Discover Income Lab's New Annuity Features for Comprehensive Retirement Planning

so with that we'll get into today's topic which is um annuities and retirement planning like how to um

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include annuities in a plan evaluate plans with annuities and this um coincides with we just uh announced the

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launch of income lab's new annuity features so we will spend some time today looking at the software entering

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annuities evaluating annuities what are some of the kind of new uh ways that you wouldn't have seen before to to look at

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how annuities work understand them and see whether annuities um are a good or bad idea for a client's retirement plan

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um but before we get into that I thought it would be a good time to um because we're launching sort of a new suite of

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features and those of you who um use income lab or follow us know that we have a pretty pretty fast product

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Cadence we we put out new things all the time um so in fact we just launched uh Medicare Irma bracket management a

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couple days ago a week ago um so there are things coming all the time um but

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just stepping back like what is it that guides the the way that we build

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software what's our mission and what are sort of the the principles that guide this um so you our our mission this on

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our website is to revolutionize how people navigate retirement so they can live with confidence and you know some

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of those words in there you'll probably recognize things like navigate because we are all about helping people

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understand not just today but how they might need to make turns or adjustments um in the future and with confidence

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especially maybe if you go back to that first master class we did with Jason juel we talked a lot about what people actually want out of retirement which is

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to live the best life they can given the resources they have and the years and

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health that they're given so doing the best you can um it's not about kind of injecting fear or anxiety and

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unfortunately a lot of the software that um that we use things around probability of

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success can lead to heightened anxiety so we're we're definitely fighting against that when it comes to product so

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new features in our software there's a bunch of things that guide our thinking um probably above all it is

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what do advisors need what are advisers asking us for so Medicare uh Irma bracket management that that was because

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that was something that was needed had a big impact on people's lives and you know many many of our uh the advisers

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who use our software we're asking for it but stepping back further from that um we base all of our product

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development on these kind of you could think of them as value so Integrity we

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we want them they need to be um you know based on the reality of of of the world

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right we found that every time we make software closer to how the world really works closer to how retiree really lives

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their life the retiree wins Innovation we don't want to just do the same things

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everybody else does right so we try very hard not to just kind of copy things but we want to we want to provide new ideas

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new tools new ways of viewing things um hopefully we've succeeded thus far

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Insight we want to give kind of advisers and clients that aha moment with certain things accuracy for sure we're we're

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kind of scrupulous about this um I try to hide it but I'm a total nerd and um and so when we uh when we produce new

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software we want things to be absolutely you know scrupulously following things as as close as we can um ease of use

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hopefully you'll see some of that today completeness so we are this is a this is an ongoing process we continue to add

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features we're focused on retirement income planning so things that are used widely or are true widely of retirees we

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want to make sure that we can handle those easily and finally client centeredness that kind of comes back to

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that mission of we want any new features to help a client understand their life

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and their world not confuse them or or cause unnecessary anxiety so you know on the Innovation

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side we could go back and think about all the things that income lab has done that really kind of changed the game

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around retirement income planning um one is kind of this shift from you know uh

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what what do you want in retirement to what can you have right how much can I spend but all sorts of of other things

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we've written articles on this kind of stuff we're the only software that I'm aware of for example that uh that models

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inflation risk it actually allows inflation to vary um uh mortality risk we just had a a webinar last month on

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how we handle mortality risk something that is not well handled in most um in

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most software and so today we're going to be talking about uh any kind of innovation and soft and Clarity around

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uh annuities um and the the vision behind

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all of this uh since we shared our mission I'll share our vision as well um is we want to unlock Financial

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competence for every retiree in the world um so the way that we tend to do

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that is we want to find places where you know let's face it the financial world

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is complicated right it's complex there's there's jargon there's math um and we actually in order to be more

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client centered and really help even advisers understand the World better we

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want to move away from jargon and move toward just the question of how could this affect my life so you see on the

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left kind of a typical I I call this the spaghetti chart or the squid chart um

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that you might see in kind of Monte Carlo you know static software that says you know what would happen if I do this

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uh and this happens to be you know correspond to something that would have had a 75% probability of success you can

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see um both those terms and this meth methodology is very jargony it's very

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you know uh complex and Technical um but it also doesn't lead to very good client

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experience and what people really want to know is given my situation you know

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how can I live my life so they want to know hey how would any any particular decisions affect my life and what you

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see here is our main dashboard that's really the place where you start

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answering that question right so this says how much do I have how much can I spend what would change that so you got

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the rails down there the green guard rail says what would allow me to spend more the red guard rail allow tells me

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what to spend how when I would have to spend less and I get to see what those changes might actually look like so much

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more clarity on the right than on the left in the world of

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annuities there is a major problem just like this which is that annuities are

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incredibly complex they've got all sorts of jargon moving Parts bells and

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whistles knobs and levers um so if you

