0:06
We got a lot of uh announcements and new features and things to go over today before we get to your
0:12
questions. Um, let me just give you a few more
0:17
minutes as we're waiting. How is the uh the spring going
0:23
for everybody? We got great spring weather here in Colorado.
0:33
Where's everybody calling in
0:41
from? All right, we'll we'll let people Oh, it's cold in Chicago.
0:46
Bummer. Um we'll let people kind of trickle in. Uh but we'll get going because we got a lot of lot of stuff to
0:52
do. So, as usual, um, make sure that if you have questions, you put them in the Q&A. Um, that is, uh, should be in your
1:01
your tool menu rather than in your in the webinar chat. Chat is harder to to monitor and and keep track of things.
1:08
Great spot to chat amongst yourselves, of course. Um, and I want to start out today with
1:15
just a few announcements on some upcoming webinars that we have. So, we have a joint webinar with Move Health
1:23
um on May 28th, um 1:00 p.m. Central, 2:00 p.m. Eastern.
1:32
Um and it's on how advisers use Income Lab and Move Health to keep clients retirement ready. So this is a place
1:37
where Russ Thornton um who is an adviser uses income lab be talking about um both
1:46
how he uses income lab and uh move health in planning for the uh health
1:52
insurance needs of uh early retirees. So should be a really really good time to
1:59
kind of see how another adviser is doing things, pick up some best practices uh and so on. So definitely join us for
2:06
that. That's uh in a little more than a week. And I think Shelby just uh just
2:13
put the link in the in the chat if you're interested in signing up for that. And then also next week uh on
2:20
Tuesday, so a week from today, we have a panel discussion on social security
2:27
claiming. Um and it'll be me, Derek Tharp, and Mike Kakakota. You all know Derek. Um, Mike Dakota is also an
2:34
adviser and a professor of financial planning at Colombia and NYU. So, this
2:40
will be a really good discussion. There's actually a ton of really interesting things to uh to think about here and ways to work
2:46
with clients on this. Um, I I've definitely my eyes have been open to how interesting this is uh recently. So, uh
2:54
definitely join us for that. We'll do a little kind of going over some some different ways to think about um and
3:00
analyze social security claiming strategies. So um with that I'll move to
3:09
our normal agenda which is to start with new features. Um this will
3:19
probably kick up a lot of questions so that may be what we spend our entire time on today. Uh but we have lots of
3:25
new features um either out or coming out soon. So I want to give you a sneak peek
3:31
of those. So first of all, let me share my
3:36
screen.
3:53
All right, there we go. So, um, first new feature to go over is, um, so the
4:01
way that income lab handles plan length and life expectancy and mortality risk
4:08
is it's really cool. It's really great. And we've done webinars on this be
4:13
before. So, I'd encourage you to um to check those out. So, by default, if you
4:20
have an income lab plan, it's going to take the age and sex of the clients or client and use um actuarial data,
4:29
mortality tables from the Society of Actuaries to give you a range of possible plan lengths based on kind of
4:36
your your longevity risk, your you know, the the longevity of people in your
4:42
family and so on. and it's doing mortality adjustments in the background on on cash flows that have mortality
4:48
risk to them like social security. But there are scenarios where you don't want
4:54
to sort of use generalized plan lengths um and instead you want to set um sort
5:00
of specified life expectancy. Um, and so we've we've had for a long time the
5:07
ability in a joint plan to set a specified date of death for one of the
5:13
two clients in the plan. Um, but now we have the ability to set it for both of
5:18
them or in a single plan to set it for that person. So in the past we always sort of made you still use uh the
5:25
actuarial plan lengths. Um, and so now you'll have even more ability to do
5:31
that. So, for example, here we have a plan where both people are just using the actuarial
5:38
um data and we've got a joint plan length. Um that takes us out to 2058. Um
5:44
if you wanted to look at um you know these the longevity settings you can
5:50
see, you know, here they are. If we changed John to be you know lower life expectancy, we would shorten the joint
5:56
plan length. If we we changed them both, we'd shorten it even more and so on. Um, so these, just to remind you how
6:03
these work, this is basically saying um that we want to find a plan length
6:10
where there's a basically a 60 that uh John and Mary jointly, so one of them at
6:16
least one of them will live longer than 60% of of other um couples their age. So
6:22
slightly above average, right? Longer lived than 60% of people. If I was over here, you know, I can go as high as 90%
6:29
of other people. So, very long lived. Okay. But if I don't want to do that,
6:36
um, if I want to set the plan lengths myself, I can, for example, put John's
6:42
life expectancy at 2040 and leave Mary's alone. And sure
6:48
enough, John, his social security now ends in 2040 and and Mary's changes for
6:55
the uh survivor benefit in this case. Um you'll also notice that when I put John's uh expected date of death in
7:03
there, the plan actually shortens uh overall. And that's because again, we're still using actuarial data. And so now
7:10
since we've specified John's life expectancy, we're not doing joint life expectancy anymore. We're only doing
7:16
single and that's married. And so it's going to be a little bit shorter than two people. All single life expectancy
7:22
is always shorter than joint life expectancy. Now if I want to
7:27
set make that plan even shorter, I can. And so now I set Mary to be at the end
7:33
of 2050. The place that you do this is um well,
7:39
you know, you you saw it uh right here that you can um toggle between the the
7:47
slider icon and the calendar icon and set the plan end date um for for one or
7:56
both of them. You can also do it in advanced plan settings under longevity
8:02
settings. And here again, that's where you see that toggle. And you can do it for either
8:09
one. If this were a single plan, meaning there's just one client, um you could also um
8:16
uh set set the plan length there. So, that should be uh very helpful.
