, my Q&A is shown up blank, so I can't actually
39:27
Oh, I'm not seeing anything. Yeah. Okay. All right. So, I'll take a look. Um,
39:33
we did have a a question. Uh, when will you or will you start incorporating AI and machine learning into income lab?
39:40
Um, you know, in terms of machine learning, we we've always done a lot of uh you know, intense analytics and
39:47
things. In fact, uh, a lot of our our default guardrail settings and stuff are are based on exactly that. But for AI,
39:54
you know, typically what people mean these days is, you know, when are you going to start using kind of LLM type uh
39:59
capabilities? And as I mentioned at the beginning of this, that is very, very,
40:05
very soon. And those of you who've already reached out on uh the beta program, you'll be hearing about that
40:10
really soon. And Derek has been helping a lot with that. So, um, and then the broader community who's not a part of
40:16
the beta program. Um, I would guess within, you know, weeks or maybe at most
40:21
a month, you might see uh see some pretty cool new features coming out. So,
40:28
all right. Well, let me grab from our
40:35
our questions here. And again, if you can um upvote any that uh
40:44
that you see that you'd like us to hit, that would be uh that would be helpful. Um is there a video that walks through a
40:50
plan build so I can visually learn where everything is? I'm a visual learner. Um,
40:56
I believe there are and I know for a fact somebody's actually working on another one right now, but I mean Derek,
41:04
you know, it's it's just your, you know, your opinion. I suppose there are other ways to enter data and so on, but do you
41:10
have any kind of tips for where do you like to use LifeHub? Do you like to use the kind of main, you know, stepper up
41:15
here? What how do you like to build a plan? Yeah, I mean, I think I do usually like
41:20
to use the stepper. Um the reason for that just being like it it feels a
41:25
little bit easier like if I don't know Justin you want to go to like the assets tab you know and maybe there's an
41:30
account I want to edit the um asset allocation or something right I can just go to the settings right there um you
41:36
know like it just and maybe it's just the way I learned it and so now I'm you know still go back to it but um you know
41:43
for me I do tend to just kind of follow the stepper make sure we've kind of covered all the areas it's good reminder
41:48
too of like okay if I don't see you know certain categy in there. Maybe I didn't actually put something in there. Um, so
41:55
I I do like the stepper, but that's kind of the initial build of it. Um, I often
42:01
do find myself like if we're, you know, now editing a plan or going in, I'm meeting with somebody and we're going to
42:07
update their guardrails, I'm actually doing a lot more of that editing in LifeHub where I say, "Okay, yeah, we had
42:13
your, you know, IRA at whatever company originally, but you've rolled that over,
42:18
so let's change where that's located and things like that." that, you know, I tend to do that type of editing more
42:24
live kind of, you know, looking at that or or even just if I'm preparing before the meeting, I find it's pretty
42:29
convenient once I know the asset allocations are right, those types of things. If I'm just tweaking, you know, a balance in a 401k account that doesn't
42:36
automatically get updated or something, I can go in here and and do that. So, kind of depends on what I'm, you know,
42:42
entering, you know, whether it's a first build or a an edit of a plan. But um
42:47
yeah, those those are the two places that you know and then obviously certain like advanced plan settings or something if you're you know changing the
42:54
retirement spending smile or things like that um you know there might have to go somewhere else.
43:00
Yeah. And I'd say so LifeUHub's great for visual and I agree with you. Like if you already have a plan and you're just
43:06
kind of making some pinpoint uh changes, you know, oh my rental, it's up to 1,500 a month, you know, well, okay, pretty
43:13
easy. Just find it. Don't have to remember what now which tab was that on, right? But we do the um this uh this
43:21
kind of step through the plan piece is built in roughly the order of um how you
43:28
would you know typically do it. So assets are first often that is a you
43:34
know a key place where you're doing uh some data gathering um you know social security kind of foundational in
43:41
people's plans. you know, other income. Um, as I said, you know, we just went over some of this with the the types of
43:47
invest types tax treatment and so on. So, the first things you'll notice here are the the resources, right? This is
43:53
the like what am I going to spend? And so, that's why they're in this order is cuz that, you know, you can actually
43:59
have an income lab plan that doesn't have any liabilities, savings, expenses, or insurance in it. In fact, that's why
44:05
it has this little X here. Like, I could just get rid of this category entirely from the plan. you know, a full rich
44:12
complete plan probably has them in it, but you don't have to have them. And so that, you know, if you're new to the
44:17
software, that can actually be kind of helpful. In fact, in a brand new plan, I believe you only see these four and then
44:23
you would have to add I could uh probably find a find one has fewer here.