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have run into annuities before or if you're annuity expert you certainly know some of these terms there are many more

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I could have put put up here and the fact is um annuity products and options

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have all sorts kind of a a a crazy mix of these things and it's really hard to

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evaluate what the impact of an annuity would be on someone's life right you can't look at a uh you know a

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participation rate of 60% and say oh okay I know I know what that'll do I know how that'll change my spending I

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know how that'll change my guardrails no there's no way to do that um and so we

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wanted to allow advisers to um kind of cut through the jargon and really just

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answer this question um with respect to annuities you know how would this affect my life and really just provide a lot

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more um Clarity around um how annuities work or don't work

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so there's three things I'll go over today for um annuities in retirement

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plans um and we'll also go over just the the nitty-gritty of sort of what sorts of things we currently um cover in our

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annuity features and some upcoming things as well um but other than that we'll cover these three things

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evaluating the impact of an annuity on a plan exploring the annuity itself to

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understand how it works because you know like I said here you can't just s of read these specs and understand oh I get

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it I understand exactly how this will work um and then comparing annuities head-to-head so these are three um

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aspects of the annuity features that we that we just launched um and I think

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it's uh it's interesting to know back to kind of our product um things that lead

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our product Innovation um we actually don't have a horse in this race so um we

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are um in our software and in our company completely product agnostic um

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our goal is to help advisers actually build great retirement plans uh and so

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when we built the ability to model annuities in income lab we actually didn't know what the result would be um

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we didn't know if it would make annuities uh if the impact was going to be good bad or indifferent or some some

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mix of those and that's still our attitude um so I think there's going to be a of interesting um discoveries and

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research uh around this uh we'll probably at some point do some research um and and put it out there um but

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that's uh that's our that's our approach to all um all product development so you

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know when we launched Medicare Irma bracket management we didn't have a you know an opinion or we weren't we weren't

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hoping that bracket management would be good or bad um it would just you know sometimes it'll it'll if we're just

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going to give you just the facts and then allow you to to create plans around

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those so let's go to the app here um

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maybe I'll actually before going into those three things of evaluating the plan evaluating the annuity and doing

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head-to-head comparisons I'm just going to show you the kinds of things that we

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cover in annuities so there's a couple ways you can add an annuity to a plan um

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what I did there is I just went to the pencil icon at the top you could you could also do it in life Hub by the way

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um but I go to assets and there's a new tab here so we have investment accounts and then we

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have annuities and currently by annuities we mean annuities with um lifetime or at

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least some kind of income guarantee uh we are adding more and more features to

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annuity so there will be some additional options here soon um but for for now

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that's what we mean by annuities and the two annuity types were covering right now are variable annuities and fixed index annuities registered index linked

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annuities are coming very soon and then you can also do um Spas so single

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premium immediate annuities and Diaz deferred income annuities um including including qac um in a different part of

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the software but we're going to focus today just on um fixed index annuities and variable annuities inside of

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um uh that have uh living benefits um so

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what kinds of features do we cover here as I said we have variable INF fixed index soon we'll have rius um

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and the main things that we we want to point out are um If This Were a variable

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annuity you would simply set its uh its asset allocation but for a fixed index

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annuity um we do have a default large cap price index um price index because

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typically uh fixed IND index annuities do not have total return in they're not based on total return indexes and so

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that's that's a difference in return um if you wanted to build sort of a custom

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index you can do that by mixing and matching asset classes um and if you do

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that there is a spot that I'll show you in a second where you can then um add a reduction in the in the return to

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account for lack of dividends if it is a price index that's being used okay so

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that's one way that we're trying to accurate to how these things

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work I go into annuity settings for most of this stuff so annuities with living

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benefits tend to have what's called a benefit base they may have lots of other terms for this we tried to be kind of

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neutral um and then a percentage that the uh that the annual guaranteed income

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is based on um we cover a variety of ways for the

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benefit to increase during def so you can do either a rollup which is

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um you know how much is that benefit base going to grow every year um barring

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performance in the in the annuity or a withdrawal rate increase so this says you know this annuity happens to start

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at a 6% uh guaranteed withdrawal rate so every year you wait it's going to go up

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that much so it'll be six and a half seven seven and a half and so on I'm not an annuity expert I don't know the annuity Uh current annuity Market

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perfectly or anything like that so um I'm sure some of you who know um annuities might think oh you know that

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number should be higher or lower or something that's fine um you know you You' put in the numbers correctly for you um and then during the withdrawal

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phase the once you start taking income from the annuity you can either have

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that amount go up only if the balance hits a high water mark Or you can base

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it on the what returns would be credited

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to the uh to the annuity based on the index and the cap rates and so on so this this one is actually only available

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for fixed index annuities um for variable annuities you would only have the balance high water Mark um there's lots of other little

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fine-tuning you can do for these settings I'm not going to go into all of them right now um if if somebody has

