0:09
Okay, welcome everyone. Um, as you're coming in here, let us know where you're
0:15
calling in from. Um, this is our every month lab talk Tuesday where we take
0:20
your questions and uh help with whatever's on your mind.
0:28
Kirkland, Washington. Love it. Beautiful time of year out in
0:35
the Pacific Northwest for sure. I'm assuming not there, but um
0:43
I am in the Denver area. Usually get some Colorado folks
0:50
up in California.
0:59
a lot of California today. Nice.
1:06
Okay. So, as we'll probably have a few more people uh jump in, but I want to make sure we get to as many of your
1:11
questions as possible today. So, I'll kind of do our announcements first. So,
1:16
you you've probably seen some emails. We are starting a new master class series
1:22
next week. Um, so this is where we we typically do a group of uh of webinars.
1:28
We often have guests uh different advisors or researchers um helping us on
1:34
those and this is no different. So we're going to have a five-part series on social security, social security
1:40
planning. Um this won't just be kind of the nuts and bolts of social security. We will try to put in some of the
1:47
basics, some of the foundations for those of you who need a refresher on kind of how social security works. But we'll try to focus more on kind of some
1:55
of the the planning topics, strategies, um conversations with clients, um risks
2:03
that are not usually um talked about in kind of the basics of social security.
2:08
So, please do come no matter what your level of familiarity with social security is. Um and I think everybody's
2:15
going to find something um for them. We try to make it very practical. We'll do some sessions on talking with clients on
2:24
um client psychology around claiming strategies and so on. So, it's going to be really great. We're going to have a
2:29
session on taxation, a section section on um survivor spousal and divorce
2:34
planning. There's going to be all sorts of great stuff. So um you'll see more information on those future sessions
2:39
coming but the first one is um starting next week and it really will focus on more of the foundational ideas around
2:46
what are the risks around uh social security and how do we manage those some
2:52
which pull you toward earlier claiming some which push you toward uh later claiming uh and so on. It turns out
2:57
social security uh uh claiming is not sort of a one-sizefits-all easy rule of
3:03
thumb kind of thing. No surprise that's true for most things in financial planning. Um but we're going to be uh
3:09
diving into into a lot of that. So um hope you all can make it. Um as usual,
3:16
please put your questions in the Q&A rather than the chat. It's just a lot
3:21
easier for me to uh to manage uh the questions and make sure I get to things. And then if you see questions that you
3:27
want answered, please upvote them. Give them a little thumbs up. Um, I'm flying solo today, uh, since Derek Tharp is
3:34
traveling. Actually just got to spend a couple days with Derek, which is great. Um, so we'll jump in now to our typical,
3:42
um, agenda, which is new new um, features, upcoming features, presubmitted questions, and then um your
3:48
questions for for this week. So, please go ahead and you can start submitting questions, but we'll we'll not get to
3:54
those right away. Um so first thing is um new features and upcoming features.
4:02
So um I'm going to spend a lot of a little bit of time on
4:07
um the the decision lab. Let me get over there.
4:15
Okay, there we go. Um for those of you who have not played around with this or
4:20
for those of you who have um there are some changes coming uh one a little bit longer uh in the future. So probably my
4:28
guess would be end of August maybe uh early September. These two new um
4:34
decision lab pieces saving for retirement investment strategy will be coming. Um they're going to be really
4:39
cool. So looking forward to introducing that to everybody. Um and then we will have some new things coming in the
4:44
social security part of decision lab. You know the launch of this this uh
4:50
feature is you know of course that got us thinking about social security and that's why we're running a a master class on this but you'll you'll see a
4:56
few new features inside of social security um coming soon. I'll go over a few of those um to today. Uh but those
5:04
for those of you who are not uh as familiar with this in every plan now there is this decision lab piece. If you
5:11
click on social security it's going to take you to a place where you can explore all of the possible um ways to
5:19
claim social security for whatever the household is that you're working on. This happens to be a household with two
5:25
people in it. So you'll see a this kind of two-dimensional heat map. um few
5:30
things I don't know which things were there uh a month ago when we when we had this but there are now you can save how
5:36
you want to see um the decision lab so for example if I always want values to
5:42
be rounded I can just hit save here I'll say okay the viewing options have been saved now every time I go to social
5:48
security it'll be there I happen to have it saved with target highlighting on which is this green outline um I happen
5:57
to like that it shows me Okay, that's the quote unquote, you know, best
6:02
choice. It's the it's the one that has the highest value, but it gives me it outlines a range where it's pretty darn
6:08
close to that amount, and I can see, you know, what the earliest is I could claim within that range. Um, tends to be a
6:15
little bit more interesting if I um explore things in maybe like a more
6:20
average age range, I can start to see some bigger
6:26
um some bigger areas. This is a great example. soon as I explore average age
6:31
ranges, I get this huge area where everything is very close. So that I
6:36
happen to like that. Not everybody would. Um but you can now save save those. Um another thing to note is um in
6:43
the social security decision lab, it's meant to be kind of like imagine this is
6:49
like your little Nintendo controller. Um and you're doing all sorts of stuff, right? I just changed the ages. Maybe
6:54
you want to throw in well, you know what? If benefits are cut by 21% in 2033, which is the current projection
7:01
from the trustees of the Social Security Administration, um I can just add, you
7:07
know, these layers to it. And if I ever want to reset to what's actually in the plan, so in this particular plan, I'm
7:14
not actually planning for a reduction, but I I could. But I can reset it. It
7:19
turns off. The ages go back to where they were. I have to hit apply changes to go back. Um, for those of you who who
7:25
haven't seen that, you actually can in advanced plan settings
7:30
go to social security and say include a future reduction in benefits in this
7:35
plan. It'll default to 2033 and 21% which is the current um projection, but
7:41
actually you can state whatever you want here. You could have it be 50% and 2045.
7:47
So this is not static. Um, we've had a few people sort of think, "Oh, that's
7:52
all I can do." know you can do anything you want here. Uh we just happen to set our default at um what the uh
8:00
at what the uh you know the trustees currently currently project.
