What sorts of Incoming Cash Flows should I enter in a plan?
In order to produce the best plans, include any significant future income, whether it is a regular, recurring income stream or a one-time inflow. Typical examples of recurring cash flows include pensions, annuities, part-time or full-time wages or self-employment income, rental income, life insurance settlements, and reverse mortgages. One-time inco...
What are 'Reinvested Withdrawals' and 'Other Savings'?
Income Lab plans carefully track cash flows to and from investment accounts. Along with 'Planned Savings' (which reflect savings explicitly included in the plan inputs) and 'Roth Conversions', you may see two other categories of cashflows that go to the investment portfolio. Funds in both categories are returned to taxable accounts in the investment...
Income Shortfall with Excess RMDs
The situation may happen due to the difference between how the "spending capacity" is calculated and how the projections in Life Hub are produced. Spending capacity, and the overall plan, are based on household resources and other plan settings, and is based on the risk of the overall plan, including the chances that returns and inflation are higher...
Regret and Planning for Age-Based Spending
 Video: Regret and Planning for Age-Based Spending Video Transcript financial advisers know that many 0:06 retirees will reach a point we call the 0:09 regret Zone regret comes from not living 0:12 the life you can afford why does that 0:15 happen one reason is that people may 0:18 focus on success and failure in 0:21 retirement that's a truly terr...
What are Survivor Income Ratios?
Planning for couples includes understanding how income could change upon the death of one spouse. Survivor Income Ratios estimate this change for each spouse/partner. These statistics allow an advisor to have a discussion with clients about whether the income available to a surviving spouse would be sufficient to support their lifestyle. Â How are S...
How to Run a Plan Out of Money - Creating a $0 Balance
How to run a plan out of money and create a $0 balance at the end of a plan. Important note: The option to customize income and guardrail settings, to turn off the guardrails, is only avialble on a “what can I spend ” plan. Video: How to Run a Plan Out of Money Video Transcript welcome this video will give you a guide 0:05 on how to model an income ...
How to add stock options, RSUs, Defined Benefit Plans, etc.
If you'd like to include stock options (ISOs, NSOs), RSUs, or another type of stock compensation, or a defined benefit plan in an Income Lab plan, you have several options. The option you choose will depend on the asset, how it will be taxed, and how you'd like it to be reflected in your plan. Below you will find a description of each method and, at...
Why am I getting large income guardrail results?
You may see some situations where you are getting large guardrail results like in the example below. Â Â This can occur if you are using Monte Carlo analysis methods and have your income settings set to the bottom three most conservative settings. Â Â To change your guardrail results, simply update your income setting to a more moderate or aggressiv...
What are the default values for the Income Setting slider?
Advisors can fine-tune all income settings in any plan by going to a plan's Advanced Settings. However, advisors will often want a quick and easy way to set reasonable income settings. The Income Setting slider offers the following nine preset combinations of income levels and adjustment plans. These presets are available for convenience only and sh...
What is "Economic Context" and how does it affect retirement income plans?
The amount that most households can spend at any given point in retirement is influenced by economic and market factors such as inflation, interest rates, and equity valuations. Advisors can use economic context to inform their retirement income planning and management either as part of client communication, as part of plan analysis, or both. (For m...
Do Income Lab's Monte Carlo analysis methods assume a normal distribution/bell curve for returns and inflation?
The Monte Carlo analysis methods in the app produce monthly returns and inflation rates that are independent and identically lognormally distributed. In other words, we don’t inject any assumptions about non-normal skewness or kurtosis ("fat tails"). We certainly recognize that this may be overly simplistic and that there may be reasons to assume f...
Why does the income sourcing chart show both clients living through the whole plan?
For the income-sourcing chart, we don't model one of the household members dying at an arbitrary point. Instead, we show the cash flows that WOULD be there if both members lived through the whole plan. We use mortality-adjusted cash flows to do the heavy lifting for the plan analysis. Here's a link to a webinar on mortality adjustments you can view...
