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 Essential Monthly Income, an Income Floor policy will only come into effect if the future is substantially worse than anticipated. If a household’s financial situation worsens to the point that it is no longer possible to provide at least the Essential Monthly Income level without taking on a risk level that is above this plan’s normal limit, a household is faced with two options:

1. Lower its monthly income below the specified essential level, or
2. Maintain its income at a level sufficient to support its essential monthly needs and assume additional risk.

If the household plans to follow the second option, check the box next to "Maintain at least..." and enter an inflation-adjusted portfolio level at which the plan will no longer keep income above the Essential Monthly level.

Under this option, Proposed Income will remain at the essential level, adjusted for inflation, until either:

1. Circumstances improve, risk goes down, and proposed income goes up, or
2. The combined household portfolio balance goes below the specified portfolio balance specified in the blank after "...unless total portfolio balance is below:".

In testing, plans with an Income Floor are often able to postpone or eliminate situations in which income goes below the essential monthly income level. However, it is essential to recognize that this option entails accepting higher risk levels.