8:06
So save that. Um, another thing that's uh coming soon in um well in the app in
8:15
general, it'll show up in this new Social Security section. Uh, but we'll be doing automatic earnings adjustments
8:23
for Social Security benefits. Um, so that'll show up um on August 1st. We'll
8:29
be announcing that in email and in app um soon just to remind you that it's coming. Um so that will be if if someone
8:38
is claiming social security before full retirement age which is typically 67 now
8:44
um there are still a few people where at 66 and 10 months um if if if you are and
8:50
you are uh earning income still there are certain thresholds where if I earn
8:56
you know too much income in a sense um then I have some benefits withheld um up
9:03
until now you've had to put those in manually in the app. Um, and so we will
9:08
switch to doing all that automatically for you. Um, for most people that's going to be fine. It won't you won't see
9:14
any difference in your plan. But if you do have people who are claiming early and have earned income and that earned
9:20
income is higher, um, you'll see the effect of that automatically in the app. So don't be shocked on August 1st if you
9:27
start to see um, some differences in how the plan was before.
9:33
Um, by the way, thank you, Joseph. Uh, yeah, there there was another little bit. I I
9:39
don't have it for these folks because they're 61 and 58, 59 right now, so they're pre62. But if there were periods
9:46
and say they were both 65 or one was 65 and one was 67, you would still see the previous dates on this, but it would be
9:53
gray. There's a little bit of a shading still. Um but uh you won't see, you
9:59
know, the quote unquote optimal being within that gray cuz yeah, too late at this point. Um so that's a yeah, nice
10:06
little feature that our team um put in there for you. Um
10:12
okay, so that's kind of upcoming stuff. Uh as
10:17
I said, nothing to do on the on the earnings adjustments. Just be aware sometimes when uh you know the results
10:24
in income lab suddenly change on you that can be a little bit uh confusing, disorienting. Um so we'll try to make
10:31
sure we're announcing that quite a bit so that people are not shocked when that happens. Um
10:38
another thing that's coming leads me to kind of a a series of questions that we had where people are trying to compare
10:46
uh plans in different ways. And so I thought I'd go over actually just some of the features maybe that are a little
10:51
less well known within income lab. Uh some of which have actually been here for quite a while but I think there's so
10:57
much in income lab it can be you know hard to master every every part of it.
11:03
Um but one is within retirement stress test. If I click in here
11:11
if I have more than one plan for this household and for this one I do. I already have one that is claiming at 62
11:18
and one that's claiming at 70. I also have a few others where I removed the guard rails. Um I actually can do a
11:26
comparison view here. Um it's maybe not all that obvious because it's up here in
11:32
the upper right. I've got a one box and sort of two columns. The two columns is
11:38
a comparison view and then that gives me the opportunity to pick a second plan to
11:44
compare. and it's just going to show me the two um the two plans um on top of
11:51
each other. And here you see this is pretty interesting. We're going to go a lot over this quite a bit next week. Um
11:59
in the case where I have guard rails in place, whether I'm claiming early or claiming late, um my total income, at
12:06
least starting out in the global financial crisis, is really not all that different. Um there are periods where
12:14
claiming late is higher. There are periods where claiming early is higher. Um
12:19
because I'm claiming later, the uh the initial income is a little bit higher because I'm expecting higher social
12:25
security benefits, right? That's that that big benefit for claiming late. Um but I also can see I can look at the um
12:33
the balances and how they differ. And you'll notice here it's quite a huge difference. So we're going to go over that next week. But this is really
12:39
really helpful if you're ever trying to compare things. We're doing more and more of this in decision lab, but also
12:46
it's available for you um here. So for example, if I wanted to look at,
12:52
let's see here, I believe it's in this household my guard rails. So this
12:59
household, if I click on current balance, I can see I'm in a 60/40 portfolio.
13:06
If I look at a plan I made where the only difference was
13:12
I'm in a 9010 portfolio. Um
13:17
if I go to the retirement stress test,
13:23
I can go up to compare. And now I want to compare those two.
13:31
And you'll see that the 9010 portfolio supports higher spending to begin with
13:38
um because it's expecting a higher return, but it's more volatile. Um and so when I hit the global financial
13:45
crisis, the the more aggressive portfolio suffers a lot more. It gets
13:51
two pay cuts, whereas the one with the 60/40 portfolio got no pay cuts at all. um it does then recover uh eventually,
14:01
but it's just a much rougher ride. So, this is a great way to kind of understand the tradeoff between um in
14:09
this case two different asset allocation strategies. Um and you can see the
14:14
volatility of the income itself much smoother for the more moderate portfolio. Um and also you see the
14:22
trade-off in terms of the balance. So you can see the balance for the moderate portfolio did not suffer nearly as much.
14:29
The aggressive portfolio went from 3 million down to 1.4 whereas the more
14:35
moderate portfolio went from 3 million down to 1.9. Uh in both these cases that's not just losses from the um
14:43
investments, you're also withdrawing money. Um so you know these are these
14:48
are large differences in either case. This would have been a a rough ride, right? But you can see the difference um
14:54
for and and really outline this for people um to show the difference in in experience somebody would have had. Um
15:02
so this is super useful and you can do anything you want when you're creating two different strategies. In this case
15:07
I'm comparing asset allocation. You could compare um when you're retiring. You could compare social security
15:13
claiming. You could I mean really anything. The sky's is the limit. In the decision lab, we're doing more and more
15:18
work to get to serve up on a platter these differences for you so that you don't have to do the work. Um, but I
15:25
wanted to draw attention to that. The other place where there's a comparison that I think a lot of people are not as
15:31
aware of um is in tax lab. So by default in tax lab if I go to a a
15:39
plan go to tax lab I'm just going to be served this particular plan with its
15:45
particular things right when it's retiring when social security is claimed it it's going to be identical and then
15:51
it's only going to differ on which withdrawal strategy is being shown. So
15:58
in this case uh by default it's picking you know one of the best uh for this
16:03
particular plan which is Roth convergence to fill the 24% bracket. Um
16:08
and you know I could see that here right it's got some of the highest net income
16:14
some of the lowest taxes and so on. Um but sometimes you actually want to
16:19
explore something beyond um beyond the uh just the the Roth
16:28
conversion strategy. For example, um what I've already done is I've created I
16:34
took this plan and all I did was I added some charitable expenses that could
16:40
count as QCDs. So they were uh 70 and a half and older.