How to enter Health Savings Accounts (HSAs) and Qualified Charitable Distributions (QCDs)
Video: Qualified Charitable Distributions (QCDs) and Health Savings Accounts (HSA) Video Transcript hello income lab I wanted to walk you 0:04 through some new features 0:06 um so this is a very simple household 0:08 single individual age 65 today 0:12 um 0:13 and he has an IRA 0:16 and also a um 0:19 a health savings account 0:22 um 0:24 the health...
How will an Income Floor affect a plan?
In the Income Settings section of a plan's Advanced Settings, you will see a section titled Income Floor with the following inputs.   Check this box if you would like to explore a plan that includes a contingency plan for extremely unfavorable future outcomes. In a plan with an initial Proposed Income that is comfortably above a household’s Essent...
What economic indicators does Income Lab track?
Research has shown that paying attention to economic conditions can help financial advisors and clients better understand their current retirement environment and make more informed decisions about retirement income levels. Longer-term economic indicators are particularly powerful in retirement planning. The following is a list of the core economic ...
Will Income Lab suggest an adjustment due to a change in inflation?
Income Lab plans will indeed suggest changes that are due to accrued inflation alone, or the planned income path (smile, etc.) alone, or both together, even if the guardrails haven't been hit. Those changes would have to be greater than the plan's "minimum income change" setting to actually appear in a plan. For example, over the course of a year, i...
What is the deductible amount?
The “Deductible Amount” field that you will see for Income/Other Income items when the Tax Treatment is set to “Wages” or “Self-Employment” is the amount from the paycheck that won't be subject to income tax. These are pre-tax expenses and amounts deducted from a paycheck before income tax. The most common examples include pre-tax 401k contributions...
What should I put in the Plan Description field?
Plan Description is a field where you can take notes on how a plan differs from other plans you have created or are considering. For example, a plan may include an earlier/later retirement date, a lower/higher legacy goal, different income or longevity settings, etc. Or you might want to test out a hypothetical transaction, like selling a rental pro...
How can I improve the Spending Capacity / Retirement Paycheck
There are numerous changes in plan settings that can lead to increased Spending Capacity / Retirement Paycheck. Keep in mind that many (though not all) of these changes involve trade-offs between income and risk. Choose a less aggressive Longevity Setting: Shorter life expectancy estimates will result in higher current income. However, lowering life...
Why do I have to choose which household members to include in a plan?
Income Lab is built for ongoing financial management, not just one-time financial planning. Over time, the makeup of a household can change (due to death, divorce, or marriage, for example). The Clients Included in this Plan field in Plan Setup allows an advisor to create a new plan quickly should the make-up of a household change. Note that if ther...
Why does Income Lab need clients’ month and year of birth?
Income Lab uses month and year of birth to calculate current client ages, which are important inputs to the Income Lab actuarial engine. We don't take in the full date of birth (MM/DD/YYYY) because the actuarial engine works on monthly, not daily ages. Combined with a plan’s Longevity Settings, client ages help determine the length of the plan at an...
How do I enter a cash flow that has a cost-of-living adjustment (COLA)?
Income Lab allows you to enter cash flows with the following three inflation treatments: Adjusted for inflation: cash flows that are adjusted over time to account for inflation. These are sometimes called "real" cash flows. Not adjusted for inflation: cash flows that remain at the same dollar amount over time, with no adjustments. These are sometime...
How to Add a 401k Contribution with an Employer Match
This tutorial will show you how to use Income Lab to add a 401k contribution with and without an employer match. Â Video: How to Add a 401k Contribution with an Employer Match Video Transcript welcome this video will walk you through 0:02 how to add a 401k contribution with and 0:05 without an employer match in your income 0:07 lab plans from your m...
How does Income Lab calculate RMDs?
 RMD Age (Required Begin Date, RBD) Income Lab will automatically calculate required minimum distributions (RMDs) from retirement accounts like IRAs and 401(k)s. The start of RMDs (called “required beginning date” or “RBD”) depends on the client's birth year. The SECURE Act (2019) and SECURE Act 2.0 (2022) made changes to RMD age. Before these laws...
