Life Hub Surplus or Shortfall in Plans

The default way to use Income Lab is to create a profile for a household, including all of their retirement-relevant assets and income streams, specific legacy and special spending goals (if any), and their attitudes toward longevity risk (the risk of living longer than they had planned) and income risk (the risk they will have to reduce income in the future) and ask "What can I have?" in retirement income. The answer to this question can then be compared to a budget or desired income level. If the answer to "What can I have?" is higher than the budget/desired income, there's a surplus. If it's lower, there's a shortfall. But in this default mode, the budget/desired income is just there for comparison - to let you know how far your wishes are from what you can have. The income plan is always based on the answer to "What can I have?", not on the desired income.

If there's a big surplus and clients don't intend to spend more (at least not now), advisors will typically adjust plan settings to reduce the surplus - for example, by lowering the "Income Setting" slider to reduce income risk and the total income in the plan.

The reason this is the default is that, when surveying clients, we found that when asked, "How much do you want in retirement income?" they often responded, "What can I have?". So our default mode answers this question and, by changing inputs and sliders, allows you to explore the range of income that could be produced for a given household and the trade-off between higher income and higher income risk (or lower income and lower income risk).

You can also run the software to answer the question "How can I spend $X net of tax?". This mode will produce a plan that produces the desired net-of-tax income and will find income and guardrail levels that fit this desired budget. The risk level could be very low (especially if in the default mode, you saw a large surplus). In this mode, you won't see surpluses and shortfalls.