0:08
Okay, welcome everyone as usual to our lab talk Tuesday for December. Actually,
0:13
the last of these for the year. Can't believe how quickly the year's
0:18
gone. Um, we'll let everybody get into the room and then we'll do our normal
0:26
normal agenda.
0:36
All right, maybe a few more comments.
0:46
Okay, so as we normally do, um we're going to start with new features. Um,
0:54
then we'll hit um questions that people have submitted. We'll throw some of those Derrick's way and then we'll do uh
1:02
we'll take your uh your live questions. So, if you have questions you want us to
1:08
cover, please make sure to put those in the Q&A um not in the chat. You're
1:13
welcome to use the chat, but um it's just harder to to manage questions
1:18
there. So, if you put your questions into the Q&A and then upvote any that you see that you that you want to see uh
1:25
answered or hear answered, um we'll we'll do our best to get to those. Um
1:30
often we can't get to everything, but uh we'll do our best. Okay.
1:35
So, first of all, um what's new? What's new at Income Lab? Um at a future time,
1:43
I want to um kind of go through everything that we've done this year, which is really, you know, pretty amazing. But um
1:50
we'll just focus on uh on new stuff in the last you know month or two.
1:59
So uh first thing is for those of you who haven't checked this out, there's a lot of new AI features in Income Lab.
2:06
And I know it you're probably getting emails and things all the time about new AFI features from every software program
2:13
you've ever heard of. Um, but these are really worth checking out.
2:19
So um the the AI plan builder
2:26
is a way to take any kind of data that you have whether that's notes, documents, um PDFs
2:35
uh of of um you know previously produced financial plans from could be from other
2:41
software programs, could be from you know maybe you've done one yourself just a um custom one and dropping them in or
2:50
putting text in. This could be your own text, could be um a a voice memo that
2:55
you had transcribed from your phone. Um, one really common thing I'm hearing is
3:02
um copy and paste the transcript of a um
3:08
of a meeting, like a Zoom meeting, um and drop it in here. And if it has
3:13
information that can be used to build an income lab plan, our system will find that information and build the plan for
3:19
you. Couple of changes to this recently. One is you can now drop more than one file in here and we now support more
3:27
file format. So it used to be just PDF, now we support several others.
3:35
Another common use I'm hearing is um is if you have a client questionnaire,
3:40
maybe it's an onboarding um document, dropping that in here. Um the way you
3:47
already have it might work great. Uh or you might end up tweaking it a bit to be to have the information that income lab
3:54
really wants, but often it it works great. In fact, we had a a story from one adviser whose um you know team was
4:02
suddenly producing plans really quickly from questionnaires and he asked you
4:08
know how are you doing this and they they actually showed him the the uh the plan builder. So you know it was taking
4:14
very little time and at this point over half of new plans on income lab are
4:20
being built with AI and the average runtime for this is 58 seconds. So very
4:26
quick um easy to do. You're going to see in the new year um a way to use this
4:32
same type of um approach to update plans. So probably in January you should
4:40
see that. Um, so again, imagine being able to run a meeting and, you know,
4:47
make sure you talk about some of the things that need to be updated in the plan and instead of then having to go and do it, look at your notes, make
4:53
changes, just having it um hit your plan automatically for you to review. So
4:58
that's going to be that's going to be awesome. Um, so please please do check
5:04
this out. Um, these are currently in a tech preview mode. Um, that means we're
5:09
still testing them. We're still improving them. Um, and you know, at at some point this will only be available,
5:16
you know, in a a kind of a different package uh with an with an extra cost to
5:21
to be determined exactly what that is. But, um, for those who are using it, it's not going to be prohibitive. Um, so
5:28
please check it out and and let us know if you uh if you have any feedback on it.
5:34
All right. Um, another one I may as well hit uh since you probably saw it here.
5:40
So, you you won't see this at the moment, but um coming soon you will
5:45
actually see uh an an AI scribe um that will do this same thing um but from a
5:53
Zoom meeting. So, we'll be highlighting that again in the in the new year and show you how that works. Um so, it's
5:59
very cool. All right. So, with that,
6:06
um I guess maybe I should hit some of the other things that have come this year in case you're not always on these
6:14
on these calls. Um probably the biggest thing to note is this new section um in
6:21
the main navigation on the left. Uh it's sort of a you know fork in the road
6:28
icon. It's called decision lab and it is an area where you can focus on
6:35
particular questions or topics that people have about planning. So there's
6:41
the social security optimizer which we've covered quite a bit. Um happy to take questions on it though. Um that is
6:48
all about when should I claim social security and how would that affect my plan. So, it's kind of putting blinders
6:54
on and just allowing you to have this great conversation with with clients about that one topic. Pre-retirement
7:00
planner. Um, how much should I save? When can I retire? Um, so again, it's
7:05
all about, you know, for those people who have not yet retired and maybe they're more in the savings zone, helping you just have that conversation,
7:12
zooming in, focusing on that. And then finally, investment strategy. How should
7:18
I invest? How would that affect my retirement paycheck? Um, just as a quick example of what we're going for here,
7:25
I'll I'll show you the pre-retirement planner. Actually, I think I have a
7:31
Yeah, I'm going to use this pre-retirement example just so we can
7:38
So, it's originally asking you for, you know, how much are you making right now? This is just one person and so basic
7:45
salary. How much do you want once you're retired? I'm going to change that to 100%.