Mortality Risk in Joint Plans with Single Life Cash Flows
View the tutorial video below for a quick review on how Income Lab accounts for mortality risk in joint plans with single life cash flows. Â Video: Mortality Risk in Joint Plans with Single Life Cash Flows Video Transcript okay I wanted to share a quick um 0:04 kind of explainer about how 0:07 lab deals 0:09 deals joint 0:10 plans when there are cas...
Why would there be an addition to the taxable account if the client is retired?
You may see additions to a taxable account in any period during retirement when the plan includes "overflow" cash flows that are not being spent. Below are a few examples where you may see these additions in a plan. The required minimum distributions (RMDs) for a household exceed the amount needed to fund expenses. In this case, excess funds withdra...
Cost Basis
You can find the cost basis under the investment accounts section of your household assets. You may need to select an account type that offers cost basis.   ⚠️ Important Note When there is a distribution from a taxable account, it is counted as a proportional amount of cost basis and gains. For example, a $1,000 withdrawal from a $1 million accou...
Differences Between the New Dashboard and the Classic View
Toggle Settings The new dashboard allows users to toggle between the different values on the screen. You can show real or nominal values, monthly or annual values, gross or net (of tax and savings) values, and rounded or exact values.   The classic view will only show monthly and real values, without rounding. Net values for the spending capacit...
Early Spousal Death - Longevity Settings
Learn how to use the longevity settings to include a specified date of death for one of the clients in a joint plan. The plan will automatically adjust all cash flows and assets on the selected date, including shifting taxation to single from married filing jointly. This is a powerful tool for special situations where mortality expectations are low ...
How do account contributions work in the accumulation and distribution phases of a plan?
Accumulation and Distribution Phases Each Income Lab plan has an "income plan" or "distribution" phase. Some plans may also have an "accumulation" phase. For single (non-joint) plans, the income plan begins on the client's retirement date or, if the client is marked as already retired, the income plan starts in January of the current year. For joint...
How RMDs and account level distribution plans interact
 Video: How RMDs and account level distribution plans interact Video Transcript hello this video explains how our new 0:04 feature that allows you to specify 0:07 account distributions from an individual 0:09 account um interacts with required 0:11 minimum distributions so here's a plan 0:14 for somebody who's already 75 so into 0:16 required minim...
How to add trust accounts
If you would like to add a trust account to a plan, the most important thing to know is whether the trust is revocable or irrevocable. This is not always clear from the name of the trust. However, most trusts created for everyday estate planning purposes are revocable. From a tax perspective, revocable trusts are taxed as if the trust assets were ow...
How to change a plan's analysis method
Income Lab offers three ways to analyze a plan: Historical: Use historical sequences of returns and inflation to model sequence-of-returns and sequence-of-inflation risk. Traditional Monte Carlo: Create simulated sequences of returns and inflation using one set of capital market assumptions. Regime-Based Monte Carlo: Create simulated sequences of re...
How to change a plan's portfolio distribution method
Distributions from investment accounts in Income Lab plans can be controlled in three ways: Via the plan's "Portfolio Withdrawal Order" Via an individual account's distribution settings Via expense-matching for specialized accounts like HSAs and 529s Set a Plan's Portfolio Withdrawal Order To change the plan's portfolio withdrawal order, click on th...
How to enter 72(t) SEPP distributions
If a client is taking substantially equal periodic payments (SEPP) from a tax-deferred account in order to avoid premature withdrawal penalties under section 72(t), here is a three-step process to ensure these cash flows are included in the plan correctly. (Our product team is working on some features that will make this process easier, but this is ...
How to enter an IRA rollover in a plan.
While the rollover of, for example, a 401(k) to an IRA, doesn't typically have any tax implications, since both accounts provide tax deferral and have RMDs, showing this movement of money can be helpful, especially so that clients can understand a plan using Life Hub. This article outlines the steps involved in implementing such a rollover. Create t...
How to Include an Income Ceiling in a plan?