8:23
We've had a lot of people asking for that for a long time. Um the second piece I want to go over is well, here
8:30
I'll do a really simple one. Um, in income lab you have the option of easily
8:36
setting what we call an income path. And you know, this one has a a flat path,
8:43
meaning it's adjusted for inflation, but no other expected changes. So when I'm viewing it in today's dollars, meaning
8:50
real, I'm stripping out inflation, it just looks flat. If I go to nominal, it
8:56
just goes up at the rate of inflation that I have in the in the plan. Um, there are other ones though. I often
9:03
use the age-based path, which is the retirement smile. You can do a custom
9:08
path and so on. Um, until now, the default for a new plan, a totally new
9:14
household, a case where you're not copying a plan, has been age-based, the retirement smile, but people have said,
9:20
you know, I prefer to do it, you know, flat. I prefer to do it in different ways. So, we now if you go to settings
9:27
and default values, you can set a default. Um, and it's just right here. I
9:35
have mine set on flat. Uh, so that means any new plan I create for a new
9:41
household would be would have a flat income path. If you want it to remain on age-based, you can flip it back to
9:47
age-based. Um, everybody's default default is set to flat. Um the reason we
9:52
did that is we have a lot of new advisers who are using income lab and they're not typically that familiar with
9:59
the age-based path and so that can be a little bit um surprising and so we set it on flat by default so that you know
10:06
they're not they're not surprised to see that. But if you if you like age-based you know just click this back to
10:11
age-based save it and you'll never have to come back here again. Um, but this is a good place to just save you some time
10:17
if you know there are people who like uh to to have it flat and you know having
10:22
to constantly go to advanced settings and change that is a is a little bit annoying. Um, we also this very few
10:29
people actually change this but you can have a default for the minimum income change which is essentially a hurdle um
10:36
rate that says hey I'm I will not make any changes to this plan unless the change is at least a 5% change. So that
10:43
includes um inflation adjustments. So you're going to basically wait until enough inflation has acred that it would
10:51
that a 5% chance would a 5% change would be needed. Uh same goes for hitting a
10:56
guard rail. So uh it's saying look I I'm not going to make changes to
11:03
um to my plan if I'm monitoring it unless it's actually a 5% or more
11:10
change. Um so that's the default. uh you can change it to to whatever you'd like.
11:17
Okay, so that's the second one. The third one is a new ability to
11:26
um model in a stress test of social security
11:32
um benefits being cut in the future. So, there's been a lot of talk about this lately. It's kind of on the top of a lot
11:38
of people's minds. Of course, we at Income Lab have no special uh insight into the future of Social Security uh if
11:46
whether there would ever be changes. Um but a lot of people would like to
11:52
examine what how their plan would be different if they planned for uh Social Security to have an adjustment in the
11:58
future. Um, so here I just have a very simple plan where with just one person in it, John, and he's uh he's getting
12:05
$3,000 in social security starting in 2027. This again is on the the real
12:12
today's dollars, right? I've stripped out inflation. Um, what if I wanted to
12:18
see how the plan would be different if I modeled for a reduction in social security? In in this case, I randomly
12:24
put it at 2040. Um and here we go. So you can see
12:31
automatically is going to reduce the social security um benefit in 2040. Um
12:39
the way that I did this is again plan advanced settings. There's now a social
12:45
security section and this will look a little bit different for for yours but
12:52
um it it's basically saying hey include a reduction. In this case, it's 23% in 2040. I believe we have this defaulting
12:59
to whatever the social security administration projects the the trustees, which I think is earlier. I
13:05
think it's 2033 and it might be 21% but um we'll check that out. So, that's how
13:10
I did that. And the nice thing is you can then go to your list of planned scenarios and
13:19
see, you know, how your spending capacity or retirement paycheck is
13:25
affected if you plan for benefits to be adjusted in the future. Um, so in this
13:30
case, it's a little further out, right? 2040 versus 2033. Um, but you can see
13:36
it's say here, I'll round the values. It's a It's about a
13:41
$200 uh difference in spending per month if I'm planning for a 23% reduction in
13:48
benefits in in 2040. So, uh obviously if I did it in 20
13:54
33, it would be it would be a bigger uh a bigger pay cut. So, I can go
14:08
there. Okay.
14:24
January. So now it's saying, okay, if if we wanted to sort of self-insure against
14:30
that happening, uh we would want to spend $14,000 a month instead of 14,400, right? So it's a it's a $400
14:38
cost. to the client to um to plan for that kind of a a
14:46
contingency. All right, let me see if there are any uh
14:53
any questions on any of these yet before I hit some of the other
15:03
ones. Okay, so David was asking how the reduction is calculated. It's a it's
15:08
simply a straightforward um the percentage that you put in. So in
15:13
this case 23% like I said I I I'm not sure if my memory is right but I think the latest trustee report was a 21%. So
15:21
we will update that default each year when that trustee report comes out. Um
15:27
but if you have it in a plan, we're not going to update that, you know, automatically for you. So, it only be um
15:33
for any new uh plans that you apply this to. Um but it's just a
15:40
straightforward. We look at what the benefit was the day before and we reduce it by 23% the day after. So, it's very
15:46
straightforward. I know, you know, in fact, it's extremely unlikely that any
15:51
changes to social security, you know, would look exactly like this, but it's just a it's a way that you can um you
15:57
can model something in and get a feeling for kind of stress testing a plan to see, well, you know, if we worried about
16:04
this and we wanted to scale back income, how much of a scale back would
16:09
would kind of make sense? All right. Um, like I said, lots
16:18
of lots of things today. So, I'm going to show you a few more. Um, the next one
16:27
is has to do with pre-retirement. So, in income lab, there's sort of two phases
16:34
to a plan. There's the income plan, which is where the software is figuring
16:40
out, you know, how much you can spend, what you're taking from portfolios, all that stuff, right?