7:51
Um, and then how much could you save? Okay, I'm going to do 0 to 20%. And then
7:58
finally, um, when do you want to look at retiring? I'm going to look at,
8:06
um, something like this. So 65 to 73. And
8:12
then it's going to give me, um, all of the combinations of those
8:18
possible years. and it's going to step through possible savings rates. So again, kind of zero to
8:27
to 20,000 and help me understand which combinations
8:32
would allow me to retire with that amount of retirement paycheck. And what
8:37
we're going for here is helping people understand that there are options. There's different You could save more
8:42
and retire earlier. You could save less, retire later. Um, you know, maybe even looking at this, you'd say, "Well, I'd
8:48
really love to save nothing and retire in 2035." Well, you can. It's just that your
8:55
projected uh retirement paycheck would be 8,000 instead of 10,000. You know, is that something you can live with? So,
9:01
that's what this this heat map is all about. as you know other planning software
9:07
doesn't have this functionality but I think crucially if it did it wouldn't be
9:13
showing you what you could spend it would be showing you how your probability of success changes at these
9:20
different parts and as we've covered many times and we'll cover more probability of success is not an
9:26
actionable insight especially in this situation right what we what we want to know is when can I retire how much
9:32
should I save if I retired then having saved that much, what do I expect my my retirement paycheck to be? And, you
9:39
know, can I live with that? So, and you'll notice here that it's darker in the spots that are closer to the goal of
9:45
$10,000. Of course, out here, retiring in 2043, saving $2,000 a month, it's
9:51
actually almost $20,000 a month in spending, but it's a lighter color because it's it's farther from our goal,
9:59
right? Of course, saving more and retiring later means I can spend more, but we need to attach it to the goal and
10:05
say, you know, how does this um what what are the options that that actually
10:11
meet my goal? And they tend to be in this kind of a diagonal, right? As you'd expect, you can save more, retire
10:17
earlier, save less, and retire later. Um so, this is just one example. Um and
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this is the style of of all of these decision lab uh tools.
10:29
All right, let's see. Looks like we might have a few.
10:41
Uh, somebody's asking about is the A are the AI features approved at Satara? Not yet, but we're hoping soon. Um,
10:49
and yes, we we do send out a recording. So, um,
10:54
can you add emails to the plan builder? Um maybe if you let me know more of what
11:00
you mean by that. Is it you know you can certainly drop email content into the plan builder. If you mean with the plan
11:06
builder send you a summary or something. Um there is that sort of thing coming.
11:17
Um question on the pre-retirement planner. Is the y-axis on the heat map showing additional savings? Great
11:23
question Eric. Me jump back in there.
11:31
Okay. So, the the plan I built does not
11:37
currently have any savings in it, but I'm going to go ahead and add some.
11:46
This is a super simple plan, so I uh you
11:51
know, it only has one account in it. Um, but I'm just going to have it, you know, a,000 bucks a month into that one
11:57
account until um until retirement.
12:10
So now if I go to that pre-retirement planner, get started, same thing. How much I'm
12:16
inv this is actually this is just so that we can show you a percentage
12:21
savings rate. It's not really, this doesn't do much in the plan other than that. Um,
12:28
you know, go back to my 100% replacement. Okay. And now you'll see it's saying,
12:34
"Hey, how should we treat this? Are you are you wanting to look at 0 to $2,000 a
12:39
month in savings period? Or are you trying to look at it in addition to this
12:46
item that I just entered?" So by default it would not include what you already
12:52
have in the plan. The concept behind it that being the default is you know
12:58
probably you're trying to sort of go from first principle say oh well I know you are saving a thousand but let's you
13:05
know pretend you weren't what's the range let's look at a full range. So that's, you know, one of the use cases
13:11
that I think people will use quite a bit. But your question might be, hey, we're definitely doing this. What else
13:17
do we want to do? And which case you just check this box and say, hey, I'm I'm trying to look at $1,000 a month
13:24
plus, you know, the 0 to2,000 here. So e either way, there's no one right way to
13:30
do it. Um, but those are kind of the two the two use cases. Um,
13:37
all right. in the pre-retirement plan. Is there a
13:44
report that states if you're on track to the goal or off track? Um, there's not, but there is a new feature coming early
13:50
next year that will have some goals like that. Um, so and a report that comes
13:57
from it. So stay tuned for that. We'll have a bunch of things in January that we're going to we're going to be showing people. Um,
14:05
in fact, I can see if I could We've we've actually teased it in the
14:10
community. So, Income Lab has a community site where you can talk to each other, ask questions, and so on.
14:16
Um, so I'm not uh I'm not spilling the beans too much on this. Um, but let me see if
14:22
I can find an example to show you of this uh of this new
14:29
dashboard that has some some of what you're talking about there.
14:49
Okay. So, for those of you who've been in the uh
14:56
in the community, you may have seen some uh some of this. Just waiting for it to
15:02
load.
15:18
All right. So, this is a new we call it the insights dashboard. Um,
15:24
and it is meant to kind of show things that are, you know, not as focused on just
15:33
that. So, we have kind of the main income dashboard. Um, these folks are planning to retire in 2030. So, this is
15:39
a pre-retirement plan. Um, and so they might want to know more. You know, this
15:45
is interesting, but hey, help me out with some of the other parts of my of my life, right? So, I can say, okay,
15:51
current income is, you know, 216,000. I'm, you know, not taking any
15:57
withdrawals yet. Um, this actually will say savings rate. Um, we're still
16:02
working on this. So, this will be the savings rate if you're not yet retired. Got your debt to income ratio, your tax
16:07
rate, you know, some some different things around keeping track of, have I done my insurance and estate planning,
16:14
looking at the net worth in different ways? Um, don't know how far along this
16:20
is. Um, and then a place for notes and
16:25
observations. This one's Christmas themed. Um, and you know, to-dos. Um,
16:32
so ways to kind of track these kinds of things. Um, there will be a whole goal
16:38
section as well, which is, you know, what you were talking about there.
