What is Test Plan and how should I use it?

welcome

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to the income lab video tutorial series

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this video

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walks you through the plan test results

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income page the first section

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looks at the overall lifetime income

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experience

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of these households across the entire

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life of the plan

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on the left we see how many households

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received more

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income over their lifetime than was

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planned

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of course it's natural to ask how much

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more income did they receive

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did the outcomes vastly exceed

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expectations

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or were the differences small so below

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the overall percentage

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you will find the average amount of

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excess income

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as well as the percentage received in

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the best case scenario

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on the right we see the same statistics

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for households that had less overall

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income than planned

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you will often find that even in the

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scenarios where households were not able

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to achieve their planned lifetime income

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their actual lifetime income lagged only

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by small amounts

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both on average and in the worst case

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scenario

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please note the data summarized were

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lifetime income experiences

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for information on how income may vary

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in any given month

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we can look to the next section

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in retirement just as during our working

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years

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people adjust as their financial

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situation

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gets better or worse and minor

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adjustments

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can rescue most retirement plans this

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data

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paints a much better picture of what to

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expect in retirement

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for this household thank you for viewing

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this video

 

welcome

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to the income lab video tutorial series

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this video

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walks you through the plan test results

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income page the income adjustment

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section

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examines the individual changes in

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monthly income

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that households make over time this data

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helps answer the questions

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how often did households make income

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adjustments

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and how big were those adjustments

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in this section you can see the size of

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the average pay raise

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or pay cut and how frequently it

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occurred

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you can also see the size of the largest

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income adjustments

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increase and decrease and the range in

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size

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for 90 percent of all the adjustments

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note that for downward adjustments we

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focus in this section on adjustments

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that bring

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income below the originally planned

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level

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we exclude downward adjustments that

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take a household from a level above its

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plan

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to a level that is still above plan but

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slightly less so

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in retirement just as during our working

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years people adjust

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as their financial situation gets better

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or worse

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and minor adjustments can rescue most

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retirement plans

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this data paints a much better picture

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of what to expect in retirement

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for this household thank you for viewing

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this video

 

welcome

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to the income lab video tutorial series

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this video walks you through the plan

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test

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income graph retirement is not a

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one-time event

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it's a dynamic process with adjustments

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for changing circumstances

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this graph is a powerful way to show

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clients

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what realistic dynamic retirement income

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experiences

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can look like to get a better feeling

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for what retirement income

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could look like for a particular

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household following a particular plan

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we have cloned the household and put

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them at every single month in recorded

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history

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which for us goes back to 1871

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and let them live out their retirement

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according to this plan

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increasing their income when the plan

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allows and decreasing it

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when the plan suggests the income

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scenarios in this chart

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range from the best to the worst ranking

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by overall income experience if you

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imagine the retirement

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income journey as a staircase each step

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up represents a pay raise

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and each step down a pay cut the nominal

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income graph includes income adjustments

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based on changes

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in inflation naturally you won't find

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inflation adjustments on the real graph

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if you'd like to focus on just one or a

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few scenarios

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you can click on the scenario label to

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take it out of the chart

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and bring it back in for example if i

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wanted to show a client the middle

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80 of these scenarios i could unselect

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every label except the 90th and 10th

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percentiles

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for most plans you will see that paid

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raises in retirement

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are available across a range of

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scenarios

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because of these increases in income pay

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cuts

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often do not bring income below the

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originally planned level

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in most cases you will also see that

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even in less fortunate circumstances

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relatively small adjustments can keep a

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plan

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on track visualizing this

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will help clients feel confident in your

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advice

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when it's time to make an income

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adjustment thank you for viewing this

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video

 

welcome to the income lab video tutorial

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series this video walks you through the

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planned test

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legacy results page to get a better

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feeling for how much legacy a particular

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household could leave behind when

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following a particular plan we have

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cloned the household and put them in

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every single month in recorded history

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which for us goes back to 1871 and let

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them live out their retirement according

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to this plan making the call for income

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adjustment along the way the data shown

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here range from the lowest to the

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highest end of planned legacy across all

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hypothetical households in the plan test

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by examining the line graph you can see

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how total portfolio balances change

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through time when following this plan if

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you wish to simplify the graph and focus

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on just one or a few scenarios you can

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click a scenario label to add or remove

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it from the chart for example if you

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want to focus on the middle 80% of

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planned test outcomes you could unselect

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every label except the 90th and 10th

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percentile fields

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unlike graphs you may have seen

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elsewhere where end of planned portfolio

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balances range from $0 to millions

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a typical income lab plan exhibits a

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tight grouping of legacy results usually

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close to the legacy goal that's because

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in a plan that includes ongoing

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management income adjustments are always

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made with the households legacy goals in

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mind this means that a household that

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follows a well designed plan does not

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run out of money but also does not

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vastly overshoot its legacy goals for

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example if the household wishes to leave

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1 million dollars behind but has say 3

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million left in the middle of retirement

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the plan may suggest an increase in

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income because the household is at risk

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of leaving too large a legacy conversely

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if a legacy goal appeared to be at risk

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the plan may have called for a reduction

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in spending in order to hit that goal by

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implementing a plan income lab will be

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able to notify you in situations like

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these to help households stay on track

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if the household is on track to leave

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much more than planned you can help them

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decide whether to spend more money give

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assets to the heirs give more to charity

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or increase their legacy goal regardless

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of what they choose it's a way you can

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show value by knowing when to have that

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conversation

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overall this chart is a great

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opportunity to show the value of ongoing

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plan

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management and to east worries clients

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may have about running out of money

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thank you for viewing this video give it

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a like if you thought it was helpful and

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shared any feedback in the comments

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