16:46
um whether there's excess income that needs to be put into the portfolio and so on. So that's where like all
16:52
everything is kind of done for you. But before the income plan begins in the pre-retirement phase,
16:59
um the software is kind of assuming that unless you tell it what to do like in
17:07
terms of putting money in or taking money out of a portfolio, it's not going to do it. So it's sort of like well you're living your life, your
17:12
pre-retirement life. um you already essentially have a plan for that in the sense that you're doing what you're
17:18
doing. Tell us if you're if you're spending money from your portfolio or putting money into your portfolio, but
17:24
otherwise we're going to we're going to kind of leave it alone. Um so because of
17:29
that treatment of pre-retirement and in retirement or actually a better way to think about it is really before the
17:34
income plan begins and after the income plan begins. Um because you can start your income plan while somebody is still
17:40
working. In fact, that happens a lot. People often retire at different ages and you want to start the plan and say,
17:48
"Well, should I be putting money in or taking money out of this portfolio?" So, before the income plan begins, we wanted
17:53
to give you more um control over what's happening um in the plan. And so, I
18:01
built a plan here with uh a nice, you know, six-year pre-retirement period.
18:07
Um, and I wanted to include some expenses that I am going to fund from
18:13
the portfolio. So, for example, I have this, you know, I'm calling it pre-retirement variable expense. Um, and
18:20
I've, you know, it's $1,000 a month and it ends at John's
18:27
retirement. Um, and I checked the box fund expense from portfolio in pre-retirement. So if I check this box,
18:35
if any part of this expense happens before the income plan begins, it will be funded from the portfolio using the
18:43
same uh distribution settings that you already have for the plan. So in this case, well, I only have a taxable
18:49
account, but I think I have it set at taxable, tax deferred, taxfree. Um so it's going to fund this portfolio uh
18:56
fund this expense from the portfolio in pre-retirement. And you can see here um
19:02
I have a a mortgage payment as well. And I've
19:08
also said fund payments from portfolio and pre-retirement. So I'm actually going to be paying my mortgage from my
19:14
portfolio. Probably unlikely that you'll actually uh be doing that, but I wanted to show that that is possible um to to
19:20
say that. And for this one, I actually have it being paid off early in 2027, and I'm funding the final payment from
19:26
the portfolio in pre-retirement. Now, this is more likely if you were if you were paying off a mortgage in
19:32
pre-retirement, you probably would be paying it off um in a lump sum. If you were doing it in a lump sum, you'd be
19:37
doing it from the portfolio. So, this is this is helpful. But, I I maxed it out. I put them all all from the
19:43
portfolio. Um and I also have the purchase of a vacation home in this plan
19:48
in 2026, and I'm funding that purchase uh in pre-retirement. Um, we will
19:54
actually default a a purchase to have this checked. We'll default the um the
20:00
lumpsum payoff of the mortgage to have that checked. You can always uncheck it. Um, that's actually the behavior of the
20:06
of the software already. It's just that in the past you never could turn it off. Uh, so now you now you'll be able to
20:11
turn it off if you want. And so I have all of these being funded from the portfolio. Um, you can see here other
20:17
than the taxes in this plan, um, I'm I'm funding it all from the portfolio. The
20:23
next year I'm purchasing that vacation home. I'm going to switch it to nominal here so rounded so it's easier to see.
20:31
Um, so I'm funding all $225,000 from the portfolio. Uh, and
20:37
that's going to affect, you know, the the balance at retirement. Um, if I, you
20:44
know, in this case, I chose not to fund the the vacation home. Um, and so, you
20:50
know, I do have a $200,000 purchase. I'm, you know, this this plan doesn't
20:55
have a source for that, so it would show a shortfall in that year, but, you know, maybe I'm making a million dollars this year and I'm going to buy a a vacation
21:02
home. And you can see the difference in portfolio withdrawals based on that. So,
21:07
this feature or set of features gives you a way to kind of really fine-tune
21:13
that period before the income plan begins. you know, if there are any kind of major events or expenses that people
21:20
that are going to hit somebody's portfolio before the income plan begins, it's important that we get those in
21:25
there. Um, so that we know what we have when the income plan begins and we can get the right answer to, you know, how
21:31
much can I spend. All right. Um, the last thing,
21:38
let me check again and see if there's any uh any questions on
21:59
these. Okay, I'll I'll handle all these questions in a in a short bit as none of
22:04
them are directly related to this one. Okay, last thing is a new set of
22:12
features um that we're calling decision lab. I think I've teased this one in the past,
22:19
but essentially um in income lab, you can always create as many scenarios as
22:24
you want uh for a given household. And that can be a great way to do scenario
22:29
planning and consider different approaches, you know, retiring sooner or later and so on. But we've never had a
22:36
way to kind of serve that up in a really easily understood um way. And so that's what decision lab
22:42
is all about. And so you're going to have these conversation tools. The first one will be about social security and
22:48
I'm going to talk to you about that um soon. So this is not yet available but I'm teasing it because it'll be available before our next uh lab talk
22:56
Tuesday. Um so uh these are about things like when will I claim social security
23:02
uh benefits and how does that affect my plan? Saving for retirement will be about when should I retire, how much should I save. Uh and investment
23:10
strategy will be about you know how should I invest and how does that affect my plan. Um, so these are about zooming
23:16
in on a particular topic on a particular really common conversation and giving
23:21
you visuals to help you have that conversation and make those decisions with a client. You know, saving for retirement, for example, is a really
23:28
obvious one. You're like, "Hey, maybe I could save a little bit more. Maybe I could save less. Maybe I could retire sooner or later. Let's let's talk about
23:34
that and figure out a way to do it without creating, you know, a hundred plan scenarios in income lab and and
23:40
kind of squinting and seeing, well, which one where do I end up with the right amount of income and so on. Um, so we're starting out with social security
23:46
because it is actually the most uh requested piece of advice that people
23:53
have. Um, and it kind of gives you a a
23:58
little bit of a a an easy entry. So instead of just showing a bunch of
24:03
things right away, we kind of say, "Hey, here's what we're about to do." I can go to get started and I can see, okay, what
24:09
do you already have? What sorts of settings do I have in this plan? So in this case, these two individuals are
24:17
they're pre62. So I wanted to make sure that they actually have all of their possible um uh claiming dates
24:25
available. And I set them as a with a pretty big difference in primary insurance amount. um because I wanted
24:31
some spousal benefit and survivor benefit stuff to happen. Um so if you wanted to change anything here, you
24:37
could. Um instead, it'll go to a little bit of a okay, here's what you're about to see. And then I hit explore options.