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questions on them we can we can ask that um for fixed index annuities we have this concept of a crediting method so

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your your performance is tied to an index okay how's that actually work um

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here I'm using what's called a cap uh and the current value of the cap is 6% meaning the most that'll be credited to

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the account is 6% um could be less but never below zero um in this case I have

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the cap change um in this case after five years I have it going down to 2% so this is a

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way to kind of one of the the real challenges with annuity planning is we don't really know what you know annuity

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values will be in the future you know caps and fees and things like that and so um we give you a way to kind of plan

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very um conservatively here you know for example uh including a uh a reduction in

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the cap um and then there's a spot for fees fixed index annuities don't typically have an overall annuity

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expense that's built into the cap but they do often have living benefit fees this is also a place where if you were doing an advisory annuity you could add

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uh a fee there okay so I think that covers

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um most of the annuity options as I said you'll see slightly different options

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for you know the accrediting methods uh option there for for variable

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annuities just a quick question on that if you don't mind sure um we are having

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a lot of questions and everyone please if you have questions put them in the Q&A versus in the chat they get buried

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as as people add comments and stuff so it's hard to find them but uh someone did ask what about MYGAs um are we

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offering multi-year guaranteed annuities really good question um so we may add

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them as a separate um type um at some point I think that'll be

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most useful once we so what we're going to do is right now we only model annuities with living benefits but very

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soon we will have this same structure it'll look just like this but in annuity settings you'll be able to tell us

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the distribution so you'll be able to say hey this doesn't have a living benefit I'm just going to take money out

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whatever I'm going to take it all out in five years or I'm going to take it out over 10 years or or something like that

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at that point um uh multi-year guaranteed annuities so fixed fixed

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annuities things like that will make more sense um for now if you did have a living benefit in an annuity one of the

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options under crediting methods actually is a fixed rate um so that essentially would be um

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and again it allows you to do kind of a two-phase um interest rate um but at the

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moment that annuity would have a living benefit if you just wanted to see its performance you could do that by um by

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you know changing the withdrawal rate to zero or something and then the then you would just see it grow because it would never take any

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withdrawals and one more question what if the withdraw draw rate is increasing

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every year of deferral and there is a rollup rate also how do you model that so you might touch on that in the M yeah

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I mean this is definitely a place where um we did talk with advisers who use

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annuities and really try to cover as much as possible if you have annuities that have you know both a rollup and a

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withdraw rate increase please let us know about them we'd be happy to you know simply allow you to do both of these instead of choosing one or the

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other so yeah if there's what we did in designing this was we tried to cover as much ground as

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no illusions that you know this is not something where you can sort of pick a particular annuity you know by

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prospectus uh from some from some company we're we're trying to be generic enough that you can cover a lot but

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specific enough that you can you you can really roll for example if I did a rollup um you know I can specify is it a

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simple rollup is it compounded is it stackable is it non-stackable what's the rollup based based on you know uh when

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does guaranteed growth end because often that guaranteed growth is only for a particular amount of time even if you're

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not taking withdrawals uh there's a lot of specificity here but I'm sure there are spots that we haven't covered so

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please reach out to us and and you know maybe point us to if you have a an illustration or a product description or

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or something or connect us with someone who knows more about it we're happy to add add features here if it's going to be useful to

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you and we have a few more questions rolling in about annuities but we'll let you keep going here um one person did

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ask for the MYGAs is that uh you said very soon is that a month or two months

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or yeah it should it should probably be it'll definitely be within two months I don't want to overpromise so let's say

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two months it may maybe less than that but okay thank

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you all right so um that covers a bit of what we what

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we cover as I said there are more settings and things um but you can really go down a rabbit hole that what I

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just showed you is the jargon stuff right that that list of all that I mean and there's more there's more jargon

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that you could use um so backing up to all right so so what like what what does

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this mean how can I use income lab to um to do annuity planning or include

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annuities um in in my plan so just to remind you

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if you're if you're new to income lab um there are a couple places of the app that uh

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that you might you know that have things that aren't all that familiar to you so what you see here is a plan with a

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couple who has $2 million um but that's not their only resources as I said what we're trying to

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do is answer the question what can I spend based on what I have and the years and health I'm given right so I built a

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very simple plan but I didn't want it to be too simple so I did add some social security um they're both taking social

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security at full retirement age or normal retirement age um and so you can see here one part of of uh planning is

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how are we going to kind of layer these things in over time and um this you're

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seeing something that Derek Tharp and I have called the retirement Hatchet retirement distribution Hatchet where

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early in retirement we're we're depending a lot on the portfolio and then as Social Security comes in we

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depend less so this is very common um and it's one of the many reasons that

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you know if a client comes to you thinking that they're going to take four % from their portfolio um you can you

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can show them this and say Hey you know I understand where that comes from but that's not actually realistically the way people do things um so if you look