16:45
And what I'm going to want to do in order to see the effect of those
16:51
is um is here. And I'm actually going to
16:57
switch them. So we got this little, you know, it's like your uh like a Google Maps. I I put
17:04
the QCDs over on the left, no QCDs over on the right, but I set them both to be the same strategy. So I'm holding the
17:10
strategy the same. So I'm just isolating what's the effect of having QCDs and you
17:16
can see in this case those particular QCDs add you know 31 $32,000 in extra
17:24
savings on net income and taxes a little bump in net legacy and so on. So you can see kind of the marginal impact of these
17:32
this particular QCD plan. Um so those are two places where comparisons are
17:37
already deeply available in income lab. um and just maybe not used as often. Um
17:43
and they can be really useful if you're if you're exploring this. Um for this particular one, this is not uncommon. Um
17:51
the Roth conversions are the biggest uh you know effect and then as you add things like QCDs, you get a little bit
17:57
more. And maybe if I did more QCDs, I'd get a bigger effect, right? Um but that's a really um nice way to uh to get
18:05
things going. So, um, oh, speaking of, uh, existing
18:14
new features, uh, really good point. I totally forgot about this. Thank you Jared for, uh, bringing this up. So, you
18:21
may have seen in our emails, um, and I think there was also an inapp
18:26
announcement about this that the OBBBA
18:31
tax changes are already reflected in income lab. Um, there is one thing that
18:38
could potentially be a little confusing, which is in advanced settings. I don't believe we've removed this yet. Nope, we
18:43
haven't. So, this this will be removed from the app. Um, but it has no effect
18:51
anymore on your plants. So, in the past, you could either choose to apply TCJA
18:57
sunsetting, which meant tax brackets would change next year. Um or you could you could have always actually unchecked
19:04
that saying no continue them throughout the plan. Um so this will no longer do
19:11
anything. Um it's just like a it's hanging out there until our uh our engineers remove it. It's a very small
19:17
task but they just haven't we haven't quite gotten around to it yet. Um but all plans actually do show the new well
19:26
which is essentially an extension of the TCJA uh um tax brackets. So you won't
19:32
see any effect whether you check this or not. All plans will have the new tax brackets. They'll also have um the new
19:40
uh salt um deductions. So that's state and local tax. Um which for the next I
19:48
believe it's five years uh are higher. They were 10,000. Now I think they went
19:53
up to 40 or 50,000. Um and then they it's complicated, right? They go up by
19:59
1% a year. Uh and then they all go back to 10 10,000. Um so there's that.
20:04
There's the new um I think a lot of people are calling it the senior bonus, but it's essentially an additional
20:10
deduction for those 65 and older. again, suns setting, uh, all of these have magi
20:16
limits and so on. All of those are applied. Um, so that that is already in there, but I know that it can be confusing because you still see in the
20:22
advanced settings that little check box, but that'll be that'll be gone soon.
20:27
Um, and you do not have to do anything for um monitored plans. Those will
20:35
automatically uh in August on August 1st get the new
20:40
uh tax applied to them. Um the changes actually were not passed until July 4th
20:46
weekend. So uh they didn't get into the January 1 update for for monitored plans, but um that's the way we'll do
20:53
it. Um all right, let me just check if
20:58
there's any other. Yes, we have a few presubmitted
21:04
questions beyond the comparisons, which was really a combination of a bunch of questions. Um, so I'll hit those and
21:09
then we'll get to our uh the questions that you're putting in the Q&A right now.
21:15
Um, all right. Let's see here. Okay. So, somebody was
21:21
asking about creating a scenario similar to the last decade 2000 to 2009. Um, so
21:30
let me go to the um stress test again. I'll go back to
21:37
kind of a more general plan here.
21:42
So, your best bet for last decade would be here. And if you go to the do
21:49
bubble. So, in the retirement stress test, we always have um so we have these five
21:56
kind of longer time periods, but then within each one, you actually have um
22:03
three options. So really there are 15 stress tests available here. Um probably
22:09
the before is your best bet. Um and you know this happens to be a portfolio
22:15
where you are withdrawing money where the goal is not that you want to maintain your balance, right? So you're
22:20
you're okay because it's a it's a retirement plan. The goal is to draw down the portfolio over time although
22:25
not to zero. Um but you can see the effect here of withdrawing money through the glo through the dotcom bubble and
22:32
the global financial crisis. Um which is right here. Um so you can kind of see the effect of both of those. Um
22:41
if you go to a little bit later you kind of get the the during um and then after
22:47
tends to be um usually kind of after some of the recovery. So during tends to be kind of
22:54
a you know imagine it being kind of things are feeling pretty bad at that at
23:00
that point. Um so for example the global financial crisis the before
23:06
is November 2007. So although maybe some people uh would have seen things coming
23:13
at this point, most people were kind of still feeling pretty good rid you know riding high during we switched to
23:19
November of 2008 which would have been you know this is after uh people weren't
23:25
sure that they had liquidity in their uh you know money market accounts and then after was November 2009. I believe the
23:32
bottom of the stock market was uh February or March maybe April. Um, and so it's, you know, things are already on
23:38
the way up. So if you're looking for, you know, particular dates and you want, for example, the last decade, um,
23:44
probably your best bet is going to be the.com bubble, either before or during.
23:50
All right. Um, another question we had come in. Um,
23:58
uh, somebody was asking about how to adjust a plan,
24:03
um, around the the default adjustment amounts. So,
24:11
let's I'm going to have to go into this a little bit, but um, if I'm in a a general plan, right, on the main dashboard, I see, you know, my balance.