Include an income ceiling in a plan to model how clients might behave when things are going very well and they choose not to take every pay raise that they could. Â Video: Income Ceiling Tutorial Video Transcript here's a very simple 0:01 plan just portfolio withdrawals no smile 0:07 if I go to retire me when 0:10 if I start this plan in April 1982 ...
How to model joint and survivor pensions and annuities
If you're entering a pension or annuity (like a SPIA or DIA) with joint and survivorship benefits, include that income stream in the Other Income section. Then, do the following: Make sure it is marked as jointly owned. Set it to end at the second spouse's death. Answer yes to the question about the income stream changing if one spouse passes away. ...
Income Shortfall While Showing Savings
Why would a plan show a shortfall and savings in the same year? The reason is that the shortfall comes from a comparison of the planned income with the plan's expenses. If you are not doing a "How can I spend $X?" plan, these don't have to be the same. The savings come from either (a) savings items in the inputs ("planned savings") or (b) extra inco...
Inflation Risk in Plans with Nominal Pensions
 Video: Inflation Risk in Plans with Nominal Pensions Video Transcript somebody's portfolio balance is 0:09 relatively low compared to their 0:10 non-portfolio income so usually pensions 0:15 um especially if those pensions are 0:18 either not adjusted for inflation 0:20 or not joint life 0:23 um or or both actually so here's a 0:26 situation where...
Inherited IRA and Retirement Account Distributions
Income Lab allows you to establish custom distribution plans from each inherited retirement account. Simply create a new account and choose one of the following Account Types: Inherited Retirement Acct (use for IRAs, 401(k)s, etc.) Inherited Roth Acct (use for all inherited Roth accounts, including IRAs and 401(k)s) Inherited Non-Qual Annuity To set...
Modeling Negative Growth Rates in Assets
Need to model a reverse mortgage or assets with depreciation, like vehicles? This quick video shows how to model negative growth rates in assets with Income Lab. Â Video: Modeling Negative Growth Rates in Assets Video Transcript Just a quick note that you can now set 0:03 negative annual growth rates for things 0:06 that are other assets. Um, so you...
Negative Spending Capacity
For some plans, you may see the following alert: “This plan's Portfolio Legacy Goal or Other/Variable Expenses exceed available resources. To achieve these goals, this plan would require additions to the investment portfolio (shown here as negative income) rather than withdrawals.” This alert is typically displayed when a plan's Portfolio Legacy Goa...
Planned Spending is in the Overspending Zone
For some plans, you may see the following alert: “This plan's targeted spending level is in the 'overspending zone'. Its estimated risk of overspending is greater than 50%.” The two major risks in any retirement spending plan are the risk of overspending (by spending too much and overtaxing portfolio and other resources) and the risk of underspendin...
Set Income Path as a Default Setting
In this tutorial, you'll learn how to find and modify the Income Path within the Default Settings. The Income Path can be configured as: Age-Based Flat Custom You'll also discover how to set an income change by percentage for greater flexibility. Video: Set Income Path as a Default Setting Video Transcript Welcome. This video will walk you 0:02 thro...
Set Longevity Settings for One or Both Clients
Learn how to set longevity settings for one or both clients in a plan. This feature allows you to test different scenarios based on life expectancy within your advanced settings. Video: Set Longevity Settings for One or Both Clients Video Transcript Hello everyone. I wanted to go over a 0:03 new feature that we have. Um here I have 0:05 just a regul...
Spending Capacity Affected by Uneven Plan Resources
For some plans, you may see an alert noting that: "The calculation of spending capacity involves smoothing out expected household resources. Because significant resources are delayed in this plan, this spending capacity may not be achievable in the near-term in certain scenarios." This alert is typically displayed when a large amount of non-portfoli...
How to enter non-qualified deferred compensation
Deferred compensation plans are best entered as investment accounts with Account Type set to Non-Qual Deferred Comp. Here, you can enter the account's target asset allocation, balance, and the distribution plan for these funds. To enter the distribution plan, click on Distribution Settings , then under Account Type, select Non-Qual Deferred Comp . ...