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at this a number and you say wait a second 8,400 if I change that to annual

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you know $100,000 that's not 4% right well that's because that's that is simplistic planning

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that's not what we're that's not how we do planning um okay so there's

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another part of the plan though which is you know this is how much we're going to spend today and we'll keep doing that

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until we think a change is needed uh that could just be an inflation adjustment but it could also be that um

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my spending has become too risky or or in in one of two directions so the way

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that we come up with this number is we say we we need a spending level that balances the two important risks in

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retirement the risk of overspending and the risk of underspending you're all probably

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familiar with the risk of overspending no one wants to overspend TA over tax their resources and run out of money but

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the risk of underspending is actually incredibly common and the way that we do retirement planning today um we we

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actually run into that probably very incredibly often basically that would be

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spending less than you actually would like to forgoing experiences and then regretting it once

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you reach an older age and have more assets than you uh can find ways to to spend so we're trying to balance that

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and the guard rails come in if one of those risks gets too high so the upper guard rail means that your risk of under

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spending your risk of regret has gotten too high it's time to spend more the lower guard rail is that your risk of

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overspending has gotten too high it's time to spend less okay you can

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evaluate what a longer term experience could look like um using our retirement

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stress test so imagine you know that that a plan like this you know had in kind of the old way of thinking had a

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you know 90% probability of success um and then you hit it with the global

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financial crisis or something instead you have a 50% probability of success that doesn't make clients feel good

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um instead what we're trying to show here is what's the effect of having guard rails on your retirement

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acknowledging the fact that you as an adviser actually can help clients adjust Through Time probability of success

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basically says you can't that nothing I can do for you after now um and you'll

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see typically in the retirement stress test that even in some of the worst most iconic periods in history the

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adjustments that were needed to keep a plan on track were relatively small and temporary so the key thing to note here

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with the retirement stress test is you know the difference between having to deal with a client seeing the

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probability of success go from 90 to 50 or 90 to 60 deal with all that versus minor and temporary adjustments one is a

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much better experience and it's actually um more accurate okay so this is a great

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place to evaluate um what adding an annuity to

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the plan could look like because um there's sort of two things you could do if an annuity um can do um Can can

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affect two things it could affect how much you can spend today if you wanted to keep risk the same right so it could

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mean oh you have to you could spend more or you have to spend less right it could move the spending up or down or you

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could build a plan where the spending you know is the same but it changes the

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the ride along the way it changes whether your income would have been Vol

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this volatile so it might make it less volatile or it could make it more volatile in certain situations and so that's what we're going to see here I've

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chosen these examples to go with the second approach where I tried to build plans that had the same at least

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spending level so that we could just focus on the on the ride you know how

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bumpy is the ride and the fact is you actually could look at both right you could spend more and see if the ride gets smoother or spend less and see if

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the ride gets smoother um so but I'm trying to keep it keep it simple here so what I did is I took this plan you

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already saw it it's $2 million and a couple of social securities uh people in their 60s roughly a 30-year plan so I

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didn't you know not rocking rocking the boat on normal um things here also you'll notice I'm planning to spend

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exactly the same amount adjusted for inflation through time that's not always how people plan we we have the

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retirement smile um that you can use in plans and often people do and that that

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really um can affect plans but for here for Simplicity we're just keeping it simple okay so uh in the retirement

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stress test we also have this option up here at the top you see these three options and if any um plan in the

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household has an annuity um you'll see this a here as well which we're going to talk about in a second but for now I'm

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just going to choose the side by side comparison tool and I'm going to say well okay what would things look like if

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I added for example 25% if I took 25% of that $2 million so 500,000 and moved it

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into that fixed index annuity that I was showing you before and now we can see

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um that in fact in order to switch I sort of like to view

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um the uh the difference if it's positive as a as a green number rather than a red

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number okay so you can see here um the fixed index annuity at least in the global financial crisis added a lot of

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stability so it basically meant you wouldn't have had to take a pay cut um through the global financial crisis

26:51

great right um we can look at it in the dot bubble see very similar thing

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and similar thing in the stagflation era now you're probably saying to yourself a few things right now oh okay so the

27:05

annuity always helps well yes and no um if I put 50% in the

27:14

annuity and compared it to the household plan the story is a little more

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complicated you still might prefer the Blue Line certainly it's

27:25

better through a lot of this but wow toward the end of the plan this plan

27:33

actually runs to zero and Depends entirely on the annuity for

27:39

income um so that is a a clear tradeoff that would be happening in this case and

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it's probably one of our first uh informal results of uh kind of looking

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at this sort of uh research on this is that you know too much in an annuity uh

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in times like stagflation can really uh lead to some interesting results so you

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there's there's no free lunch in the world right um and so it would be surprising if you couldn't find places