24:44
And what you are going to see right away is a heat map showing you every one of
24:49
the 9,000 plus um possible claiming strategies for these
24:56
folks. um and it's going to default to the you know quote unquote optimal one
25:02
meaning the highest total lifetime benefits from social security. Um we are
25:08
going to have a webinar next week on social security claiming and we'll talk
25:13
about actually a lot of you know trade-offs pluses and minuses of this approach just focusing on social
25:19
security versus looking at the whole plan and so on. Um it's not that simple.
25:24
There are lots of trade-offs as with so many things in uh in financial planning.
25:29
Um but here's a way you can kind of view the trade-offs for any particular thing in terms of you know this happens to be
25:35
the highest lifetime benefit. But I had if I had it over here I could say oh what's the trade-off in taking it sooner? Well I would be giving up you
25:43
know $78,000 in lifetime benefit. Um my break even point is 16 years from now.
25:51
Um, you know, there's a certain amount of time before claiming. People prefer to claim sooner, right? So, the farther
25:58
over I get here, the less time until I um until I get to start taking social
26:03
security. Um, but I'll snap back to optimal. Um, so you can hide this in
26:09
case it's like a little too much for if you're using this with a client. Um, or you can you can show it.
26:17
Um, again, we're going to have more webinars on this, but I'll I'll just tease a few things. One of the really
26:23
nice things about uh this tool is that it's set up to help you have just really good conversations
26:30
about these trade-offs. So, one thing is uh often there's not a huge difference
26:36
between the quote unquote optimal approach and a bunch of other approaches. So, I can turn on and and
26:42
kind of outline a target range here. Here I have it. Give me everything within one and a half% of the highest
26:49
lifetime benefits. And now you can see, you know, what am I really giving up by,
26:56
you know, going to uh 20 to to 64 and 69 or what am I really giving up by going
27:02
to uh 65 and 67, right? And if you're giving up, you know,
27:07
$15,000 over your lifetime, um, you know, maybe that's not as something that
27:13
we really need to be worrying a lot about. So, you can set, you know, the the the range that you want to outline
27:19
here. And then we also let you kind of on the fly. I don't think these numbers are actually coming through correct
27:24
here, but I'm in the uh I'm in our uh development uh testing environment here.
27:30
Um, so I think I was set at 85 now uh before. Let me just do it to make sure.
27:37
Uh I can set the life expecties that are used in this calculation. So that's not changing the plan. Uh the plan is the
27:44
length it is. Um but let's say I wanted to say well you know we may not live you
27:49
know that long. Let's let's bring it down a little bit and see where things
27:54
move, right? So I moved from up here in kind of the 69s to 65 and 68. And you'll notice that now you know even 66 and 62
28:02
is within my within my sort of you know acceptable range. I can add the uh
28:08
reduction. In this case it's six uh 20 35 and a 23% reduction. Again set it to
28:16
whatever you like. Um and not surprisingly that moves it a little bit further down and to the left. Um and
28:22
again you know within my range is even 62 and 64. So, really quick, easy ways to kind of
28:31
talk with clients about the the risks and benefits of different things. Um, we'll have more webinars on how to use
28:37
this. There's also um a time value of money piece that you can add here. We'll have we'll talk a lot more about that um
28:44
in future uh webinars and materials on this. And then once you have an approach
28:50
that you want to dive into a little bit more, you can go over to this sort of uh
28:57
you know dive in view more. Switch back to real just to and you can see okay if we if we did
29:04
that particular approach then you know Mary's benefit would start in uh 2026
29:10
and then we'd get um John's benefit and a spousal benefit starting in 2028. this
29:15
plan, you know, happens to have um John dying in uh in 2044 and so the spousal
29:22
benefit comes on. And so just a way to show clients, you know, all of the the
29:27
pieces of social security. Um also there's a break even graph which shows
29:35
uh the earliest claiming date versus the selected dates uh versus claiming at 70. We include
29:41
claiming at 70 because that's often a thing people will read about. Hey, you really should do that. Uh you can always
29:47
turn that off just like any any part of our our software that have these kinds of graphs. Um and you'll see when the
29:53
break even is uh as well. Um if you're using a time value of
30:00
money calculation, it would be included in these break
30:05
evens. All right. Um the other part of this which you know going back to I I
30:14
forget what what this plan's um longevity was but if we if and I don't
30:20
think the plan has that reduction in benefits in it but I can also ask a totally different
30:27
question how would different claiming dates affect my overall spending capacity or
30:34
retirement in uh retirement paycheck and so Now, instead of having to produce in this case 81 different plans and say,
30:41
"Hey, how how much effect do I see on on the overall retirement
30:47
paycheck?" [Music] Um, looks like this is
30:53
maybe this is There we go. Yeah, like I said, I'm in our development uh side, so
30:59
it's a little bit uh it's not working the exact way that we wanted it to. You can see here, for example, that, you
31:05
know, kind of in the in the lower right of this is where our our sweet spot is.
31:12
Um, so that's roughly in line with what we just saw where the highest levels are are kind of in the, you know, 68 and
31:20
um 60 68 to 62 to 68 range. Um, but you can see based on this where the the
31:27
sweet spots are. The other thing that can be really interesting is to notice that, you know, the lowest here is 9730.