24:19
That's not all of the resources of the plan, but it's the resources that people kind of feel they have some control
24:24
over. Um, the full retirement paycheck, including anything outside of the
24:29
portfolio. And I see the guardrails. If I click on guardrails,
24:34
um, I can see how, um, the guardrails are different depending on the income
24:40
settings. And I get anything here from a very conservative plan way over here, um, where I'm spending 17,900.
24:47
and I get um you know my my upper guard rail is quite close
24:54
um all the way over to here where my upper guardrail is farther away because
24:59
I'm already being more aggressive, right? So um in this case, if you know my my portfolio goes up enough, I'll get
25:07
a nice big pay raise of 11%. The question was, what about this 5% thing? I I just see 5% all over the place. And
25:15
I'm not sure on this one where we'll see it, but my guess is, yep, I still see it there. Still, okay, now I get up to 6%
25:21
here. But in a lot of cases, you're going to see this 5% thing. Where's that
25:26
coming from? Um, that's not actually
25:32
um straightforwardly a matter of where you put your upper guard rail. It's
25:37
actually it has a lot more to do with um what's called the minimum income change
25:43
setting. Um so by default a plan has a minimum income change of
25:51
5%. You can change that. Um but what what is it? It's really saying hey look
25:57
monthtomonth all sorts of things can change. Uh at a minimum I know that
26:03
inflation will change. Every month we get a new month of inflation. Um income lab is pulling that in at the beginning
26:09
of each month. So if it was 0.1% it, you know, we we'll apply inflation of 0.1%.
26:14
If it was 1.5% we'll apply 1.5%. Um and so in theory you could make adjustments
26:20
every month. Um including inflation adjustments. Everybody could get a pay raise. Uh or in deflation they could get
26:27
a pay cut. U but practically that's not something anybody wants to do. Uh it
26:32
doesn't affect their life enough. Um it it's just far too ownorous. Um, and so
26:38
that's what the minimum income change is all about. It's saying, "Hey, what would a how big would an income change have to
26:44
be for me to bother doing anything about it, to bother the client with it?" And so on. Um, you can find that if I click
26:51
the three dot menu, go to advanced plan settings and go to income settings or no income
27:00
path. income path. Um, and you see minimum income change
27:05
and you can see it even gives you a little bit of a some information. It's what's the smallest adjustment that you
27:11
would bother making. Defaults to 5%. You're welcome to make it whatever you like. Um, and it does have, you know,
27:18
some effect on things like the retirement stress test, right? If you wait longer to make changes, um, that
27:24
actually can be beneficial in some cases. Um, and so that's what that's all about. And so when you see, for example,
27:33
a 5%, you know, you just kind of can't get it to be smaller than 5%. And as you even
27:41
change things, you won't see it be different than 5%. That's essentially because, you know, if I went over here,
27:49
um, I am spending at such a low risk level. So way over here, I'm at 99% risk
27:56
of underspending, 1% risk of overspending.
28:01
If I set my upper guard rail, you know, to say, "Hey, I'm at 99% risk of
28:07
underspending, but give me a pay raise if I get to a 100." Well, that's going to happen, you know, tomorrow. Like it
28:13
and my adjustment would be extremely small. And so what happens is the the guardrail actually gets pushed out a
28:20
little bit and says, "Okay, well, how would have to be?" so that I would actually get a 5% increase in my
28:26
spending because I'm not going to make a 0.5% increase. So that's where that is. That's why you're kind of seeing 5% all
28:32
over the place. Um it it's not so much about where the guardrail itself sits. You're more likely to see it in these um
28:39
in these more um conservative side of the guardrail settings because it's so darn close already um to that risk level
28:47
where you would get a pay raise. Um but it's just saying, "Hey, we're going to wait a little bit. we're going to let it
28:53
go up, you know, a good amount before we before we take a pay raise. And the same actually is true on pay cut. Um that you
29:02
can your settings can can say, for example, on a on a pay cut, the lower guardrail is when my when my risk of um
29:10
overspending gets high enough, I'll make an adjustment. Um typically though, the adjustments for a pay cut tend to be
29:18
smaller. Um because by default, we're saying, "Okay, just put yourself in your client's position." Um if they get good
29:25
news and they hit their upper guard rail, they're going to want a pay raise, right? Okay, give give me the whole pay raise. If they hit the lower guard rail
29:32
and they and it's time to take a pay cut, you have a decision. Should I take a big old pay cut um and take on the
29:40
risk that I might overreact, right? it kind of um cut my spending too much,
29:45
give myself this pain that I didn't really need, or should I take a small pay cut, see if that's enough, if it's
29:51
not, take a little bit more the next month or two months later or so on. Um and kind of tiptoe in. And by default,
29:58
um these settings say tiptoe in because that tends to be what people want to do. It also tends to actually work out well
30:03
for people to do small and maybe a few in a row rather than this giant um pay
30:09
cut. And so because of that, similarly, you'll often see 5% because we're kind of hitting that that um floor uh where
30:17
it's saying, "Hey, let's wait until we would make a full 5%, maybe we do another 5% after that." Um, I think we
30:24
saw that example um just a second ago uh in the retirement
30:32
stress test where I went with the aggressive asset
30:37
allocation and we got two pay cuts in a row. One in
30:44
this case in December of08 and another in March of '09. Um, so this is a great
30:49
example um, where we tiptoed in. In this case, because it was an aggressive portfolio, we did have to make two
30:55
adjustments. You know, in retrospect, would it have made more sense to make a bigger adjustment in December? Yeah,
31:00
probably. But we didn't know ahead of time. Um, and so the preference here is
31:06
to do multiple pay cuts, see if they're enough, and then if you continue hitting the lower guard rail, you continue
31:11
taking pay cuts, but you don't want to overreact. Um, so that's where all of
31:16
that's coming from. Um, happy to, you know, dive in a little bit more. Admittedly, that that's one of the more
31:22
complex parts of of the app, but it's trying to be very realistic um about
31:28
that. Okay, let me see what else we have in presubmitted questions.