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where there's a clear tradeoff uh between things um so that's that's definitely

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one of them just for the heck of it we'll look at uh at the Great Depression as well

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this is kind of an interesting one to compare to stagflation because stagflation is mostly about inflation

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sideways return you know not great returns but inflation um the Great Depression actually had uh

28:34

deflation so it's actually helpful for fixed index type uh type Investments another thing to note here

28:42

is um the retirement stress test is not it's not a time machine it's not

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saying hey we put you back you know in the 70s we gave you bell bottoms you know we um you know you're driving a

28:58

Chevy Nova no all it's doing is putting your plan through the returns and

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inflation of that period now that may just sound like an academic distinction for kind of the

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normal stress testing we do but actually it's a big deal like the Great Depression there there was no social security but that stress test included

29:19

Social Security right so really all we're doing is hitting it with the returns and inflation from that period

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the same is true for annui so you need to be careful to understand we don't know what you know your fixed index

29:30

annuity caps would have been in stagflation they didn't exist so you know you could do a model that sort of

29:36

tried to pretend it would know but we don't really know what they they would do so what you're doing in the stress test is saying hey given the current my

29:43

current assumptions about how this annuity will work how would it react through this kind of inflation and

29:51

um and return scenario right that's an really important caveat okay the second thing that you

29:57

can do so this was comparing you know a plan with and without an annuity we could do the same thing you know with a

30:03

variable annuity and say um and all I've done is move again

30:10

500,000 to the variable annuity in this case and a similar similar

30:15

impact can look at stagflation and sure enough it also has

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that rough end and uh I believe

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yep it has a a very rough and if I put too much in the variable

30:39

annuity okay so the second thing you can do um with annuities is look at how they

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just zoom in on the annuity itself through these periods and see how it

30:54

would have performed so the these annuities I actually do have starting in

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I think it's four or five years from now so I wanted to show an accumulation phase and a withdrawal phase um and

31:06

that's what you're seeing here um you can see that this annuity in the global financial crisis starting in November of

31:11

07 would never have had a step up it did have these guaranteed step UPS because I

31:17

had a 7% rollup going on but it it and so you can see here how the benefit base

31:23

was going up over time but it never it never recovered enough to hit that uh that that benefit base and get a step up

31:29

again which means that the withdrawals were always the same um I could look

31:40

at go to the 25% one could look at the fixed index annuity same accumulation

31:46

phase um and you can see um I must have turned off the the I

31:54

must have put this one on um go back in here I think I accidentally

32:02

edited so I'm going back to the annuities think I had intended to have

32:07

this one have withdrawal rate increase I think

32:13

that is

32:19

set oh no that makes sense I wouldn't see the withdraw rate increase in the in the uh in the benefit base so um

32:28

all right so the benefit base is staying the same it did get a step up early on here um in early 08 right um and then

32:38

over time it never got another step up uh finally it started getting some credited returns here this is probably

32:45

way past that 5-year period so it's only getting 2% credited returns this is one of those annuities where I had it uh the

32:51

benefit bases going up by the credited returns um and in fact this is one

32:58

where those you know kind of hypothetical credited returns are still they still hit the benefit base later on

33:04

so you can see this one ran out of money in that same situation uh where the

33:09

very there's a table at the bottom and here you'll see how the withdrawal rate is going up so six and a half seven

33:15

seven and a half eight right okay so this is a great way to to

33:22

kind of explain to yourself how does this thing work right you're not even asking is it good or bad it would it

33:28

would it help me to add this to the plan or not you're just zooming into it and instead of saying oh you know do I like

33:34

stackable return uh guarantees do I like you know you're just saying all right how's the thing

33:41

perform um and you're hitting it with a bunch of different uh a different scenario so we can look at

33:46

stagflation um you can see it runs out of money much faster but uh you know this one happens to have um that that

33:54

extra feature so the third you thing you can do and by the way this can be really

33:59

helpful with clients right because again explaining those the jargon is just it's

34:05

too much right you want to say so what show me show me how it works it's sort of like you know giving somebody the specs to an engine versus you know

34:10

letting them get in the car giving them the keys um you can also pit annuities

34:17

head-to-head and say okay what's the difference between these two things in this scenario so I'll go back to Global

34:25

financial crisis just because that's uh you know so recent most people remember it and what you see here now is in blue

34:32

you see the withdrawals from the fixed index annuity these are you're if you're going to do this you're going to want to make sure they're the same dollar amount

34:39

right we don't want to compare you know $500,000 fixed index annuity to a $200,000 variable annuity um so

34:47

typically what I do is I just copy the plan and change the annuity um if the annuity has more or if the plan has more

34:53

than one annuity you will be able to compare them to each other from inside the same plan but you can see here okay

34:59

there's a clear tradeoff between this variable annuity and the fixed annuity the variable annuity provides less