44:33
Yeah, here we go. So, I only have these four. then you have to click on this plus menu to say oh let me add another
44:39
category. Um so yeah I think there's a there's something to be said for just kind of the sort of uh you know table
44:47
style uh entry but yes there are videos and I'm a visual learner as well. Um the
44:54
other thing is that you know for those of you who are new to the software do take advantage of the onboarding that we
44:59
offer. We do have awesome, you know, customer success team that can help walk
45:04
you through things. Typically, I think what they like to do is have you, you know, build a plan and then come kind of
45:09
uh work on it uh with them after you've done some work on it. Um, one the
45:15
philosophy of this user interface is really the stuff that's most visible is the just core have to have it stuff and
45:23
then as you kind of peel back the onion, you get to more details. So clicking on a uh either an item in lifeub or the
45:29
gear icon here you see okay what's the next level you see all the same stuff but then you also see some other things like asset allocation and then you know
45:36
you can even go deeper and maybe this is a really specific plan where you're going to specify particular
45:42
distributions from this account. Most of the time you're not going to do that but you can peel back the onion and if you
45:47
need to you know really dive in you you you can. So that's if you're new to the software,
45:53
just think to yourself like, you know, okay, I I want to do this really specific thing. Okay, then I'm probably going to have to look for, you know, a
45:59
blue link or something. If it's very high level, you should find it, you know, um right on the surface.
46:09
All right.
46:15
Um, let's hit this uh Nathan's question on on uh Roth conversions because this
46:21
is a this is a common one. That's a really important um question which is basically hey I'm doing you know I've
46:27
been doing Roth conversion you know I built a plan I looked at it in light in tax lab you know maybe I figured out
46:34
that I like um doing you know Roth conversions to the you know 24% bracket
46:40
or something like that but then once I actually implement that in the plan it
46:47
takes my gross um income you know way down. So in this
46:53
plan, it looks like I don't yet have Roth conversions applied. Let's just
46:58
double check. One easy place to see that is in LifeHub.
47:04
Why this one is Yeah, it would be right here in savings and transfers, but there
47:09
aren't any. Um thought I had one with Well, I can I'll
47:17
show you here. I'm going to show you a different way to add Roth conversions. So, I'm going to go to advanced plan
47:22
settings, taxes. I'm going to change the tax strategy to
47:28
bracket management. And then I'm going to go to 22%.
47:35
Save and go back. So what's happening here is you know in
47:43
order to figure out how much you can spend from your resources the app is figuring out okay you know given your
47:49
capital market assumptions and your asset allocation and you know the timing of these other um resources like the
47:56
rental property the rental income and the pension income you what can I spend and be um and be uh you know within the
48:06
the risk range that I want to be um unfortunately That is a totally separate
48:11
question um from taxes and I really wish that the world worked in a different way
48:17
where taxes were more closely related to this. Um but because of that that
48:23
initial answer to the question what can I spend is always a gross of tax answer.
48:28
Um, so think about it this way. The amount you can take out of an IRA um, in kind of a, you know, sustainable
48:35
withdrawals type uh, way of thinking um, has nothing to do with tax rates. If if
48:42
we got rid of the income tax system tomorrow, uh, the amount you could take out of your IRA would stay the same.
48:47
It's just that the net amount would go way up, right? Um, and so because of that, there's always this dance between
48:55
gross of tax sustainable income and net of tax spendable income. And that's just most visible with Roth conversions
49:02
because if you're doing large Roth Roth conversions, if you were to, you know, keep your spending at the same amount um
49:10
or keep your gross income at the same amount, your net income would just go way down for that year. So, for example, in this year, I'm taking out 18,100, but
49:18
I can only spend, you know, 138 from it. Whereas, if I weren't doing Roth conversions, it would be much, much
49:25
higher. Um, so typically what people do in that situation is, well, first of
49:31
all, uh, see whether this was a household that was spending well under
49:38
its means. So, for example, if this household told me, well, actually, I only need 10. you're telling me I can
49:44
have 18 gross, but net I only need 10. So, one question is sort of, well, what
49:49
are we going to do? Are we going to build a a more conservative plan? Are we going to do something with that surplus
49:56
and so on? So, in that situation, you could simply pay use the surplus to pay taxes on Roth conversions. Um, that's
50:03
and I don't know, Derek, how often you run into that. Um, but you know, more often you're going to be in a position
50:08
where paying all the Roth conversion taxes would take your net income a little bit too low. And in that
50:14
situation, you're going to want to build a plan that um that actually targets a
50:21
particular net of tax income. So, for example, if I said here, um, you know, I
50:27
actually need, you know, um, you know, $15,000 or something, I could
50:32
sort of copy that plan. Or actually, I have one built already, I think. Um, okay. I built it for for 12,000, but
50:41
um, for this plan, um,
50:48
I'd have to look at what the settings are for it, but I, um, I I am, uh, including I guess I put it at 12,500,
50:55
not 12,000, but um, I'm building a plan that will now gross up my withdrawals in
51:01
the years where I'm doing Roth conversions in order to pay the taxes on the Roth conversions. So, it's this
51:06
multi-step thing where first you ask what can I afford to spend. Then you see whether there's any Roth conversion, you
51:13
know, that you might like to do. Then you see whether that is drawing your net
51:19
spending down too low. And if it is, then you build another plan that will target a reasonable net level. But
51:24
because you have already done that first step of knowing, hey, you know, this is roughly in an area I can afford to
51:30
spend. Once you build that final plan, you're not typically going to find yourself in this situation where you're
51:37
way overt taxing your um your portfolio or something. So, you'll already be have
51:42
kind of think of it as like a target like you're getting closer and closer to the uh to the um the final plan. Uh I
51:50
know Derek, you actually have found that you have another strategy for develop for for presenting this to people where
51:56
you maybe don't even include the Roth conversions in every plan that you present. um what are your thoughts there?