31:38
Uh, somebody was asking about different types of fees and how they
31:44
work in the app. It's a really good question. The difference between a flat fee and an AUM fee. Um, so again, this
31:50
is in the uh well, there's a couple places you can do it. It you can have different plans can have different fee
31:55
levels. So, you can find it in advanced plan settings. U if I go to fees and expenses at the
32:02
bottom. Um, I mean, these I've obviously just messed around with it quite a bit. I have a I have a 2% AUM fee in here.
32:10
I've got some per asset class fees. These are all just random, you know, playing playing around with it at
32:15
different point. But I also have this flat fee. Um, so the any of these
32:22
percentages, those are going to be AUM based, so they'll affect your net uh returns. The flat fee is a true dollar
32:30
fee, so it will be $500 in this case, no matter what happens. that might currently be a very small percentage. If
32:36
the portfolio balance went way down, it could become a higher percentage, but they're really quite different. Um,
32:41
you'll even see the flat fee, I believe, in Lifehub, um, as a, uh, as an item.
32:48
Um, so yeah, I wouldn't confuse these two. Uh, I would, if you, if you do AUM
32:54
pricing, I would definitely, you know, put it in as a percentage. If you do flat fees or both, you know, put them in
33:00
separately. So yeah, they're definitely not meant to be kind of interchangeable.
33:09
Okay, check. Uh I believe we had one last question was uh well I guess pretty
33:17
pretty ample question and probably not one I can get to in full today but I will touch on it which is um putting
33:24
everything together for the client. Um, so this is definitely a place where
33:29
uh depending on what you mean by that, like how do I present it to a client? How do I use the app with a client? Um,
33:36
you're going to have different answers. I will go over just I'm going to just assume uh a little bit about what you're
33:42
talking about and and I'm going to go over the main dashboard um and and how you might talk about this
33:49
with a client. If you meant tax lab or if you meant uh you know social security
33:55
um the answer would be different. We have had master classes on where adviserss have provided some of this you
34:01
know here's how I present to a client. Um and so I think you you could uh potentially benefit from some of that.
34:07
Um the master class we had with um Ryan Townsley uh I believe that was in the
34:15
fall or spring might have been the spring. uh time is just uh running into each other. Uh we had Jason Juel I think
34:22
over a year ago similar talking about how he talks about different parts of the app. So those are really great
34:27
resources to go back to and we'll continue putting out some videos on that to give you kind of talk tracks and
34:34
ideas for how to talk about the um the app with a client. But if you were trying to present an income plan to a
34:41
client, um the first thing is to say, uh we're the main question in retirement is
34:48
figuring out given your resources and some of your preferences and you know special things and goals about you. What
34:55
can you spend? Um what are you eligible for? What can you afford to spend? And
35:01
that's where we get your retirement paycheck. So for this example, we have $3 million in in investable assets that
35:08
we're going to use for retirement, but we have other things too. So for example, if I go to my cash flows here,
35:14
um here I have a pension. Okay, this is not a super complex plan, but you can imagine pension, social security, all
35:20
sorts of things uh coming in here. And we have figured out given your
35:26
resources, given your preferences, given what's special to you, all of your risks, whether that's investment risk,
35:33
inflation risk, mortality risk, um, and your preference for the kind of
35:38
lifestyle you want, right? Are you the sort of person who um would really prefer to avoid bad news? Are you the
35:43
sort of person who kind of wants to live a little and and and spend as much as you can? We've taken all that into
35:49
account and we think you can afford 11,800 uh per month, right? So imagine that as
35:54
sort of your retirement paycheck. Um you know much like uh when in your working
36:01
years, right? If I change this to annual, it's sort of like having a job that pays you $142,000 a year. Um but
36:10
we're not just going to do that and stop monitoring your plan. It's not like, you know, we'll never talk again. My job is
36:17
to make sure that you stay on track. That means if things are going really well, I need to give you that news and
36:23
let you know that you can spend more. If things are a little bit rough, I need a plan in place, a contingency plan that
36:30
would tell at me when it would make sense to tap the brakes, spend a little less, or change the plan in some other
36:35
way. Um, and so that's what we have here for you. if you if your account went up,
36:41
you know, tomorrow from 3 million to 3.3 million, um we would talk about a pay raise. And that's why it's important for
36:49
us to understand, hey, are there things you would do if you could afford them? And we'll kind of put those on the bucket list for now. Um again, maybe in
36:56
this case, it's helpful to look at it from an annual point of view. You know, if you got an extra $14,000 this year
37:03
that you could um that you could have, how would you spend that, right? Was there a bathroom remodel? Was there a
37:09
vacation? Right? What what are the kinds of things that we would do? On the other hand, and this is the thing that more
37:14
people tend to be focused on is, okay, when would we make an adjustment? Um I know in March of this year, a lot of
37:20
people, I think it was March, April maybe, um a lot of people were asking their adviserss, hey, should we do
37:26
something? What are we going to do? And often you'll hear stay the course. Well,
37:31
that can bring up a question in people's minds. Is there ever a point you would tell me to make a change? Well, here we
37:38
go. This is the point, right? $2.1 million. We would talk about spending less. In this case, $7,000 a year less.
37:46
Um or maybe we'd make some other changes, right? Maybe we have a a particular vacation we were hoping to do. Maybe we can, you know, trim that a
37:53
little bit here or there. Maybe we could maybe there's something later in the plan. There are all sorts of things we can do to get your plan back on track.