16:43
Um, so more to come. We'll once that's uh ready. But this, if you've been in the community, you'll you'll recognize
16:49
some of that layout. And of course, we're looking for feedback on it as well.
16:54
All right. Um, can you use the pre-retirement plan or an existing plan? Um, yes, you
17:02
definitely can. All right. and some other great questions that
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we'll try to hit um in the next in the next section. But we'll go to our presubmitted questions
17:16
here. Um
17:23
okay. Um can you provide an overview of how income lab approaches inflation?
17:30
Um this is a great question. Um, let me go back to our uh
17:37
a standard example plan and you can see this.
17:47
Okay. So, everywhere in income lab um you have the ability to view the plan
17:53
um either with or without inflation displayed. Okay. So inflation is always
18:01
a big part of the plan. In fact, income lab has a really, as far as I know, it's
18:06
the only software that actually includes inflation risk in the plan. Meaning that
18:11
the risk that inflation could be higher or lower, but higher is what we worry about um than your stated inflation
18:19
rate. Um so for example if I go into settings and capital market assumptions
18:26
um traditional Monte Carlo um here I have by default it's assuming a 2.54%
18:34
inflation rate but with a standard deviation of almost 1%. Um you could
18:40
change these right you customize these however you like. Um but this piece the the ability to say
18:47
right well we don't actually know what inflation will be. we might have a good idea of of a of an average, but I want
18:52
to take a look at um the possibility that there could be different inflation
18:58
and that I want to know how that would affect my plan. So, if you have a plan, for example, with a lot of um not
19:05
adjusted for inflation income, which is common if you have a pension in the plan, um that can make a big difference.
19:12
So, this is probably a place we don't toot our horn enough, but the fact that income lab actually treats inflation as
19:18
a risk, not as a known amount is is really important. Sometimes when I say
19:25
that, people might say, well, my my you know, I used to use MoneyGuide Pro or something. It had an inflation assumption. It did, but it didn't have
19:32
an inflation variability in it. So, if you put it at 2.5%, it'd say, "Oh, good.
19:38
I know that my inflation will be 2.5%." It would be the same as if you put your
19:43
return as being 6% with no standard deviation. You're essentially just turning it into a, you know, a financial
19:50
calculator that just does time value of money. Um, it would be the same with inflation. So, I think this is a really
19:56
big deal. That wasn't your question though. You wanted to know how exactly we're we're dealing with inflation. So um it's it's
20:04
going to depend on you whether you want to display things in real or nominal
20:10
dollars. But crucially what this is just a display option. So real dollars means
20:15
today's dollars. It means I want to basically see what my income would be
20:21
like. You know if prices essentially imagine they sort of
20:26
stayed the same, right? Imagine in 20 years a gallon of milk still costs four bucks or whatever it is today. Um
20:34
that's what real dollars are. Now that is a that can be a good
20:40
setting for certain things. Um but nominal can also be a good setting. So nominal is like the dollars that are
20:46
actually in our pockets. Um and this tends to be the way that people actually think about the world. Um so Derek, I'd
20:53
say this probably a good one for you. Um just do you have you know preferences on
20:58
this? Are there some places you use real, some places you use nominal? What should an adviser kind of think about
21:05
when showing this kind of stuff to clients? Yeah, I think I mean for me I kind of vary even depending on what I'm talking
21:12
about. Like I will find that something like right here looking at the guardrails um you know that to me real
21:19
makes a lot of sense in terms especially if somebody's a little farther away from retirement just wanting to know what that feels like.
21:25
um when we get into like the stress test is one area where I will find myself
21:31
um kind of flipping between I tend to like to show the income like the spending potential as um real just
21:40
so somebody understands okay this what especially if you do like some long-term stagflation scenarios like those numbers
21:46
just become completely impossible to really interpret. Um but
21:51
for the portfolio I also often when I scroll down will like to flip over to um
21:57
looking at in nominal just to you know help somebody understand pure dollars
22:02
kind of if if where they would have started a period what they would have today. Um I think real can be useful
22:07
because you could say well that portfolio would feel like some amount and that can be good to understand. Uh,
22:13
but I also think a lot of times it's when I'm going through this process, especially if it's a result like we're
22:19
looking at here where it's a very lowrisk type of plan, like trying to
22:24
build confidence around like, yes, you can spend, you can spend at this higher level. Um, you know, this is a, you
22:30
know, you don't need to be afraid of this if that's kind of the scenario somebody's in. painting that picture of
22:35
okay you started retirement out of I can't even see the numbers here on my screen but with you know 2.5 million you
22:41
would still have you know 2 million whatever the numbers might be that can give people some like okay yeah that
22:47
actually feels you know even going through this tough scenario that feels like a pretty reasonable thing to do.
22:54
Yeah. Uh so I think that's a a good point that this actually another way to think about it is real dollars are what
23:00
it feels like. Nominal dollars are the world you actually live in. Um and so
23:06
often with income real is helpful because it it's really it's purchasing power. So you can kind
23:12
of okay you know maybe in this plan I would have started out with 19,100
23:17
in monthly income and by today it would be at you know 20,100. up slightly
23:23
higher than it was before. So basically you've this life has been good. Um
23:30
on the other hand um you know I think particularly in lifehub I don't know if this plan has one but let's see. Um yeah
23:38
so this even has like insurance like life insurance coverage. It's a million dollars in term insurance. Um,
23:45
it you're almost certainly going to want to show this in nominal because that term insurance is going to stay at a
23:51
million dollars over time until 2035 when the term is up. But if you were
23:57
viewing this in real dollars, it would show that actually it's $839,000.