52:02
Yeah, so for me I found the simplest way is to kind of break it into two pieces. one one would be doing that Roth
52:08
conversion analysis which you know I think is very helpful to figure out okay what strategy are we targeting over time
52:14
but since the guardrails are always a reflection of you know where are things at at this point in time I'm also very
52:20
comfortable just letting the gu you know that underlying plan evolve over time as
52:25
we're doing the conversion um and still you know setting our guard rails based off of you know kind of where where
52:32
things exactly are today and not actually forcing the guardrails into or sorry the the Roth conversion into the
52:38
plan. Um, you know, there there are pros and cons to that, but the other thing, one of the reasons I'm comfortable with
52:43
that is like we don't know what tax changes could come down the road. You know, we don't know for sure just if even if we think we're probably going to
52:50
complete a Roth conversion strategy, we don't know that with certainty. So, I'm pretty comfortable with a okay, let's
52:56
just, you know, let the plan evolve as it evolves and not necessarily force the Roth conversion into the plan for
53:03
guardrails purposes. Uh but definitely it's nice to have for some of that modeling around like okay do we actually
53:09
want to do the Roth conversion in the first place. Um so yeah I kind of break it into two two distinct decisions in
53:15
how I look at it. Yeah, I guess part of that decision on whether you're going to do it, you know, that way or, you know, build this plan
53:23
that is, you know, targeting a specific net of tax spending amount which you've
53:28
already determined is, you know, going to be in the reasonable range is do you want a plan where LifeHub includes, you
53:36
know, every little number matching up and and so on. And that can be useful for sure. But there may also be clients
53:43
who will sort of take their plan as a more general sketch and say like and you know maybe this year we'll do Roth
53:48
conversions because that looks looks like a good idea. This I would say is probably the hardest area of planning
53:59
because of what I said this this weird dance between gross and net of tax. Uh
54:04
and like I said, I I just wish it were the kind of thing where you could just perfectly solve for these things, but
54:09
because uh investment accounts uh and sustainable withdrawals just that is
54:15
just a gross of tax concept uh we're just stuck as financial adviserss in
54:20
this position where you do have to apply some art and some back and forth. Um
54:26
you know, but that's also valuable for clients, right? So, I mean, you know, it's it's hard work and and so
54:32
definitely worth uh worth having an adviser help you out with it. Um, we do have, I think, a bunch of videos from
54:39
some of our master classes on that concept. I think it was the second or third session with Jason Juul uh in the
54:47
master class. So, Shelby, I don't know if you can drop the that master class link in there. um that we even had a um
54:56
just a a a kind of a flowchart of showing what your workflow would look like if you're doing Roth conversions.
55:02
Um and so I'd encourage you to have a look at that. That can maybe I I may not have might not have come out of my mouth
55:08
in as clear and clean a way as I was hoping it would. So maybe that uh that uh kind of schematic of how to do it
55:14
would would be a little bit clearer. Um, okay.
55:21
Just the last five minutes here. Let's see what we've got.