31:35
The highest is $10,100. In other words, a less than $400 difference in uh retirement
31:43
paycheck depends on social security claiming. Um, you know, at least for me,
31:49
I I can imagine that being sort of permission to
31:55
uh to focus on lifetime benefit in social security because it's just not a huge difference in spending capacity.
32:01
And now for some people maybe it is and and so you know claiming will matter a little bit more to them. Um but that at
32:08
least I note here for this family is a pretty interesting outcome that um the
32:13
actual claiming is not meaning there are huge differences in the total possible
32:18
spending. And so you know it's possible to kind of optimize just for social security and still not kind of hurt
32:24
yourself too much. Uh because again there are trade-offs. Staking early means a lower benefit which means probably you'll have to spend a little
32:31
bit less today because you're you're de-risking in that way. Like I said, we're having a whole webinar on these
32:36
kinds of topics uh next week and we'll probably have another one on this tool when it comes out. Um more of, you know,
32:42
how-to and really diving in and using it with clients, but wanted to tease it for you because you will see it before uh
32:48
the next Retirement Income Intel. So, like I said, today a little
32:54
different than a lot of times in the past because we're spending a ton of time on new features. Um but that's, you
33:00
know, thankfully that's that's it for now. Um, so let's go to I wanted to
33:06
spend some time on your questions here. Let me make sure. Let's see if
33:12
there are any on that. Uh, okay. So, somebody asked, uh, are
33:18
you able to display the present value of lifetime benefits? Um, yes. So, that's we're we're calling it opportunity cost.
33:23
We wanted like a slightly less um uh like technical term. We could have
33:30
called it discount rate or or something like that, but that's that's simply what it is. Time value of money, right? Um so
33:35
that's that is exactly what it is. So I didn't show you that. But of course, if you add a higher time value of money,
33:41
things also shift down and to the left. That's exactly what you would expect, right? Because you're you're essentially saying, "Hey, I think there's more risk
33:48
to me ever receiving future benefits. Maybe because I might not be alive or maybe I think benefits could be cut."
33:55
Right? So you're sort of layering on additional risk or another way to view it is I view a dollar of social security
34:03
sooner a lot more than I view a dollar of social security later. So you'll be able to do that. Absolutely
34:09
right. Um all right. Uh we have a question.
34:14
Very cool tool. Thank you. Um how will this interact with tax lab? So, one thing I didn't show you and it won't be
34:20
there immediately is a way once you've played around with this, right? And you've changed plan length and you've ch
34:26
or not plan length, you've changed longevity assumptions, you've changed whether there's a benefit cut, you know, all these things. Now, what you're
34:33
looking at is potentially totally different from the plan that you that you started looking at. And so, we will have a way for you to apply those
34:40
settings to the plan. And um again you won't have this immediately but um ideally it will give you a way to say
34:47
okay I want to apply maybe it's just the claiming strategy because okay maybe you explored taking uh a situation where the
34:56
longevity is shorter but but you don't necessarily want to change the plan to assume that longevity will be shorter. you still want it to be long enough to
35:02
handle uh longevity risk, right? So, there's this trade-off or tugof-war between considering mortality risk,
35:09
right? I might die younger than I think and here's how that would affect my social security claiming, but at the
35:14
same time, I want my plan to cover me in case I live a decently long time. So, um we will have a way to apply it to the
35:21
plan. Um and that would interact with tax lab. um potentially in the future
35:26
there will be some things that would simply show you okay in these claiming situations what taxability bracket would
35:33
I be in in each year um because that's something that you can see in tax lab but it might be nice to pull it in and
35:39
just show it to you there instead of making you go to tax lab to look at it so that's um that's a thing we're
35:44
definitely um considering uh same thing with Roth convergence eventually things
35:49
get so complex that really you just end up having to go to tax lab but we'll try to pull in as much as we can while still
35:56
making sure that it's sort of digestible to clients that the goal of decision lab is that these be kind of bite-sized
36:05
conversations. The I think what's behind this question is yeah, but it's really complicated actually. Fair enough. Um
36:11
but it it like it'll allow you to to zoom in and then when you back out and you say but we also need to consider
36:17
your Roth conversion strategy and maybe that means we should wait a little bit longer. Right? Again, we'll talk next
36:24
week about this kind of balancing act that people have to do with social security. Um, it's just it's I find it
36:32
really interesting that the you know, take at 70 um that you'll often see in
36:39
sort of, you know, just the financial press. If if you know, my parents were to Google when should I text social security, they'll see a lot of most
36:45
people should wait till 70 type advice. And um we're certainly not the first
36:50
people to say this, but you know, it's not that simple. Okay. Um okay, question. Are the default life
36:58
expecties coming from Society of Actuaries or some other source? So th those are coming from Society of
37:03
Actuaries um retirement plan participant uh mortality
37:10
tables and that's what you'll see in here. I'll share again just to
37:23
Um, so what we're doing is we're we're look we're looking at that set of
37:29
mortality tables. And for those of you who are into actuarial stuff, we also are applying what are called improvement
37:34
scales, meaning as time goes on, there's an expectation of how mortality will
37:40
improve or or not. I mean, mostly it it assumes that people will uh live longer as time goes on. So, we're applying that
37:47
and when you are using the sliders, um, that's what you're getting access to. Um, the nice thing is we're using
37:56
retirement plan participant scales because those are people who have money in essentially 401ks and things and that
38:04
tends to be a slightly longer lived cohort than, for example, if we used um,
38:09
social security scales. Um Derek, I know you're on here and uh waiting patiently
38:15
as I go over a million new uh features, but um this I have a kind of a question
38:20
on this. Like when you're talking about plan length and mortality risk and longevity risk, like what what are your
38:25
best practices or ideas, I mean whether you're using income lab to do it or or not just in talking about that with
38:32
clients? Yeah, I think for me when I'm sitting down and talking through the first thing I kind of do is build the
38:37
rough draft of the plan and kind of see what the results are going to show and what I know about the client's spending
38:43
relative to all that because sometimes, especially those scenarios where we have those underspender type clients that we
38:50
just know they could spend way more than they want to. I'll often throw the longevity all the way, you know, to the
38:56
extreme. I'll move the income risk down. You know, just do all those types of
39:02
things just to really make the point of like you're so okay for retirement that we really don't have to worry about this
39:09
as kind of a first plan to illustrate to them. But then maybe move things around and say, but you're on a path of
39:15
accumulating a lot when you might want to be doing more with this now today. So that's kind of how I start with that.