Cash Flows: Gross Total Income vs Income Sources Total
For tax purposes, Gross Total Income includes all income from cash flows that can be used for spending and any passive income that is not necessarily available as a cash flow but is still potentially taxable. This second category includes undistributed dividends, interest, and capital gains from turnover (but not from withdrawals) in taxable investm...
View Mode vs Edit Mode
There are several reasons why your plan may be in view-only mode, preventing you from making edits. You may have the software open in another tab or window, or your client may have the plan open through the client portal at the same time you are trying to make edits. If this is the case, you will see the notice below pop up on your screen. You can e...
Handling Survivorship on Income Sources
Many income sources change in amount or availability upon the death of one spouse. Many pensions and annuities adjust down or go away entirely upon one spouse’s death. If you are planning for a joint household with income sources such as these, be sure to fill in these fields carefully to accurately factor in any changes due to survivorship. Here ar...
What is an Income Path?
An Income Path reflects anticipated changes in real (inflation-adjusted) income needs as household members age and advance through retirement. Income Lab allows you to plan for the following types of future income paths: Age-Based Planned household income is different at different points in the plan based on client ages and the household's income le...
Monthly Essential Expenses
Monthly essential expenses are the level of monthly income necessary to cover all basic needs in a household's budget. You can think of this as the income required to cover non-discretionary spending or as the level of income required for this household to avoid making major reductions in core basic living expenses, such as housing, transportation, ...
Income Settings and Guardrail Settings
Income Lab plans are built around balancing the two sides of retirement income risk: Risk of Overspending Risk of Underspending These risks are complementary: minimizing one maximizes the other. A 0% risk of overspending is a 100% risk of underspending. While the first of these is well-known and important, the second can often be hidden. But undersp...
Minimum Income Change
Most people prefer to keep their income steady unless a change would be large enough to make a difference. Usually, income changes of a few dollars or a few cents just aren’t worth the administrative effort. The Minimum Income Change setting specifies how big an income change must be, as a percentage of current nominal income (i.e., actual future do...
Why are portfolio withdrawals lower than expected in a plan with a non-portfolio income source that is not adjusted for inflation?
The "spending capacity" calculated for Income Lab plans accounts for everything unique to that plan, including the characteristics of a household's non-portfolio income sources. The total spending capacity and total portfolio withdrawals in the plan will depend on these characteristics. So, we'd expect different levels of portfolio withdrawals depen...
Why do I see an income surplus in a preretirement plan?
Why do I see an income surplus in a preretirement plan that is "solving for" a net-of-tax income goal? Answer Typically, if you are running a "How can I spend $X, net of tax?" plan in Income Lab, gross income and total expenses (including taxes) will match in every year. However, if an income plan starts mid-year, this won't always be true. An incom...
Why doesn't my plan have portfolio withdrawals?
Sometimes, a plan unexpectedly shows no or very little in portfolio withdrawals in the "Income Sourcing" graph and table, and in Life Hub. If you see this, it may seem that something is wrong. But there are a few reasons this could be happening.  Targeting a low net-of-tax income level First, you may be targeting a net-of-tax income level that is w...
How can I compare 'How much can I spend?' to 'How can I spend $X net of tax?' plans?
Two 'Primary Plan Questions' and How They Differ There are two different 'Primary Questions' you can ask when creating an Income Lab plan: How much can I spend? How can I spend $X, net of tax? For the first question, the software looks at all of the resources available to the household for funding income, pairs those resources with goals like plan l...
How do I address Gross-of-Tax and Net-of-Tax Retirement Income?
The dance between gross- and net-of-tax income is, without a doubt, one of the most complex (and, frankly, frustrating) parts of retirement planning. This is true no matter what software you use for planning (or even if you use no software at all). In some ways, Income Lab makes this dance much clearer than you’d see it in other software because Inc...
Tech Previews
Income Lab loves innovation, and we work hard to get new, envelope-pushing features into the hands of our users. Sometimes, the best way to do this is to launch an early version of a feature so that real advisors can test it. With their feedback, we can learn whether the feature is working and quickly make tweaks to improve it. We call this a Tech P...