55:27
Okay. So, Roth conversions, how are taxes paid or tax are paid? Is there a
55:34
lost opportunity cost calculation? Because tax are paid uh before they would have been. Um, so this is a good
55:40
question. It's basically kind of about like a break even or like is it worth it calculation. Um
55:49
there you can certainly compare two plans. Uh that's another thing that I've I've often um done. Uh and Tax Lab is a
55:58
great place to do that. So that might be the the the closest thing to what you're talking about, David. Um in terms of
56:03
comparing to um so you can go to tax lab and by default it's going to compare one
56:09
plan with two different um withdrawal strategies which is you know technically that is two different plans. It's just
56:16
as I said before, you haven't actually created two different plans. You're sort of in a sandbox. Um, and so that's
56:23
that's probably the, you know, you can kind of add up your additional net income and your additional net legacy
56:28
and that, you know, that that sort of um gives you a good feel for what is there
56:33
some additional, you know, juice from from that squeeze. Um, I would also say a key thing not everybody knows about is
56:40
if you were trying to compare two types of plans that differ in some other way, like maybe with and without QCDs or
56:48
could be, you know, changes in when you're claiming social security. If you've built that plan, you can
56:54
actually compare two different plans here. Um, so that's another place if you're ever looking to kind of see that,
57:00
you know, give me a final number, whether you call it opportunity cost or or something like that, this is a really
57:06
good place to do that. Um, so you can sort of see, you know,
57:12
uh, for example, here is, you know, are the QCDs, how much are they adding? You'd want to, in that case, have the
57:17
same strategy, different plans, right, to really zero in on what that difference is. Um, but that's a a good
57:23
place to do that. Um the other place um
57:28
that uh that you can see
57:34
um there we go. Okay.
57:40
So in this case QCDs are adding you know between legacy and income it's adding you know almost
57:47
100 grand right so 90 $90,000 over the life of the plan. Um, oh, I chose the
57:53
wrong one. Anyway, uh, there was one other
58:01
thing I was going to point out. Oh, here it is. Um, there is a break even is a
58:07
pretty silly one. I need to go back to comparing the same plan to itself. This is break even on taxes paid. um which is
58:14
admittedly not the same thing as you know all of the complex calculations that went into net income and and
58:22
legacy. So this is more on like hey at what point would my taxes have been higher if I'd been in one situation or
58:28
the other. So David that's another potential place to look.
58:34
All right, Justin, maybe one last one real quick. It looked like based on you answering if
58:41
you um the question about discussing the setting and customizing the guardrails for an individual plan. Um personally,
58:48
I'd like to go to um the stress test for that is where I really like to draw that
58:54
out for a client and look at like, okay, we've got um and maybe even want to show here back on that page where you can
59:01
look at the range of guard rails. Um oh yeah um
59:06
where you can see okay we've got you know this range of more aggressive to more conservative guardrails settings
59:13
and that's going to move this around but then to really see like the actual impact of that. I love going to the
59:20
stress test and being able to actually especially compare two different strategies against each other is where I
59:26
think you really get most benefit here where you have you know not just okay here's one particular strategy but
59:32
here's one strategy and here's the other one overlaid on the same one. So you can see dynamics like if you use a more
59:39
aggressive set of guardrails, you're going to be able to start out with a higher income, but it's going to mean that, you know, as we go through a
59:46
downturn, you're going to need to cut back a little bit more. Um whereas if we
59:52
actually did them with just the u on the other hand, you start out lower, but you don't have that down that cut in
59:58
spending. And I think that's the best way to really find, okay, what's the right level of guard rails for a
1:00:05
particular individual because some people will be have a lot of variable expenses that they could cut out of a plan if they needed to and possibly very
1:00:12
comfortable with that cut back. I mean, even with the aggressive guard rails, you're usually not going to see huge
1:00:19
cuts in spending. Um but uh yeah, so yeah, here when you can overlay the two.
1:00:25
Um to me, this this is just the best way to really map out and sometimes I'll even do kind of the extremes like here's
1:00:31
the most conservative, here's the most aggressive and I feel like that's a good starting point to talk through and see the portfolio values.
1:00:39
Yeah. So for those of you who didn't see up in the upper right of retirement stress test, you have this option to go
1:00:45
from, you know, one box to comparing two. And then I've just I created a plan
1:00:51
that just had a more conservative income setting which meant I was spending less and my guard rails were wider which
1:00:57
means through the global financial crisis I didn't get any pay cuts. Uh definitely interesting though here you
1:01:03
know even with my pay cut I having spent started out spending more I would have been in you know roughly the same shape.
1:01:10
Um the difference though, maybe not surprising because I'm spending more uh is that the um the gold one has a lower
1:01:19
balance. Um so it's a good good way to show the the trade-off there.
1:01:25
All right, so that's our time for uh for today. Um
1:01:31
lots of questions we didn't get to as always. Um but I appreciate it. Um
1:01:37
and uh we will hopefully see a lot of you next week and uh next month we
1:01:43
should have a lot of new material on those AI features that I was mentioning. So you'll you'll want to come back uh
1:01:49
next month. But thank you Derek. Thanks everybody. Have a great week.