24:03
Now, a client, you may want to have this discussion with a client that, oh, you know, over time purchasing power gets
24:09
eroded. So, you know, 10 years from now, that million dollars won't quite feel like a million dollars anymore. And
24:14
that's what all this is showing. Um, but you also may not want to, you know, have
24:20
just complicate uh your life by having that discussion. Um, another place, it doesn't look like this one. Well, maybe
24:26
it does. Yeah. Okay. So, it has a mortgage. Um, so most people's mortgage
24:32
payments are going to be, you know, flat. So in this case, 24,000 a year.
24:40
And in nominal terms, that is true. But if I switched it to real,
24:45
well, it shows that it's actually not 24,000 in 2028. It's 22,900. Again, this
24:51
is true. Um, it's actually one of the the few places where uh, you know, things get a little better if there's
24:57
high inflation is that your mortgage payment is, you know, technically it's kind of it's costing you less in purchasing power terms. um interesting
25:05
conversation to have but probably not the point of having a of the conversation you're having with a client. Um so nominal whenever you're
25:12
kind of especially in lifehub um I think can be a a a good option there. We always offer an away for a way for you
25:19
to save the setting um and so that every time I come to lifeub for example um
25:25
it'll show me nominal with val rounded values and I'm showing the the timeline
25:30
as well. Um, so you can always save these and they can be different like maybe on the dashboard you want it to be
25:38
real um because you want these paycheck
25:43
dollars to be you know understood as purchasing power. Um so that's the uh
25:51
one other quick thing I'll maybe throw in there Justin when um also just noting like the net versus gross on the
25:58
retirement paycheck. Um, that could be a nice one where a lot of times I do find myself coming here. But, uh, a little
26:05
caveat to that just while we're right here on it is to make sure you don't have
26:10
anything unusual in terms of like your, um, the spending level or like income
26:16
sources. I I personally build a lot of plans with people retiring um December
26:21
of the prior year just so we have a really clean um set of income going in
26:26
so that the their taxes aren't unusually high because they had earned income for half of the year. Things like that where
26:32
it's showing much less net. Um, that's just one area where I think new users in particular sometimes get a little like,
26:38
wait a minute, why? Yeah. Why is this so low in terms of net income? Like, especially if it's you have somebody retiring and their first
26:46
paycheck is December, like that could be a situation where it's going to they earned a lot throughout the year
26:52
could really be assuming a much higher tax rate than they would actually have a subsequent.
26:58
No, that's a really good point. um on the gross and net. What you're getting
27:04
when you do that is actual calendar year taxes. And so if there's anything
27:09
special in that calendar year, like I mean the most classic one is somebody retires midway through the year, they
27:15
had really high wages, well your taxes that year are going to be pretty high um
27:20
potentially, especially compared to the next year when you're only living on, you know, whatever your retirement resources are. So there can be reasons
27:27
like Derek said, you know, if you're somebody's retiring in September,
27:33
you know, maybe make a plan where they retire the next January just to avoid that. It's not that it's wrong. Those
27:38
tax calculations are correct. It's just that if you're looking for more of a feel of the long-term taxability from
27:45
this view, you might want to do that. Um, somebody is saying, and maybe this is the person who asked the question
27:50
originally, what's confusing on the inflation is that you can have different parameters in different areas and so
27:57
it's not a consistent display of inflation. Yeah, I mean, that's true. This is one of those things where it's sort of like again, it's up to you which
28:04
you want to be the defaults. So, you can go you can save them all to be the same.
28:10
Um, and you can do that in your if you go up to the uh your little uh if you if
28:16
you put a picture in or if it's still a avatar, click there and go to the display settings, I think it's called.
28:22
Yeah, display settings. And you can set all of these defaults to be consistent
28:27
for you if that's how you prefer things to be. Um, if you're the kind of person who actually like has a preference that
28:34
one be one, one a different one be a different one, you can you can do that as well. So, you know, whichever your
28:39
preference is, if you're ever wondering what you're looking at, on every screen that has this, you will see a little
28:46
note about what it is. So, today's dollars means real. If I change it to nominal, it'll say future dollars. Um,
28:53
in this case, yeah, those are the same because we're already retired, but if
28:58
retirement were in the future, you would see um a difference there. So, uh, I
29:04
definitely can see how, you know, if if you have them set differently and you're going from screen to screen and you're
29:10
not remembering that you had them set differently, that could be confusing for sure. Um, so it's possible we've aired
29:16
on the side of giving you lots of power here, but with that power comes, you know, a lot of responsibility.
29:22
Um, all right, another question, presubmitted question.
29:31
Um, does the software have a calculator for Roth conversions? Yes, absolutely. Um, so where you want to go is tax lab.