39:20
But for clients that are, you know, more middle of the road type of plans
39:26
where it's not so cut and dry that they're going to be fine. Really just try to get things accurate. Um the
39:32
slider right there I think is a really good um it's actually one that I love that I can see the plan length kind of
39:37
dynamically adjusting as I move it around because often I will get clients that ask, "Oh, what's the, you know, the
39:44
plan length?" when you're using the actuarial assumptions that's it's not a straightforward is oh I build every plan to 95 or whatever somebody might use so
39:52
I I really like that view for when I'm having that conversation so that I can quickly answer a question or if a client
39:58
says oh that's way too long let's you know shorten that we can move it around and then I can tell them what that is
40:04
but th those are kind of the main things I'd say when you know when I'm having that conversation is just trying to
40:10
trying to get a good understanding what somebody's actual longevity is Um, I think most people, a lot of people I
40:17
encounter, I'd say probably underestimate just using things like, oh, the American life expectancy and not
40:22
attained age life expectancy, not accounting for their affluence, not accounting for some of those things that
40:27
make them a little different. So, just trying to have a conversation around that. Yeah. Yeah, that's a really good
40:32
point. I like the uh the best practice there. I know we've talked before also about there is this this big cohort
40:39
sounds like a lot of your clients are in it where they actually have plenty of resources compared to their um kind of
40:45
standard of living and so starting with I know Derek for example I know you also like to plan with flat instead of the
40:52
retirement smile because the retirement smile actually adds spending capacity it adds retirement paycheck because you're
40:59
shifting spending to an earlier age where you're more likely to be both alive and and and healthy.
41:04
But, you know, you can, you know, make it longer. Right now, we're at 40 and a half years versus I think it was 33
41:11
before. And you can uh change the the income setting to just be okay, let's
41:17
just go really conservative. And then if I save that, um it's going to bring my
41:22
retirement paycheck, my spending capacity down because now I'm funding a longer lifetime and I'm taking less
41:27
risk. Um, and you know, maybe they're maybe
41:33
now they're still they still have a surplus, but you've built a super conservative plan for them. And then
41:38
hopefully they can then say, "Wow, I mean, I um it looks like I I mean, I
41:44
could fund myself forever, basically." Um, all
41:51
right. Uh, Raquel is asking about premature death of both clients. Uh you
41:56
you may have come on a little bit uh late cuz I I mean perfect question. You couldn't have teed this up any better.
42:02
Um but you now can set the um the plan to if you go to longevity
42:10
settings, you can actually set both of them to have a specified date of death.
42:16
Um probably not this year, but you know
42:23
can now. So now essentially you're not using actuarial numbers um for to get
42:29
plan length at all. You're just specifying the plan length. So this plan is going to end in 2041 and it will have
42:36
John dying in 2031. Um behind the scenes if you're doing
42:42
this again we've done webinars on mortality risk. Um we're still applying
42:48
all of the actuarial calculations to handle mortality risk. Um, this is we
42:54
probably don't make a big enough deal about this, but um, we focus a lot on longevity risk in retirement planning,
43:00
and we should that it's not a that's not a bad thing, but we can forget sometimes about mortality risk, which is the risk
43:06
that you die sooner than you expected. Um, and it's that's clearest why that's
43:11
a risk in the case of a joint plan because typically cash flows will change if somebody dies. So, social security,
43:18
for example, is the obvious one. if someone dies, your social security is going to go down. Um there's a survivor
43:24
benefit thing and so on that that can help you a bit, but but it will go down. And so if you're planning for a very
43:30
long plan um and this is very common in other financial planning software, if you put
43:36
people at um you know, both of them dying at 95, well, what if somebody dies at 80? So you're you're vastly
43:43
overstating how much social security they'll receive by 15 years. Um, and so we're still applying all of those
43:50
calculations in the background. So, um, even if you've set the plan length using
43:55
this. So, again, no, we can't go over all of that today, but we've had webinars on this in the past. And also,
44:01
there was a an article I wrote on the Kitsus blog about mortality risk um that can kind of help you understand that.
44:07
So, this is all doable now um, Raquel. So,
44:14
enjoy. All right. Uh Jim was asking with the new um you
44:21
know I know there are I've not followed this super closely because uh to us until there are um until there are
44:28
specifics um you know it's it's not going to um it's not going to impact us. But um
44:35
if there are going to be tax law changes um how will we handle that? So, we'll do it as quickly as as soon as it becomes
44:43
known and, you know, firm kind of black letter law. So, we're not uh we don't
44:50
we're not planning on doing any kind of um anticipatory uh modeling of any new
44:55
tax law, but this is a it's it's funny, you know, years ago
45:04
um sunsetting of the Tax Cuts and Job Act was uh was far far in the future. Uh
45:09
and it's not anymore. So, by default um all plans have this box checked. So, I
45:15
went to advanced plan settings and then into the taxes section. Um, and apply
45:21
2026 suns setting is there by default, meaning the tax brackets shift for all
45:27
plans next year. you can turn that off and it will keep tax cuts and job act um
45:36
settings uh meaning the the rates and you know the salt um cap that's state
45:42
and local tax cap all of those things it'll keep them throughout the plan. So those are kind of your two options right
45:49
now. Um and you know we we'll certainly monitor the situation if if there are new uh new laws then we'll uh we'll get
45:56
it going as quickly as we can. Um typically um for the you know kind of
46:03
standard um changes you know we we get them going in in January for state taxes
46:10
they often actually don't release new information until February March. Uh but in this case you know since this is kind
46:15
of an off cycle thing we'll we'll have it going much sooner if if uh anything
46:22
happens. All
46:32
right. See here. All right. When I look at the cash
46:38
flow tab, I have different colors. So, I think you must be just talking about this beautiful uh set
46:45
here. Um Nat. So, this is unfortunately there is no way to change these colors.