37:59
Spending less is one of them. So, this is your kind of think of it as your GPS,
38:04
right? It's it's this is the direction we're going looking ahead. Here are some times we would make um a change one way
38:10
or the other. If you want to understand what living in retirement is like, if
38:17
you have these kinds of guard rails in place, we can go to uh kind of look at
38:24
in your particular situation, how would this particular plan have suggested
38:29
changes? um through different times in history. We're not going to live through
38:34
these periods again, right? The the the the future, you know, will not be
38:40
exactly like the past, but we remember these periods. We remember what they're like. So, in this particular one, um if
38:46
I ran it back through the returns and inflation from the global financial crisis, it actually, you know, it did it
38:52
did suffer. It it it had that the portfolio balance went down from 3 million to uh a little bit under 2
38:58
million. It got extremely close to the lower guard rail, but it never quite hit it. It then recovered and got a pay
39:05
raise in 2017. Another pay raise in 2020. Um, you may not even remember this
39:12
at this point, but 2022 was pretty rough. And, um, today it would have been sitting um, at about $2 million in
39:20
today's dollars. If I actually um included all the inflation from that
39:25
period um today I would be sitting at uh pretty much where we started. I would
39:31
have started at 3 million. I would have ended at 3 million today. Um so this is a really great example of just how
39:37
constant monitoring by your advisor, advice on when to make adjustments,
39:42
knowing when you would make an adjustment um can keep somebody on track. Um, so that's just a little, you know,
39:49
one idea of kind of a a talk track for explaining how adjustment based planning and ongoing monitoring um really works
39:56
for somebody. All right, so that is all of our presubmitted questions. Uh, so let me
40:04
have a look at what we have in the Q&A. So already addressed it, the uh the
40:13
recent tax changes. So those are all in there. No need to do anything to track plans. Those are those will be updated
40:19
automatically on August 1st on our normal update.
40:25
Um, okay. Quick audit report. This is a great question. Um, and we actually do
40:31
have um a few uh features that we're working on um that would hopefully make
40:38
it so you don't have to audit the plan as much. Um, but the question is really around, you know, fat fingering things.
40:43
Just we're all human, right? I mean, I make these mistakes all the time. Um, so
40:49
I'm actually going to go to a more complicated example here. Uh,
40:54
probably the best place to audit your inputs is LifeHub. So, here I have a
41:00
more complicated plan. Well, there's there's a few places. One is the cash flows.
41:05
So, if I go to cash flows, I'm going to see I have a a um a tab for income and a tab for expenses. I also have a tab for
41:12
taxes. Um you might switch to nominal because we live life in nominal. So,
41:17
that that's usually less confusing. Um and then I can go down to the table and
41:24
I can say, okay, does this look right? Um so, the example you've had was perfect, right? You're saying, "Well,
41:29
what if I put in uh tw $24,000 a month instead of uh $2,000 a month?" Right?
41:35
You would see that here, right? My rental clearly this is $1,000 a month. If it showed $144,000 because those are
41:42
these are annualized numbers. Now I'm saying, "Ah, okay, I got that wrong." Um the other place, and it's essentially
41:48
the same data, is in life. And here again, expand it all the way and um
41:55
start looking at um okay, I've got this $12,000 a month. Does that look right?
42:01
Um or did I make a a mistake there? This doesn't have any planned savings, but if I did, that would also be these are all
42:07
going to be annualized uh numbers. So, for cash flows, they're going to be a
42:12
total from all the months. Um, for balances, they're going to be beginning
42:17
of period um, uh, values. So, if it's in 2025, it's whatever I have in my plan
42:23
right now. If I go to 2026, it's going to be January of 2026. Um, so this is a
42:29
great place to audit it. Um, you're right. It makes a big difference in income. Yeah, that's often the thing. We
42:35
will often get questions saying, "How could my retirement paycheck be, you know, $40,000 a month?" And it's often
42:42
because of this, right? somebody put an extra zero or they put an annual in as monthly, that kind of thing. We will be
42:49
putting a few more alerts in the app saying, "Hey, you know, are you sure about this one? This doesn't seem quite
42:55
right." We're not going to stop you from doing things because clearly someone could have a $40,000 a month um you
43:00
know, income of some sort, but we'll kind of point it out to you um to make sure that those sorts of whoops uh
43:07
things don't happen. So, those are my that's my advice. a using LifeHub as a
43:13
as an audit. Um and then you know the other one that I do see quite a bit
43:19
is um if I go into this pension for example and if I've said
43:25
uh this is a joint plan this income does change when someone has passed away. Let's imagine I had said that it's uh um
43:33
I'm a second spouse's death. Um, I will sometimes see weird numbers in here. Again, we don't
43:40
want to have to limit this in some way because you may have a very good reason for putting the numbers in your the way
43:46
you're putting them. But, you know, if this is a $1,200 pension, um, most
43:52
likely it doesn't go to $12,000 a month after somebody dies, right? So, um, we may we're going to be putting some
43:58
warnings in saying, "Hey, this, you know, this doesn't look right. Let's, uh, let's double check that.
44:07
All right. How do we actually apply a social security strategy to a plan after doing
44:13
the analysis? There will be a new button that just says apply this to plan. That's the easiest way to do it. Uh for
44:18
now, you'll just have to, you know, maybe just jot down, oh, this is, you know, February of 2028 and the other one
44:25
is, you know, March of 2030. Uh but we'll have a shortcut for you for that very soon. So, um, yeah, we've
44:32
definitely heard people loud and clear on that. That was actually part of the design from the beginning. We just haven't got that one done yet. It's
44:37
that's one reason we still have this beta tag on decision lab uh lab in general is just a lot of a lot of things
44:44
to come. Um, is there anywhere you can record notes on a particular scenario? Yes,
44:50
there is. Um, so if I go to um there's a few places. Um,
44:57
one is from LifeHub. This actually is something maybe not everybody knows. If you click on the center of Lifehub, you
45:04
get to kind of the main plan information including the plan name, um the state of
45:10
residence and and their um retirement dates. And we have this description
45:16
setting. Um and so that's that's a great place to do it. Um the other place to
45:21
access it is the pencil icon in the upper right. And then again on the first uh the first tab, plan info, you have
45:29
this description. So this is just one place um to do it. Um and yeah, probably
45:35
the probably the easiest and best place to do it. Um
45:41
you will actually see those if you go to up here in the upper left plan scenarios. Um you'll see the uh the
45:48
descriptions here. I haven't actually changed the descriptions, so they're all the same. Um, but you will see at least
45:53
the first part of those descriptions so that you can see what the differences are.