35:06

income but it also doesn't run out of money right which may seem sort of obvious but when you see it in pictures

35:13

it's much clearer the fixed index annuity does run out of money and I hear

35:19

from people who use annuities that that's that's often how they talk with their clients they sort of say like we

35:24

should just kind of assume this this will run out of money at some point um and here you can see it also provides

35:30

much more income so this is just a clear tradeoff you know which would you rather have an annuity that may go to zero in a

35:36

situation like this or uh but provides more more income or an annuity that uh

35:45

that would provide less income but maybe not run out of money as quickly so here we see actually in the uh stagflation

35:52

both of them ran out of money um and so here you know probably uh more

35:58

compelling uh case could be made that it's not worth taking less income okay so those are just to run

36:06

over those again those are the three ways that you can um evaluate

36:12

annuities in plans um probably the most important

36:17

overall is what's the impact on the plan is this good or bad or indifferent um

36:23

and you know there as I said we don't put our finger on the scale here all we try to be as as um accurate as as we can

36:31

and allow you to put uh the the variable as the inputs in um correctly and then

36:36

just you know the let the cards fall on the plan second explore how a particular

36:43

annuity works you know kind of seeing okay how does the jargon actually play out in the real world and then finally

36:51

comparing annuities head-to-head so sort of if you're if you're looking at two annuities trying to figure out which one

36:57

if any uh you might want to use um it's a it's a great way to do that um so the

37:03

the latter two are kind of zooming in and really helping people understand annuities but the first one is our way

37:10

of helping you not do annuity planning in a silo right we we do hear people say like oh it's you know it stinks when I'm

37:17

doing planning you I do my I do my planning over here and then and then I have my annuities and it's never

37:23

entirely clear what the effect is um in fact I've I've played with you know probability of Success software and

37:29

seeing you know you have the annuity and your probability of success just goes down because maybe the fees are higher

37:35

or or or whatever but that's not really the effect you're looking for you're looking for if I spent the same amount

37:41

would my ride be smoother or could I you know maybe it would make me spend less but my ride is smoother or maybe you

37:47

know in a few cases I can actually spend more in my ride is smoother that's what you want to know you want to get back to this question of how does it affect my

37:54

life and that's what we we really focused on on in uh in producing uh

38:00

these new features and is what we'll focus on as we expand uh annuity coverage in the in the coming um couple

38:07

months so with that um let's go to some uh to some

38:12

Q&A um so a quick question that we can address uh two people asked in different

38:20

ways about the example households in the software have they been updated to have the the new annuity and Irma features

38:27

also if not is there a way they could have a sample client to just show the

38:33

annuity and so maybe there's a third uh sample household we can have that would

38:38

have annuities in there so uh at this point they have not been added Justin unless you have an update on that nope

38:45

they have not been changed the Irma features are there for everything so in a way there's no way not to have Erma uh

38:52

bracket management we've always covered Irma as a we always treat it as a as a tax but we didn't have the bracket

38:58

management for Roth convergence to Irma brackets so that's everywhere if you go to those example plans um you'll see

39:05

that in tax lab um but no the example households don't have annuities in any

39:10

plans but we could actually actually we could also just add a plan to the household that has an annuity um that's

39:16

something we could definitely do and just a friendly reminder please put your questions in the Q&A uh and not the chat

39:23

it's hard to keep to manage those okay so the questions in the Q&A and we'll I'll try and navigate the ones in the

39:29

the chat as well but um there is one that's not about annuities that I want to make sure was the very first question

39:35

that we received so I want to make sure we were uh touch on it is there a way to Discount assets via LLC for Roth

39:42

conversion for purposes of reducing taxes due on conversion than being able

39:47

to show the full value for income accumulation and Legacy purposes um I'm not entirely sure what

39:55

that question is let's let's handle that we could email that person let's stick

40:00

to the annuity stuff for now um um I will answer that one okay so do

40:07

you have one you want to handle uh well I guess someone says can you please advise where to where one can do the QX

40:14

and the software that you referred to earlier yeah that's a great question um

40:20

so the any uh I don't know what you'd call it

40:25

sort of traditional annuity that you know the pension type annuity um you

40:31

would add in the income

40:37

section as other income so we have lots of people have been doing this planning for a long time um so if it's a

40:45

qac um you know you'd get your uh you'd get your quote on what it is I'm I'm

40:51

just going to make up numbers here um and it was coming from a an IRA

40:59

presumably so it's ordinary income um and you'd reduce the IRA or

41:05

whatever your the the purchase price of this is um and then you would just make

41:11

sure that it uh it lasts until until John's death so so that's how how those

41:17

work uh if it's a qac it's going to be a delayed annuity so you know you'd put in the the correct year um when that

41:24

annuity starts um so any deferred annuity would do that way

41:30

um if you had something that was you know maybe it's a joint you know spia or something um then