46:50
So it it just is going through a set cycle of colors that are where there's enough contrast. And you know, if I had
46:57
20 things in here, I would probably see all colors, you know, twice. I forget how many colors there are, but there's
47:03
maybe 10 or or eight uh that it's cycling through. So no way to no way to change that. Um you would see different
47:09
colors, though depending on the number of uh cash flows that you have in this uh in this graph.
47:21
All
47:32
right. Okay. So, a couple good good questions here um that we'll take. Uh I know we're kind
47:40
of running in our last 10 minutes here. So, here's an example. a client currently 65 kind of asking about sort
47:48
of a phased uh spending plan in retirement.
47:53
Um so I don't know Derek when you run into those kinds of situations if if you
47:59
have where somebody's sort of like hey let's kind of blow it out for a few years and so on. Um what's what's your
48:05
approach there? I can go over how you know you can click things maybe as you're talking but um maybe talk about that in in more general terms. And you
48:12
mean just like stepping into retirement partial? Well, no. I think this is more like let me spend a lot to begin with.
48:19
Maybe they are still working a little bit or something too. Okay. I mean,
48:24
yeah, that that would be definitely one case where if somebody really wants to start out that way, I would go turn on
48:29
if I had turned off the um the smile, I definitely go turn that on. Make sure
48:35
it's kind of frontloading the spending there. And I think, you know, even if somebody has some additional goals, um
48:42
there are things that they want to spend on that would accelerate above that, that'd be a good case for building that
48:48
in to the plan. Um and then the aggressiveness of the the overall plan
48:53
setting. So moving that to a more aggressive guard guard rail strategy just so it would increase that uh put
49:01
more preference on spending today rather than that future preservation. Um, those would be the kind of big things I would
49:09
just set as defaults. But then, yeah, if they really wanted to go even, you know, spend a little bit more lavish than what
49:15
we're getting there, I think you'd probably have to build in a goal unless uh you have you have any ideas, Justin,
49:20
that I'm not No, I think that's that's exactly right. And I was I was kind of I forget how old these folks are and and
49:26
so on. So I was just messing with the plan length and stuff as you were talking, but yeah, just by adding the retirement smile, the age-based path, we
49:33
now start with, you know, 11,200 a month and then in today's dollars, they bottom
49:38
out um in, you know, 30 years from now um at
49:44
75.50. So that's a quite a quite a difference. Um, if I shift it to nominal, just to remind folks who aren't
49:50
maybe familiar with the retirement smile, um, that doesn't actually mean a reduction in this case in total
49:57
spending. Um, it just doesn't grow with inflation. Um, and so it's basically
50:03
flat for these folks for a lot of it. But then, yeah, as Derek said, like if this if this difference in spending is
50:08
still not enough, it's very easy to then just um add an expense, which you could
50:16
think of these variable expenses as goals. Um and so if I, you know, say
50:24
extra spending, um and you know, maybe it's $1,000 a
50:31
month, so it's $12,000 a year. I I can make it a lot bigger even. Um, and maybe
50:36
I want it to end in I don't know, I'll do it for the
50:44
first the first 10 or so years. Uh, and I should have copied this
50:50
plan so that you could see the difference. But what it's going to do is it'll it'll let you spend more now, but
50:55
the the spending, you know, long-term after this extra spending is done will
51:01
go down. Um, so if I add the variable expenses to this number, right, I said it was $2,000 a
51:07
month. So if I include all the spending in the plan, I'm at 12,200. I think it was maybe more like I
51:15
forget now, uh, what it was before. Uh, and now you'll see this, you know, extra chunk of spending
51:23
at the beginning of the plan and then it drops down when, uh, when I told it to.
51:29
Um, if I go to the expense details, you'll also see in this case, I only
51:34
have the the one item in a in a fully built out plan, I would often have, you
51:40
know, baseline spending and and maybe some other budget items in there and so on. But for this one, all we have is the
51:46
only one we've accounted for is this is this big chunk. But you can see now the plan is to spend a bunch more and then
51:53
you know when we hit 2036 um to have the have the withdrawals go
52:00
down you know quite a bit you know when they're in I guess in this case it's right here. So kind of their
52:08
mid mid70s is when we go from you know sort of the 160s to the one you know almost
52:15
140s. So yeah, I think those two things are definitely the the ways to go on that. Um add the retirement smile
52:22
because that's kind of a natural um way to view sort of a steady change in
52:28
spending. Um and that's based on research, longitudinal research on how people spend as they age. Uh but then I
52:35
I see this all the time, you know, adding in some extra spending. Maybe it's vacation spending or things like
52:40
that and that can give people permission to uh to to go for it, you know, to to
52:46
live a little. So definitely very easy to
52:54
do. All right. Um somebody did say that retirement st sure looks steep or
52:59
steeper than what I'm seeing. Yeah, the um the the steepness will depend on the
53:04
ages of the people and their overall um kind of
53:11
uh their their resource range. So if they have a lot of resources, it will be
53:16
steeper. Um and then the the changes will depend on um on how old they are at
53:22
different times. So in our uh in our knowledge base we have an article
53:27
showing the actual you know formula that is being applied uh for this uh for this
53:36
calculation. So it does take into account it's not the same curve for every family in other words. Um so you
53:42
will see differences in steepness including you know if if we had very low resources the retirement smile would be
53:48
very shallow. There wouldn't be much of a change. The idea there is that if you have more potential spending, more of it
53:56
is likely to be discretionary and therefore you'll have more of a change of it over time. If you're have a lot of
54:02
discretionary spending in your 60s, a lot of that'll be gone in your 80s. Um, and so it's a steeper it's a steeper
54:10
curve. All right, probably have time for one more. Um, there's a couple here
54:16
about shortfalls. Um so this might be a good time to to
54:21
kind of tackle that in general. So um one was based on that checkbox at the
54:27
beginning. What if there's a shortfall? And actually in my in my example, I had not built that plan out to be all that
54:32
uh all that um interesting of a plan, but it I'm sure we'd get a shortfall
54:38
here. Um so this is actually a place where remember this was the household that is um in pre-retirement. I guess
54:46
just one person uh in this case and I had them um funding all sorts of things
54:52
from their portfolio. But if I turn off funding from the
54:58
portfolio, then I'm going to see um a shortfall. Well, I mean, even here
55:05
I'm seeing a shortfall because I'm not um accounting for all of their sources
55:11
of income. Uh, so for example here, you know, I have this home purchase. I haven't said where that money is coming
55:16
from. I have taxes. I haven't said where that money is coming from. So this if you're going to use LifeHub in
55:22
particular, this is a really good example of why you would want to actually include pre-retirement income.
