How to change a plan's analysis method

Income Lab offers three ways to analyze a plan:

1. Historical: Use historical sequences of returns and inflation to model sequence-of-returns and sequence-of-inflation risk.
2. Traditional Monte Carlo: Create simulated sequences of returns and inflation using one set of capital market assumptions.
3. Regime-Based Monte Carlo: Create simulated sequences of returns and inflation using two sets of capital market assumptions - one for the near term and one for the long term.

You can apply any of these analysis methods to any plan.

Setting Overall Defaults

The default analysis method that will be applied to any new household plan can be set in the 'Default Settings' section of your account settings. You can access these settings at the top of the application. 
 

To access the default analysis method, open the Analysis Method section:

You will see two menus here. The first, called 'Analysis Method', establishes the default method used in plan calculations. These calculations underly spending capacity, risk of underspending, risk of overspending, and guardrails. The 'Test Plan' setting determines which analysis method is used in the 'Test Plan' section of the application, but it will not affect the plan's values.

Please note that if you copy a plan or create a new plan scenario for a household that already has a 'Household Plan', the new plan will have the same analysis types as the parent plan. When copying a plan or creating a plan scenario, the overall defaults will not be applied.

Changing the Analysis Method of a Particular Plan

1. Click the three-dot menu and select Advanced Settings.

2. Click Plan Analysis and select your preferred option - remember to save your changes before returning to the plan.

You can see which analysis method a plan is using from the plan dashboard. Simply click on the Portfolio Balance card on the main dashboard and let your mouse hover over the small (?) icon below the asset allocation doughnut graph.

You will see a small help box open that displays this plan's analysis method.

Editing Capital Market Assumptions

You can edit capital market assumptions for Traditional and Regime-Based Monte Carlo in your account settings. 

1. Click Settings tab at the top of the dashboard.

2. Click Capital Mkt Assumptions. 

You will see three sets of CMAs: one for Traditional, and two for Regime-Based (Near Term and Long Term).

Please note that capital market assumptions should be entered net of inflation.

Any changes made and saved here will be applied to all plans that use this analysis method. However, you will have to 'rerun' the plan to refresh the values.