46:01
Okay, let's see here.
46:12
Which plan on the comparison is the base plan? Ah, okay. So this uh question I think was about the retirement
46:20
stress test comparison. Um so if I go to this comparison
46:28
um the question is okay which which one appears where? Um so the one that's on
46:33
the left the current plan will be the one that where you also see the uh this
46:39
light planned income in place. Um, again, I don't actually remember
46:45
any of these differences. Probably make more sense to go to one of the others, but um, okay. Yeah, it looks like the
46:50
difference here is um the blue one is the one with no legacy goal and then I added a $1 million legacy goal to the uh
46:58
to the uh the mustard colored, the gold one. Um, and because of that, I have to
47:03
spend less, right? So, this is a actually a really nice example. Um, and
47:08
the one on the left is the blue stuff. Um, and so that's what you'll see by
47:14
default. Um, when you're showing so much information, it can be a little bit of a challenge. Uh, and so that's also the
47:20
guard rails we show down here are by default the one on the left, the current plan. If I want to show the other
47:27
guardrails, I can just flip it over. Um, but we can't show you, you know, both
47:32
guardrails at the same time. I don't think there's anybody who could handle that in their brain. Definitely I
47:38
couldn't. Um, so yeah, that's that's the the one on the left. Um, in tax lab,
47:46
I imagine this one might Okay. Um, it is, uh, you know, the one on the left,
47:53
um, minus the one on the right is a way to put it. Um, and so you'll see it by
47:59
default as green, right? How much better is the one on the left than the one on the right? Um, but if you want to see it
48:06
as red, which is perfectly reasonable thing, right? Rather than viewing it as an advantage, view view this as a cost,
48:13
um, and you just flip it around. And so now left minus right is negative. And so it's in the red.
48:25
All right, let's see here.
48:33
Okay, good question about the um if if clients are spending a lot less than
48:42
well maybe I'm not sure which way it is, but I'll answer it two ways. If clients are spending a lot less than the retirement paycheck, um one of the first
48:49
things that people often do, and Derek Tharp has gone over this before, is for example here I I pushed it to be a
48:55
little bit more aggressive. I did that on purpose. Um, but the first thing to do is say, well, heck, we're not
49:00
spending anywhere near 179, so let's push it all the way to the left. Um, and so, and then you hit apply changes to
49:07
make sure that actually um applies to the plan. Um, there's a few other things you can do to bring the uh make the plan
49:16
more conservative to make it match what somebody's actually spending. Um, now there may also be a conversation to be
49:21
had about, hey, you could afford to spend a bit more. Let's make sure you're not giving up certain things you would
49:27
like because you think you can't achieve them, right? So, have that conversation about living the best life you can and
49:34
so on. But for some people, you know, they just don't particularly have an interest in spending a lot more. So, I might do this. Um, if I have a plan, for
49:42
example, uh, this one has it, I think. Um, yep, that has the retirement smile.
49:49
It's easier to see if I show it in uh
49:54
real. Um, I might go and um I'll just I'm going to copy this plan so that we
50:01
can compare. And I'll say
50:06
smile.
50:20
And then I'm going to go to advanced settings, income path,
50:26
and change it to flat.
50:33
And now I'm not planning to spend more in my younger years and then spend less as I get older. Um, instead I'm just
50:39
going to plan to spend the same amount no matter what. Uh, and that, you know, brings me way down, right? I was in the
50:44
17s, now I'm in the 14s. So that's the first thing that you would do. But if somebody is spending, you know, 142 and
50:52
they keep hitting the upper guard rail, um, I would say it's it's a little bit up to you what you would do. there's no
50:59
harm done whatsoever if they don't want to take the pay raise in in just allowing the plan to continue to hit the
51:05
upper guardrail. They'll always know what they could spend if they wanted to. And as time goes on, um you'll be able
51:11
to say more and more maybe there's some larger um purchase that comes along. Maybe it's a new car or an RV or
51:17
something and it may they may just find themselves then in a position where they've accumulated so much uh they're
51:22
in a sense they're so far above the upper guardrail that they actually could spend quite a bit. So there's no harm
51:27
done whatsoever in just letting them continue. Um there are some things you can do uh in addition to this though if
51:36
if you kind of want to put a hard ceiling on the plan. Um so in advanced
51:41
plan settings uh I believe it's an income settings.
51:47
I can go all the way down to the bottom and I have this floor and ceiling section. Um, and I might say, look, even
51:53
when higher income would otherwise be available, meaning I've hit the upper guard rail and so on, um, maybe look,
52:01
I'm never going to spend more than uh, I'm never going to let my income go up by more than 50%. Um, or I'm never going
52:08
to let it go above, you know, $10,000. This one happens to be 14, so I could put it at 20 or something like that. Um,
52:18
I don't know why that's not editing for me. There we go.
52:28
And uh we'll see if I chose a good number. If I go to the stress test, I'm hoping
52:35
that I'll chosen a good number. Maybe I didn't.
52:42
By the way, this will be in um Okay. Yeah, unfortunately I didn't I
52:47
didn't choose a low enough number. Um, but if I if I had put it at, you know, for uh 15,000 or something, you would
52:54
see it uh cap out here and I would stop having these um these upper guardrail
52:59
uh numbers. So, let me let me just try that.
53:22
And then you'll see the balance will actually go above the upper guard rail. Um, and it'll just stay there. Uh, and
53:29
and so you kind of would always have some knowledge that um, you know, for
53:34
example, right here, my balance is 3.2 million, my upper guardrail is 2.4 million. Essentially, I have a have a
53:42
whole bunch of money I could spend um, and still be in good shape. So, um, those are a couple things that you can
53:48
do. Uh, if you have somebody where, you know, they're just not taking those those payraises. You can also start
53:54
talking about, um, you know, maybe gifting or, um, you know, estate
54:01
planning type ideas, uh, charity and so on. At this point, um, there's also,
54:07
this is similar to the idea of if somebody has a surplus, what do we do with it? it might be a time when somebody could afford some Roth
54:13
conversions because they have that excess uh in in what they can spend. So, couple couple ideas there.