29:40
Um, and what this does, and even people who have used the software for a long
29:46
time, I sometimes find I talk with them and maybe there are parts that they don't use as much. Um, the other day I talked with someone who was talking
29:53
about this exact thing and um, you know, kind of wasn't using tax lab a lot. So, it was a great opportunity to say, "Hey,
29:58
you've already got a really powerful tool here." So, this is taking that plan that we were just looking at, which was
30:03
a complicated plan with all sorts of different resources and spending and lumpy, you know, expenses and so on, and
30:11
it's putting it through 20 different ways of sourcing the withdrawals and
30:16
doing Roth conversions. Um, and so, you know, more than half of those are Roth
30:23
conversion options. And you can see here the the green shows where the values are
30:28
best. And so, um, you can kind of see where, okay, in this range, it looks
30:33
like there's some value to be had in terms of paying lower taxes over the life of the plan, you know, having
30:39
higher net income, uh, and all of that. Um, and then you can compare two
30:46
approaches. Um, you can even compare two different plans with different approaches or the
30:52
same approaches. Um so for example if you wanted to see retiring now retiring
30:57
later um you know maybe it's uh taking social security sooner or later right
31:03
these are all things that you can do this comparison in here um and then dive in also to explore you know all the all
31:11
the gory details of it so this is a a great place to do that. Um there was another question about
31:20
scenario planning which kind of basically how do I do scenario planning with income lab? So this is a a once
31:27
you've built scenarios this is a great place to be able to compare them. Um,
31:32
so you know, in this plan, I haven't created ones that I remember the the
31:38
differences are, but um, you can see here there's always what we call a primary plan for the household. Um, if
31:46
you want to upgrade a different one to be the primary plan, you just click on the little star icon and it'll move it.
31:52
Um, but you know, for example, I have, you know, maybe one difference is this
31:58
plan doesn't have any legacy goal. goal, meaning a goal that there be a particular account balance at the end.
32:05
Um, and this one has a million dollar legacy goal. And I can see, oh, okay, if I added that legacy goal, instead of
32:13
19,100 a month, I'd be at 17,900, right? So, it kind of shows me what the cost is
32:18
of adding that that goal. I might look at it and say, okay, well, what if I invested more aggressively? Um,
32:26
I can see the the effects of that here. um some of these scenario planning
32:32
situations. So you can see here that added a bit to my retirement paycheck. It probably is also going to add to the
32:37
volatility of my uh income and my investment. So that's not a there's no free lunch, right? Um some of these
32:45
scenario planning situations, you are better served by using decision lab. So
32:50
um you know if let's go back to that pre-retirement planning situation. I had a I had 25 different plans there with
32:58
different levels of savings and when I'm retiring. Now, you could go and create
33:04
25 scenarios, but that's probably not the easiest way to go about it. Um, or I
33:09
could, you know, in in the uh social security optimizer, I'm going to look at
33:16
over 9,000 ways that you can claim social security. uh in this case they're
33:22
they're already old enough that it's only the blue stuff that's remains for them. But again, it's just much easier
33:28
to um to use this, you know, for
33:33
example, in the retirement paycheck, um it's going to look at it's going to vary
33:40
when I take social security and it's going to tell me my retirement paycheck based on that. Um in this case, we're
33:48
doing 81 different plans. Again, you could do that in the scenario planning section, but it's not really going to be
33:55
very easy to do. Um, so your best bet is to use for the questions that decision lab, you know, addresses. That's your
34:02
that's your better bet than creating different scenarios uh in the household.
34:10
Um, I guess I should probably say though if you do want to create them, the best
34:15
way to do it is have a primary plan or a plan that you really you know it's got everything you want to hold constant and
34:21
then just hit copy plan. It'll take everything from the plan. Change one thing, right? Change when they're
34:27
retiring, change um the asset allocation, change something and save it. And then you'll see you'll be able
34:33
to compare them here. Um, another place that you can compare plans easily is in stress test.
34:40
Um, again comparing scenarios. If you go up to the top here, there's the one box
34:46
is just looking at one plan. If I click on the other, I am
34:52
able to pick a second one. And now I see the you can see here that the orange or
34:59
the uh the gold I guess um starts out with more more income, right? Because
35:06
it's more it's invested more aggressively, but in the global
35:12
financial crisis, it hits it goes lower. It hits a guardrail. It
35:18
takes a pay cut. And you can see it doesn't catch up to the one with the more moderate portfolio, which never had
35:25
a pay cut, um, until 2017. So, it's essentially, you know, 9 or 10 years of
35:33
underspending compared to the to the moderate one. And then, you know, they're they're sort of next to each
35:38
other. You know, in 2021, this one had a little higher income until until 2024. So, you can kind of
35:46
compare, okay, what's the what's the trade-off between investing more aggressively
35:52
um or not in this case in a in a bad scenario, right? In a good scenario um
35:58
we're probably going to see the more aggressive one look look better. So, I just moved it to being after the global
36:04
financial crisis, so November of 2009. And you can see here the gold one is always above the green one um because,
36:13
you know, it it does better. And here you can see the balance and those balance differences are quite
36:19
substantial, right? Um, so it's not that, you know, one's always better than the other. It's that they're they have
36:24
there are trade-offs in different situations. So I think those are two great ways to use, you know, scenario planning and
36:31
income lab. Um, I don't know, Derek, if you have any thoughts on this or places
36:37
that you've used scenario planning. Yeah, I mean I I do I like to keep mine simple. Mine's more of like a kind of
36:43
housekeeping tip maybe, but like as I do accumulate scenarios, especially if it,
36:48
you know, go through like six scenarios with a client, time passes, go back to the plan. Like sometimes, um, you know,
36:56
what I kind of like to start with a fresh start kind of like, okay, we looked at these things last time, kind
37:02
of wipe the slate clean, get the plan up to date, um, and then copy and make