41:40

You' also be able to put in if it has any kind of survivorship change so if it's you know $1,000 a month but it's a

41:48

50% survivorship you could put in you know it's 50% for both you can do more complicated things where it's different

41:54

depending on who dies right um and and that's that's how you would handle um spas and and

42:01

dasas um does the software illustrate differences between Legacy amount in an

42:08

annuity and versus no annuity yes it does so

42:16

um not safe so there's a few ways to to look at

42:21

that um in the stress test you get to

42:28

look at the plan most realistic way um now we don't

42:33

know what future returns will be for anybody so you want to look at a range you know good bad um and what you'll see

42:40

is the difference in um the portfolio balance at the end so

42:49

here we see that the balance with the fixed index annuity is lower um lower by

42:55

so the balance the no annuity plan is 1.25 million and the plan with the

43:00

annuity is 1.03 million um so that's you know that's that's a great place to do

43:07

to look and you would just want to look through examples and and see them head-to-head um you can also um I didn't

43:16

mention this earlier but it's it's worth mentioning um for for things that aren't a stress test

43:24

so for things like um you know viewing the cash flows here

43:29

right you can see here's my fixed index annuity withdrawals it kind of looks funny here because it's happening before

43:35

Social Security then it kind of stacks on top of them um if I switch it to

43:40

nominal you'll see uh it sort of it just stays the same through time so here it's just

43:47

3330 for the entire plan um you can

43:52

decide for these more straight line appreciation type uh views you can decide how you want the

43:59

annuity to show for a client the default is that the only things that you'll show

44:05

are the guaranteed increases so if I go back to the annuity

44:11

go back to annuity settings and go to benefit increases in advanced settings I

44:16

say hey in basic projections should I show basically no effect of growth just show guaranteed

44:22

growth um or specify my own rate of growth during the withdrawal phase which defaults to zero or should I use the

44:28

average returns of the portfolio or the you know index with caps and so on from the from the inputs itself um you can do

44:37

either one um and that will affect what you see in in

44:44

um in that cash flow section so if I had this fixed index annuity actually

44:49

triggering increases based on average growth you might see the yellow kind of stepping up over time and that would

44:56

also change um what you would see in life Hub so here in life Hub if I expand everything

45:03

go to the fixed index annuity I can see ah okay it does run to zero uh even

45:09

under average returns right and so here you're going to see that effect as well

45:16

um you know even you know right here by 2045 my portfolio is about 2.5 million

45:23

if I switch back to the household plan I have three million right so it's a it

45:30

is a way to kind of view the the tradeoff in portfolio balances okay um does a software account

45:37

for income from a qualified annuity offsetting rmds it does so

45:44

um by default it will be set I think this is not set to be a qualified

45:50

annuity but if it were oh this one didn't have any

46:06

if I change the account type to be a traditional

46:12

IRA um there is a setting down here advanced settings under income it's the only one in this

46:19

case um so first of all it's any withdrawals from the annuity will count

46:25

um as rmds if if you're in rmd phase and they'll offset other required rmds um

46:32

there's also a setting that says hey if my rmd is great from this annuity is greater than what my guaranteed

46:38

withdrawal is take that so I my understanding is many annuities you know allow that now that's that's only going

46:44

to happen if you have a pretty good account balance right so um but so that's one setting it defaults CS so

46:50

mostly you won't have to uh adjust that but yes if if the annuity has rmds or is

46:57

D subject um any withdrawals from it will count uh and against the rmds that are required from the uh from the whole

47:05

you know set of of uh deferred accounts someone said the let's see the

47:13

specificity of an annuity would be helpful can I use this for any type of annuity meaning immediate annuity versus

47:19

deferred annuity types of fi fixed interest annuity or Equity index annuity

47:25

or VA annuity yeah so I mean some of those terms so we chose to call Equity index annuity fixed

47:33

index annuity um potato potato in this case um we are adding um registered

47:40

index linked annuities rius so you can right now you you can do those too you'll soon see

47:45

rias for spas and dasas you would enter those

47:51

um as as an income stream we may put you

47:58

know spia Andia options in the annuity section just because conceptually they all kind of live there at at some point

48:04

but you can already um do uh spia Andia planning uh in in income

48:11

lab does the income area handle an inflation factor for QX bsds with

48:18

annuity inflation so you can put in um a custom

48:23

inflation rate um which is probably your most I don't even

48:29

know if there are true inflation linked spas and dasas I know they've existed before but I'm not sure if they if

48:35

they're available today um so typically you're either going to go not adjusted for inflation so it's nominal um or a

48:41

custom inflation rate I think but if you did if there were an annuity that's inflation linked you could you could do it that way

48:47

yeah does the software accommodate inheriting an annuity and how that

48:53

impacts taxes it does it does so um if it's a

48:59

non-qualified annuity it has its own tax treatment and so that's treated as you

49:04

know gains come out first it's gains first treatment um and then if it's inherited it's you inherit the basis and