54:26
All right, let's see here. I know we've only got a couple minutes. Make sure.
54:35
Ah, okay. Clark, I got you. Uh the question was in relation to tax lab not
54:40
retirement income. I think I did end up addressing the tax lab but um yeah I think I did it was on the one on the
54:46
left. Okay. See here. All right. This is a long one.
54:52
Bear with me while I read it.
55:07
Okay. Yeah, this is definitely a complicated one, but Ty asks about basically funding your Roth conversions
55:13
if you happen to be having to fund them from qualified tax deferred accounts like an IRA as opposed to a um a taxable
55:21
account. So, um let me go over just the basics of it first and then your idea is actually not not a bad one. Um so, in
55:29
tax lab, well, hang on, let me let me go back. Um, by default, an income lab plan
55:36
is it it's asking the question, given my resources and all the other stuff in my
55:41
life, how much can I spend? Um, and that's a great place to start a conversation. Um, however, if you're
55:47
doing tax planning or if you have a situation where things are particularly lumpy, that would be Roth conversions,
55:53
um, you know, maybe a huge asset sale, things like that, um, starting with a
55:59
gross number and then netting out based on whatever the taxes happen to be that year is often not a good, it's not a
56:05
final place, uh, for the plan. Um, but unfortunately, when you're asking how much can I spend, the answer to that
56:12
will be gross of tax. So, it's similar to the way I was saying, um, you know,
56:18
this is like having a $170,000 a year income. Um, if you were, you
56:26
know, uncouthed enough to ask somebody how much they make, they would typically answer you gross of tax. Um, because I
56:32
think we all recognize that if taxes change, I'll get to net more. That'll be great, but my actual income, you know,
56:38
from my employer doesn't change. Uh it's similar especially from uh the viewpoint of IAS. IAS don't care what your tax
56:45
rate is. They will support a certain amount of withdrawals. Uh if your tax rates 100% they support the same amount
56:51
as if it's 0%. Um and and so that makes tax planning hard
56:58
and and uh the role of the adviser crucial. Um, and so what you can do in
57:03
in order to kind of um force a situation where you're not, let's say I'm doing
57:09
huge Roth conversions, um, and you know, I have $100,000 in taxes. Well, I
57:14
probably don't want to net 70,000 this year and then next year when I don't do Roth conversions, net, you know,
57:20
$150,000 or something. Um, and so what I can do is go into the plan, go to expenses,
57:30
and uh state some kind of uh net spending goal. Here I happen to have put
57:36
in $12,000 a month. Um, but you know, you could do whatever you want. And then hit change this
57:43
and change it from a how much can I spend plan to a how can I spend the budgeted spending. And what that'll do
57:50
is it'll force uh grossing up of withdrawals in early years. Now, Tai's question is a really good one, which is
57:56
it's saying, well, what if the only thing I have available is um traditional IRA funds. Um what what's going to
58:05
happen is um by default, if it's grossing up your withdrawals, the first thing it will try to do is not take
58:11
withdrawals. So, if there's excess income, it will use those to pay the taxes. That does happen occasionally. Maybe again, you have sold a house or
58:18
something. Well, let's go ahead and just use that money first. Um, then it will take from taxable accounts. Then
58:25
finally, it will net out your Roth conversion from the IRA. So, it'll put
58:30
some of it into a Roth and use the rest to pay the taxes. If you want to force particular accounts to pay the taxes,
58:37
you can do what um what Tai suggests, which is put um
58:43
a particular distribution plan on a particular account. Now, this plan is
58:49
very straightforward. Um, but let's imagine let's let's even step one step
58:56
back and imagine I have two taxable accounts. If I want to force one of them to be the one where the the taxes are
59:01
paid from, I can click on distribution settings and say specify a distribution
59:06
plan for this account and state, you know, maybe I take $10,000 out this
59:12
year. Um, that won't exhaust the account, right? but it'll force the first $10,000 that that's needed in the
59:18
plan to be from this or maybe it's 50,000 or 100,000. Um, so you can you can do that. There isn't a way to kind
59:24
of um uh override that approach of first spending non-portfolio, then spending
59:30
taxable, then netting things out. So, the only real option if you want to avoid taking money from your traditional
59:36
IAS in order to pay the taxes is either to choose a lower um a lower Roth
59:42
conversion plan. So, for example, if I'm in the tax lab, um you know, maybe it
59:48
was saying, hey, 22 or 24%, maybe I go down to 12 or 10. The other would be,
59:53
you know, maybe there are years where there is some extra income you could use to pay taxes. Um, and so in that
59:59
situation, um, so here's where you would choose a lower Roth conversion plan. Um,
1:00:05
but maybe there are situations, right? So, maybe I choose 10 or choose 12 or something. Um, another place you can do
1:00:11
it is going to advanced plan settings and taxes
1:00:18
and then at the bottom here I can specify years when Roth conversions are allowed. So maybe there are particular years you don't want to take IRA funds.
1:00:26
Um, you can do that. I typically just select all and then unselect the ones I don't want. Um, so that's another way to
1:00:32
do it. So there's not really like a the suggestions that you had of if I
1:00:37
understood right. Um, but uh there are some options to kind of fine-tune
1:00:42
fine-tune this. Um, okay.
1:00:47
So, just a couple questions left, but we'll we'll um uh Jeeoff, we did answer the one about
1:00:54
the the new tax rules and yes, the 6,000 seller senior deductions in there. Um,
1:01:00
that that's all in there, including the sunset, including the MAGI limits and so
1:01:05
on. Uh, I'll have to look at the FIA question a little bit deeper, but we can get back to you, Mark, on on that question since we're out of time. Um,
1:01:12
but uh, thank you everyone for joining us and hope to see you all next week when we kick off our Social Security
1:01:18
Master Class. Have a great week everyone.