37:07
additional scenarios. Maybe there's two scenarios. this time we want to look at instead of all six that we looked at last time. Um, and just mention that
37:14
because sometimes like um, you know, if you are trying to like keep fields updated or consistent or just managing
37:20
kind of your comparison between scenarios, I've had the best luck just kind of wipe the slate clean, start
37:25
fresh, and then uh, build that. But that's more of a housekeeping item than a
37:32
building. No, I think that's that's actually a really good tip because once you copy a plan,
37:37
if you ever go back to the original plan and make a change, that change isn't going to come through here because, you know, for all we know, that was that was
37:43
intended. You wanted them to be different, right? We can't sort of read people's minds on, well, which changes should propagate everywhere and which
37:50
one shouldn't. Um, and so if you're preparing for a meeting, what I hear you say is, okay, well, maybe I know we're
37:55
going to talk about, you know, buying that lakehouse, so I'm going to do a here's your current plan. here's the one
38:01
if next year we take 100,000 out and buy a lakehouse, you know, let's see it how that looks. But then, you know, a year
38:08
later, six months later, that may not be the conversation. So, yeah, you can you can kind of wipe these out, just, you
38:14
know, delete them and uh and go from there. The other thing you can do is um
38:20
I obviously did not do it very well here, but you can in the description field, you can say, okay, this is uh you
38:27
know the same as this other plan, but it's got a million dollar legacy goal, whereas the other one didn't or you know
38:32
that kind of thing. I did that a bit with the plan names here, but um when you go to the list, you will you will
38:39
actually see a little bit of the uh the the description there. So,
38:47
all right. Um, couple more questions and then I we should try to take some of the uh the
38:53
ones from today. Um, how is it that income labs money Carlo
38:59
allows one to die with small funds while others have them die with a sizable
39:04
amount? So, I wasn't entirely sure what this one is, but I have some ideas possibly. um they might be talking about
39:11
this test plan um function um or it could be the retirement stress test. So
39:19
in either case, um what you're getting is a is an actual
39:25
test of the So I wouldn't necessarily call it a Monte Carlo, although you can choose to use technically Monte Carlo,
39:33
you know, ways of producing these. What it's really about is given a set of
39:38
returns and inflation, how would this plan react to it and what are the ranges
39:45
of outcomes there? So we just took this plan and we put it in this case I put it
39:51
through historical scenarios a lot more than in the retirement stress test there. There you get 15 examples. Here
39:57
we run you know over a thousand and we're just showing you example scenarios
40:03
from bad to best. And you'll see here
40:09
um that there's a pretty tight grouping at the end. Now, this didn't have any goal to leave a legacy at the end of the
40:15
plan. Um, but you can see anywhere from about 300,000 to 1.3 million is is what
40:21
we end up with here. You can also see earlier in the plan, you know, a pretty big big range between that kind of best
40:28
and worst scenario. The reason there's a range here
40:33
is that um those guardrails are always being updated and keeping you, you know,
40:40
keeping you on track. Um but when you get to the end of the plan, in this
40:45
case, you know, we're what um 28 years in. Um it's not assuming that everyone
40:52
dies at that point. I mean, if we knew when you were going to when both clients would be dead and exactly that day, you
40:58
could land it on a dime, right? I mean, it'd be very easy, but that's unrealistic. So, the fact is, if
41:04
somebody makes it 28 years, they're probably still, you know, there's some amount of plan remaining, right? Um, and
41:12
so that's why it's not sort of all landing on exactly the same spot. What is really notable here though is that
41:19
they're within a reasonable amount of each other, within a million bucks. And these are very different scenarios, right? That green line had fantastic
41:26
returns. The red line had terrible returns. Um, the reason that they're fairly close to each other is because of
41:33
the guardrails. So, the adjusting to keep things on track to saying either, hey, time to pat t pat tap the brakes
41:41
because we're running too hot given the world we're living through, or saying, hey, things are going great. You can
41:46
afford to do more. You can spend more. Um, that's what's keeping these tightly grouped. If you ran a normal Monte Carlo
41:55
in a, you know, legacy planning software, what typically happens, it's a giant spray, right? We call it a
42:02
spaghetti chart or a squid chart because some go way down and usually they go, you know, below zero by year 15 or 20
42:09
and some are way up here. So there you'd see, you know, any gap between, you know, negative a million and positive 50
42:15
million. Um, and so the the range here is much more realistic as a kind of a a
42:22
way to describe what what could happen. You can do the same thing in the retirement stress test. You can't you
42:28
just can't see them all at once. Um, so we already looked at the global financial crisis.
42:33
And as Derek said, I think nominal is a good way to look at balances.
42:38
But you can say, okay, well, this this one's not going to be as long because but if we go back to the
42:44
dot bubble, let's say, all right, here's a scenario where we start with, you know, 2.75 million and
42:52
today we would have about 900,000. Stagflation era,
42:59
we'd have over two million today. or sorry not today by by uh 1996 which
43:08
is the same amount of time right and so why are there differences here? Well because the the returns were different
43:14
right um but crucially we have actually hit a guard rail in a few spots to to
43:20
keep things on track. Um,
43:27
I know we have a whole bunch of uh submitted questions. So, maybe since we know those people are here, we should uh
43:35
we should hit some of those.
43:40
And Derek, feel free to jump in if you see any.
43:47
Oh, planned start date. This is a really good question. And then it's a, you know, it's kind of a core core question
43:52
of of income lab. Um so if I'm creating a plan
44:01
uh if there are two people in the plan there's a question here you know when
44:09
should the income plan start. Now the two people could be both retired, neither retired, one retired and the
44:15
other not retired. And this retirement date is it's really there, you know, so
44:20
this one is just for Mary, right? And maybe that's linked to Mary's wages or salary, right? And so the
44:27
timing is all related to this. But this lower question is, okay, I got it. John's already retired. Mary's retiring.