49:12

the gain so there's no Step Up in bases and that's all that's all handled in the tax uh calculations here yeah if it's if

49:19

it's a um you know an IRA it's just it's taxed as an IRA that's how it

49:25

works um okay some of these are specific

49:31

annuity questions um but about like um modeling things but I'll uh tackle here

49:39

if I do sell an annuity I try to use the least surrender terms do you have flexible options for surrender schedules

49:46

yeah so what when mentioned earlier that right now these annuities are all annuities with living benefits where

49:52

we're um where we're modeling the the guaranteed income in those cases the

49:59

withdrawals are only from the guaranteed income and those don't trigger surrender charges so when we add the you tell us

50:07

how you're going to distribute that a key factor will be you know typically you're not going to want to trigger surrender charges right so allowing you

50:14

to put limits tell us what the you know period is and so on so that's that's one

50:20

reason it was a little slower to to get to you in the app is there's there's some added complexity there um so we

50:27

will will be handling that and on that note most of these annuity terms change after the guaranteed periods or change

50:34

again after surrender uh I imagine maybe he's saying annuitization or after the surrender

50:41

period ends does the team plan to offer these offer changes after these time time

50:46

frames so if there are things other than for example changes in caps and

50:52

participation rates things like that um that you want to see in the software like some some sort of change in

50:57

withdrawal rate or fees there I know a few people have already told us there are annuities that charge a different

51:02

fee during deferral versus during income so that is something that we're going to we're going to add we don't want to

51:08

overload people with options but for the ones that are you know really important and and people use them um we're happy

51:14

to add them so if you have you know particular annuity structures that you don't think were adequately modeling

51:21

please let us know and then someone said can the annuity module be used to for modeling

51:28

government pensions um I know we have had some so

51:34

certainly you can add government pensions in as as a pension in the other

51:40

income section um I do know some people have been asking for special inflation

51:46

adjustment options there and that is on our road map so sort of a you know inflation Plus or uh you know limited um

51:54

type of inflation treatment um um so that's that's going to be your your one

51:59

limitation there right now so again reach out to us if there's something specific some specific treatment that

52:05

you need um for the government pensions now people tend to either treat those as adjusted for inflation or put

52:11

in a custom rate um someone said if you're going to

52:18

Model A MGA right now how would you do

52:23

it we can address that oneon-one too I'm not it would depend on how I'm trying to

52:29

use it um so if I want it to kind of just show it growing I can already do

52:34

that I could treat it as an annuity with no withdrawals um and with a fixed rate but if I want to have it kind of flow

52:40

into the plan I probably would do something slightly different like maybe use a um yeah there there are some kind

52:48

of workarounds that you could do to show it correctly in in the software obviously the goal eventually is not to

52:54

have workarounds on that and we will reach out to that user as

52:59

well um okay so someone said are you able to bring up the screen that

53:04

compares several annuities yes go back there and it's it's only oh

53:12

no I went to taxes uh it's only two so you can only compare two at once um

53:17

there probably is a brain out there that can handle looking at three four five six at once but uh you know mine is not

53:24

it uh and uh so we go to retirement stress

53:31

test which is this little uh clipboard with a heartbeat on it go to the

53:38

a up here and then and it'll just find the first one

53:45

it can find uh if you want to look at a different one that you just use these uh these

53:52

choosers okay um we do have a couple more questions um

54:00

someone said uh the retirement stress test feature this is not annuity based I would find it very useful to model any

54:07

period of time not just period significant to e economic downturns any way to model a custom time frame not

54:13

right now but that has been uh a request we've certainly something we could do it wouldn't actually even be that hard so

54:20

um yeah not at the moment but I I definitely hear you by the way something I dawned on me if you're in the annuity

54:27

section of retirement stress test and you want to go back to not comparing just click the X and then you'll you'll

54:32

go back to the c one and since you're here uh could we

54:39

also compare a pension with a diminished Cola with Social Security with its

54:47

Cola um yeah I mean you can do any kind of side by side comparison here so like if

54:54

you wanted to I don't know what exactly the scenario is that you have in mind but um I've definitely seen people do

55:01

you know for example uh taking lumpsum versus taking the pension payments um so

55:07

maybe there are multiple Cola options or in uh um inflation options on an an

55:14

annuity or a pension you're looking at you could do those head-to-head here annuities head tohe you'd be

55:20

comparing plans head-to-head you know well what if I took the pension what if I took took the

55:26

payout what if I chose this inflation treatment that use the comparison feature

55:33

here and with that we are at the end of the hour we got a lot of questions answered and we have a few more that we

55:40

will get back to you uh from uh we'll reach out to you about your questions uh just a friendly reminder there's a

55:46

survey at the end and thank you all for attending thanks Justin than