How can changing the date when the income plan begins change the retirement paycheck (spending capacity)?
In Income Lab, you will see two related by independent concepts: Retirement Date: When will a person stop working? Beginning of the Income Plan: When should the income plan itself begin planning for how much to take from or add to the retirement investment portfolio? What is a Retirement Date? Each person in a plan has their own retirement date. Thi...
How do I enter a Donor Advised Fund (DAF)?
A Donor-Advised Fund (DAF) is a charitable giving vehicle that allows individuals, families, or organizations to donate assets to a public charity and recommend how those funds should be distributed to other nonprofit organizations over time. You open a DAF account with a sponsoring organization — typically a public charity, community foundation, or...
How do I model distributions from Inherited IRAs and retirement accounts?
The rules surrounding how someone can or must distribute funds from an inherited IRA or retirement account are complex. This article summarizes the rules for distributions and shows how to include inherited account distributions in an Income Lab plan. For more on these rules, see Kitces.com. Types of Beneficiaries Designated Beneficiary Any individu...
Why does adding opportunity cost change lifetime Social Security benefits so much?
Adding an Opportunity Cost (or, “discount rate”) to lifetime Social Security benefit calculations can have a large effect on the calculation, even if the opportunity cost is fairly low. The reason is that, over a long period of time (such as a 20-30+ year retirement), the opportunity cost compounds. For example, $1 received 35 years from now at a 0%...
Are people really willing to adjust spending?
Retirement income plans with guardrails imply that when things change enough, for better or worse, people will adjust their behavior. The lower guardrail - the guardrail that says “we're running too hot now and it's time to trim back spending or make some other change to cool things down” - can be particularly important because changes in spending i...
How do Investment Fees Work in a Plan?
Setting Investment Fees There are two places you can enter investment or advisory fees in the software: Default Fees Plan-Level Fees To set fee defaults, go to the “Settings” section, found in the horizontal bar at the top of the screen (next to “Reports”). Then choose "Default Values" and open the “Fees & Expenses” accordion section.   Fee le...
How to Model Dividend Income in a Plan
Video: How to Model Dividend Income in a Plan Your browser does not support HTML5 video. Video Transcript 0:00 Welcome, this video will walk you through how to add in dividend income and model dividend income- growth inside your income lab plans.0:08 To begin, first select your household. If this isn't existing- household. Click the pencil icon to g...
Understanding In-Service Withdrawals in Retirement Plans
Understanding In-Service Withdrawals in Retirement Plans Video Transcript Understanding In-Service Withdrawals in Retirement Plans | Income Lab Tutorial - YouTube Transcripts:(00:02) Hello everyone and welcome to a quick tutorial on accounts that allow inservice withdrawals. Some retirement plans may allow participants to access their funds even whi...
How does Income Lab incorporate inflation into tax calculations
Each year, certain tax amounts and thresholds are adjusted for inflation. Since future inflation adjustments are not known ahead of time, it is important to project these values in a plan using the plan's assumed inflation rate(s) to properly project tax calculations in the future. For tax values that do not adjust for inflation over time (i.e., va...
How to Copy a Plan in Income Lab
When working with Income Lab, creating a new plan for a client doesn't mean starting from scratch every single time. The platform offers a simple and efficient "Copy" feature that enables you to quickly duplicate existing plans and customize them for new clients. To copy a plan, follow these straightforward steps: Navigate to the Income Lab screen c...
How can I annotate in-app during a meeting?
Sometimes, when presenting an Income Lab plan to a client, advisors want to be able to “mark up” the screen with highlighting, underlines, shapes, and even writing. Luckily, in today's world, this is easily accomplished. While the Income Lab software itself doesn't offer this functionality, there are many good options that work well with Income Lab ...
How are the statistics on the Insights dashboard calculated?
The Insights dashboard shows a variety of statistics and measures for each year of the plan. Below, you'll see how these measures are calculated. Stats Section All statistics shown in the Stats section of the Insights dashboard reflect total annual numbers. Beginning-of-year values are used for balances, and the sum of all cash flows is used for inc...