44:35
Well, I better push this one out now. Uh, you know, in a couple years. uh when
44:40
I first created this obviously uh 2025 was in the future. Um so she's retiring
44:45
in a couple years. When do you want the income plan to start? And this question
44:50
is well what does that even mean? What that means is when do you want the software to figure out how much you can
44:58
spend and how much you should save. So when is kind of that main line between
45:03
hey before this line you're going to tell me what you're doing. After this line, the software is going to tell you
45:09
what you should do in terms of how much to take out of your accounts or how much to put into them. That's what that income plan start date is. Now,
45:18
theoretically, you could have somebody who's in their 30s and you could have the income plan start today and it would
45:24
say, "Oh, save this much and and so on." That's not typically how people use it. Typically, they say, "Well, we're doing
45:30
what we're doing now. um John's retired, but maybe maybe I actually want the real
45:35
income plan, the retirement plan itself to start when Mary retires and between now and then we'll we'll just do what
45:41
we're doing. So that's what that question is about versus well no I want to know right now because Mary's still
45:47
working but I want to know how much of her say her um earnings that we should be putting aside for now so that when
45:53
she does retire we'll have more in the accounts. So that's what this this chooser is about. If the plan has only
46:00
one person in it, you won't see that because it just it'll start when it when the person retires
46:06
um or when it when you've set it to retire. So, great great question and that's a a crucial difference um in
46:13
income web.
46:29
Okay.
46:42
I don't know, Derek, if you're seeing any others that Okay, there's one about multiple rental properties and sales.
46:48
Um, so you actually can do um as much as you
46:54
want with rental properties and sales and things. It's true that, you know, if if the plan is complicated, if there's
47:01
multiple properties, multiple sales, maybe even multiple um mortgages and things, it's going to be something to to
47:08
get those in. This would probably be a place where I would start using the uh the AI plan builder um because you could
47:14
just describe all those things and have um have the AI take a shot at doing it.
47:21
Um but in any so, you'd want to put all the properties in other assets. So, it's
47:26
in the assets tab and other assets. Um, and then you'd say include a planned
47:32
sale with the date of the sale. You can either project what the sale price would
47:38
be or you could put a growth rate and adjusted basis at sale. If this were one
47:44
that qualifies for extra deductions, um, which is typically for a residence, um,
47:50
then you'd want to add that to the basis. That's why it's called adjusted basis at sale. Um, so you'd want to put
47:55
all those purchases or sales here. Um, and then
48:01
in other income, put in the rental the rental income. So,
48:06
for example, if this were being sold in 5 years or something, I might want to put the end date, you know, on a
48:13
specified date 10 years from now. Um, and so on. And you can do the same with
48:19
um with the liabilities. So I could have extra mortgages. I could pay them off
48:25
early when I make the sale. So as you say, it's it's a heavy lift in terms of
48:31
data entry, but AI can really help you on this. And certainly it's a lot of calculations and it's heavy lift, but
48:36
that's where you're just letting the software do it, right? So So that's that's the way I would go. I would definitely give it a shot uh and and put
48:43
those in um because it really can it really can matter.
48:53
All right. Is there any scenario where the break even for Roth conversions is earlier retirement versus 70s or 80s?
49:01
Um, every scenario seems to have a break even very late in the plan. This is a really good question. Um, so just for
49:06
those of you who are not sure what we're talking about in Tax Lab, you can look
49:12
at one version of a break even on Roth conversions, which is basically saying,
49:17
hey, at what point would the total taxes that I've paid because of Roth
49:23
conversions um, be less than I would have paid
49:28
otherwise. So, this is a great example of exactly what you said. we're talking about, you know, 21
49:34
years from now. And these folks were um let's see,
49:44
yeah, in their 60s, right? So, we're talking about into the 80s. So, that's a really good good point, right? For them,
49:50
you're talking late 80s. Is this worth it? This is one of those places where I
49:56
think the concept of break even um is more complex than than just this is
50:02
showing. This is just tax break even. Um break evens often also involve a
50:08
consideration of the heirs. Um because if you have you know very high income
50:15
heirs the break even might be incredibly early. You know if you're paying 24% and they're in the 35% or something that
50:22
could be much earlier. So Derek, I don't know if if you have ways you talk about this with clients. Yeah. Um, and to the first question, I'm
50:29
trying to remember the exact circumstances, but I did have one just the other day that came up with a
50:34
surprisingly early break even. I was like, "Wow, I've never seen a break even that early." Um, I think it had to do
50:40
with obviously the person was younger. That was one factor, but I'm trying to remember what else. There's something else that really pushed it early, but
50:47
it's unfortunately escaping me right now. But um you know to the broader point of I I don't see myself going here
50:55
a lot to to discuss this kind of break even concept with clients because I do think you know this is something where
51:01
you're not unless they're giving the assets to charity right if they have charity's name as beneficiaries on the
51:07
IRA accounts okay that's something where if you pass you could avoid taxes um but
51:12
if that's not the case if it's going to children and those children you know um are have income and potentially even
51:20
sometimes very high income. You know, that that's going to dictate kind of what that actual real world impact would
51:26
be. Um, you know, certainly somebody who's doing Roth conversions into the 35% bracket, but their kids are going to
51:32
be very low income, that might not make a whole lot of sense. Uh but the flip side of that being somebody who's doing