55:29
I know often in income lab, if you're using it for somebody and just thinking about retirement, you don't necessarily put in
55:36
their current income, but this is a really good example of why you would want to do that. you know, even even
55:42
here, uh, in the year where all we're doing is, you know, this variable expense and the mortgage payment and
55:48
taxes, I still don't have a full accounting for this person's life. Um,
55:53
so this is, you know, definitely at least putting wages in and things like that would be pretty important. Um, I
56:00
know Derek, you you do have some pre-retirement um, folks, right? So, do you have any best practices in terms of
56:06
using LifeHub and talking about shortfalls and things in that period? Um, yeah. I mean, I personally haven't
56:12
used it so much on the shortfall side of things. Probably an area I could use it a bit more, but um for me, LifeHub just
56:18
really is like, hey, let's get organized. Let's make sure we've got everything up to date. Um, you know,
56:23
here's your held away accounts that I don't actually see the balances of all the time. Can we, you know, check in on
56:28
those? Um, and really just a good way to kind of touch base. And I think, you know, clients appreciate seeing that visual of like, oh, here's our whole
56:35
situation in one place where they can kind of see that. And I' I've written its us, you know, on a kind of related
56:41
topic of how I think that kind of ties things together. Um, and al also kind of works as like a quick visual CRM. I've
56:48
used that term for myself in terms of looking at it, saying, "Okay, get a call from a client out of the blue or
56:54
something and need to get caught up on all their HSAs and other types of accounts." Like, that can be a good place to go and quickly see that. um and
57:01
get up to speed. So, that's that's kind of the way I primarily use LifeHub. And then I think clients like seeing me, you
57:07
know, step it through into the future, see their balances grow, see mortgage balance going down, see those types of
57:13
things is uh is another way um that I'll use that. Yeah, I think another thing I
57:20
mean, it sounds like you would do if you're doing it for a visual CRM or you know, a complete kind of view of someone's life, you would really want
57:26
the wages and things in here. Otherwise, it's just simply false. The other thing is that this is not only showing your
57:32
inputs, it's showing estimated taxes. And if I have, I don't know, $500,000 in earned income, these taxes are just
57:39
wrong. I mean, they're nowhere close to right. Um, so that's another reason uh
57:44
to to make sure that if you're doing pre-retirement stuff, it really is best practice to go ahead and get, you know,
57:50
all the all the things in there. Um I think the questions on shortfalls
57:57
um also then we'll probably wrap on this because we only have one minute. Um but we've we've talked about shortfalls um
58:05
in particular for plans. I don't think I have one built here, but if you have big Roth conversions or any kind of uh you
58:14
know just lumpy expenses um especially toward the beginning of
58:19
the plan, you will occasionally if you go and view the spending capacity in net
58:24
terms, you'll actually see a negative here. And obviously like that doesn't make any sense. Um, I mean, in theory, I
58:31
guess you could have uh negative spending capacity, but it's it's hard to know how you'd be living in that case.
58:36
Um, and so there's a couple things to do in that kind of situation. One is a make
58:41
sure you actually have all of the resources in there. Um, so if if I saw a uh a problem here and I hadn't put in,
58:49
you know, the the wages or some some big pension or something like that, that that could be the problem. But more
58:56
often it's a it's a sign that um that
59:01
the person needs a plan that it sort of takes one extra step of refinement which
59:08
is changing it from a how much can I spend plan to a plan that is targeting a
59:16
specific spending level. So here, you know, I again this plan was not particularly uh strongly built out. Um,
59:23
but let's say we had $5,000 in regular expenses. Um, and I had already done a
59:28
bunch of planning and I knew that was well within what this person could afford. I can then hit change this and
59:34
click over to how can I spend $5,000. And now this plan will will
59:40
target $5,000 in net spending plus any of those variable expense goals we had
59:47
plus the taxes. Um and so then you will no longer have a negative um uh net
59:53
spending in those situations because even if you have huge Roth conversions, it's going to gross up the withdrawals
59:59
to handle that. So that's uh the other question we had here about shortfalls and net income. Um I think that's that's
1:00:05
what you're after there. We've gone over um that in a bunch of um webinars as
1:00:10
well. sort of that that in fact even with the webinar we had with Jason Juel I think we had sort of a a flowchart of
1:00:16
how to how to do planning and that was one of the key um one of the key steps
1:00:24
um all right we're a little over time so uh thank you everyone thank you Derek
1:00:29
and we hope to see you next week at one or both of of our webinars and stay
1:00:35
tuned for more on uh the decision lab uh you'll see a lot more things about that coming out over the next month or so.
1:00:42
Um, and everybody have a great week. Thank you.