51:39
um uh you know who who's a afraid to do
51:44
I actually had this scenario come up where is somebody who's kind of averse to doing disc uh doing some uh
51:50
conversions even in the 22% bracket despite the fact that all of his kids are solidly in the 35% bracket and would
51:57
likely be there forever. So, it's like this break even concept, it's not really even if you live to this point because
52:03
if you pass away earlier, it's still going to get inherited by your kids and they're going to pay higher taxes
52:08
anyways. So, um I do think it's just not something I use a whole lot. It's useful
52:13
to be able to run the numbers if you need to, but um it's just not somewhere I go to actually have a conversation
52:19
with a client. Couple questions about the uh investment
52:25
strategy um tool here. Um so one was
52:31
just asking can you go over it? Another one was hey I have a client with 50%
52:37
uh conservative 50% aggressive. Is there a tool where I can look at you know comparisons of different approaches? And
52:43
absolutely that's exactly what this one is. So here um we are uh first asked hey
52:52
which which accounts do you want to vary? Um now typically you're going to vary all of them right if you're kind of
52:58
asking this kind of question but this allows you to if you want to just vary one um you can deselect and you know
53:04
select the single one. And then uh the second question is okay which investment
53:11
strategies do you want to try? If you have model allocations, it'll select all of those. You can select up to 10. Um,
53:18
if you, you know, so maybe I want to add a few um to get up to 10 here. Um,
53:24
you know, just to to make it a little bit um
53:30
easier here, maybe I'll just select six. Um, if I had said skip to answers, it
53:36
would have selected all my accounts and it would have had all my model allocations. Um so now what it's going
53:41
to do is run this plan but just change the allocation. Um so in this case what
53:48
Ronald was asking I would first you know set up model allocations to be the sorts
53:54
that you want to compare and then you can you can look at all the results. So the first thing is all right let's look
54:00
at how the retirement paycheck um varies. Why? That's not
54:08
Sometimes I feel like that happens to look at that. Well, let's just say
54:28
maybe it was a because I'm sharing. Let me see.
54:40
All right. Yeah, it was because I was sharing. Here's the uh Okay, so you see what you
54:46
would expect, which is okay, if I invest more aggressively, I have a higher retirement paycheck. But again, this is
54:53
not a free lunch. Um, and by the way, I can see just by clicking on this, I can see what that means. um over here in
55:00
terms of the strategy. Um so there are two costs of investing more aggressively
55:06
though. Um one is that you would have more volatility in the uh investment itself. And so that's what you're seeing
55:12
here. Just a classic risk return um you know standard deviation versus average
55:18
return chart where the size of the bubbles is uh related to the the
55:25
retirement paycheck. Um, so okay, yeah, you could get more over here, but you're
55:31
you're going to see more volatility in your investments. Um, you can also go to the stress test
55:37
though, which will show you how that income changes. So maybe I'll just show,
55:46
you know, two of them here. Conservative model and the aggressive. And again,
55:51
kind of like we saw the other in that other example, um you know, in the uh global financial crisis, um you would
55:59
have had these pay cuts and you would have had a lower balance.
56:05
Again, I started after the global financial crisis, I'm going to see that the uh the
56:12
aggressive one did better. Right? So, this is a place where you can really have that discussion about the
56:17
tradeoffs. um between um investing more aggressively and being
56:23
able to spend more at least initially and the possible volatility of that. So,
56:28
you know, is that kind of volatility we were seeing in the stress test, is it worth accepting for $1,000 more per
56:35
month in income? Um so, that's the way that this one works and uh hopefully that's
56:43
answers. Um I know we got two more qu two more minutes. see if there's any uh quick
56:49
ones we could hit. Um
57:02
so this one I the uh does income lab increase the client's withdrawal rate if
57:08
they've paid off real estate's investments? Um, I'm going to take a shot at
57:16
kind of what I think that might be asking. So, this is a complicated plan with all sorts of extra spending and so
57:23
on. Um, to show you where that's coming from.
57:29
Um, we have early in the plan, we have things like this mortgage payment. I'm
57:35
going to switch it to nominal so that it's so the mortgage payment stays the same.
57:46
So, we've got a $2,000 mortgage payment. And then you see here when it drops away, we stop paying that. So, what the
57:53
plan is doing in this situation is it it will adjust the withdrawals. If if you were paying the mortgage payment with
57:58
withdrawals, it'll adjust it down at that point. It's not going to replace it with something else.
58:04
Um, this one I believe has someone dying in 2044 and then the spending adjusting
58:11
on that. That's why you see this adjustment. So, yes, the the answer to your question is yes. Like, it's going
58:16
to adjust all of the needed withdrawals and so on as different, you know,
58:21
expenses come and go. Um, and if there were a sale of a property, you would see
58:27
it. And actually, um, oh, this is this is spending. So, we
58:33
have it a donor advised fund donation here. That's why it's, you know, kind of kind of high in that month. Um, but if
58:42
there were income from the sale of a property or something, you would you would see that here as uh as income. So,
58:52
all right. Um, that's our hour together. Sorry if we missed a couple of uh
58:58
questions. If you do have questions, definitely in the app there's um there's inapp support. You can chat with one of
59:05
our team members. Um send us an email if it's something that you want us to cover in another uh webinar. But uh yeah,
59:12
maybe we'll just end today by saying thank you. Thank you for being uh income lab uh clients and uh we look forward to
59:20
another great year with you next year. And thank you Derek for uh for all your
59:25
help. Have a good one everybody.