well I'll do I'll do one of my famous Icebreaker questions so it's not just dead silence but uh you know for for

0:33

Justin and Bonnie uh what's the coldest you've ever been you know where have you been like freezing cold as soon as I say

0:39

that usually a memory pops up but Bonnie or Justin as soon as you said that a memory popped

0:45

up but uh Justin I don't know if you want to go first I I'm I'm still trying to think of like the actual coldest I've

0:52

ever been you so you might need to go give me a second um for me I did a run fairly recently

0:59

where uh it was 31 degrees uh and so that's actually not that's kind of nice

1:06

for running conditions but the standing outside for like the hour and a half plus before the run I remember the first

1:13

three miles of the run I literally could not feel my feet so I kept looking down to think like are my feet still there

1:19

yeah they're still there oh yep they're still there um so again it was nice once I got going after about mile three but the first

1:26

three miles I literally felt like I had no feet foreign yeah

1:34

I do remember Johnny was telling this story the other day a few years ago it might have been 2020 a friend of mine

1:41

hosts an event uh riding up Mount Evans which is a 14er in Colorado

1:47

and it was beautiful day it was Fourth of July it's a beautiful day until we got to the top and turned around and there was a

1:55

huge black cloud that dumped inches of hail on us there was lightning below us

2:03

yeah descending in that just hoping your hands actually know how to break uh and I think I was shaking and cramping for a

2:10

couple hours after that and it was pretty bad we definitely had hypothermia I mean we came around a corner and that

2:17

was this what's hail in the road and now tires was about this sick there was no really right there's no

2:24

guard rails to talk income laptop right

2:29

so I think I just learned something new that was a good Icebreaker are you guys both uh Road Riders

2:37

I'll write anything Bonnie good to meet you by the way all right the big thing I'm into right

2:44

now is gravel really like that I I do less than I used to I do a lot

2:50

more mountain biking now uh I got hit by a car a couple years ago and that uh that definitely put me off it a bit but

2:56

you know so it looks like we still got a few people kind of

3:03

wild fish my sources it feels like I'm in therapy here so

3:09

what is the cold we had a couple minutes to let people come in so I did one of my I like

3:15

different icebreakers the oldest you've ever been is always a fun one because you know we learned about biking we

3:21

learned about Bonnie running mine when I was actually traveling to Chicago and I had to I had the first time I've ever

3:27

been to Chicago I didn't have a winter coat I didn't have gloves I had to carry these boxes of books for the American

3:32

college so we would travel and the American college does not make a lot of money it's a non-profit so you would

3:38

carry the binders with you on the plane sometime and so I would have like this 50 you know 50 binders in a box and was

3:45

carrying it through Chicago after I got off the train and I have to kept going in different stores because my hands

3:52

were getting so old and like hurting and so I'd like Stand Inside something and

3:57

then go three more blocks and stand inside and that's the you know coldest

4:02

I've ever been and uh was on that trip to Chicago would have to be in my military time in

4:10

Denmark I just remember something really not knowing if my feeds were still attacks like just in the winter sleeping

4:15

outside for weeks and like I can't feel my feet I don't know if I can walk like that sort of thing

4:22

but uh the hail thing was quite the experience all right

4:28

we'll get going thank you everybody for joining us um Jamie I'm definitely going to take

4:34

the Icebreaker idea for the Future For That Awkward period where everyone's coming in yeah

4:41

so uh yeah thanks everybody for joining us and definitely want a big thank you to uh our panelists for today

4:48

um Jamie Hopkins from uh Carson group Bonnie tricel from

4:54

um or did I pronounce your last name wrong there probably did retirement did I get it right awesome

5:00

and Johnny Paulson from um income lab um unlike

5:05

some other product launch webinars we've done in the past we decided to do this one a little bit differently so

5:11

um thus the panel so I will set it up with kind of a quick uh review kind of

5:19

thirty thousand foot view of what we're what we're up to here and then I'll do a quick and a demo of the new

5:25

um of the new feature the retirement stress test and then we'll have a discussion um especially focused on kind of client

5:32

experience advisor experience um uh psychology around uh retirement

5:39

planning and to try to weave in some of the some of the themes uh that relate to

5:44

the uh to the new retirement stress test and really talk about stress testing in kind of practical

5:50

terms what it means to people um in in their lives so

5:55

I'm going to start by um sharing my screen and I before getting

6:03

into the stress test itself I actually want to back up for those who who maybe aren't as familiar with with income lab

6:08

or with adjustment based planning or retirement income management in general and just kind of set the

6:15

stage so um income lab is is retirement income

6:21

management software and you know those words are carefully chosen it's for

6:27

people kind of at and in retirement for advisors to provide them with guidance

6:33

so I think probably one of the the best um analogies that I've heard for this is

6:40

you know imagine you're driving down the road and uh your GPS instead of giving

6:45

you turn-by-turn directions just says uh you have a 70 chance of reaching your

6:51

destination in time well that might be true but it's not very helpful it's uh what you need at

6:57

that point is directions um and so income lab is all about helping advisors give directions what

7:03

can I spend um what would cause me to change that and what would the size of those changes

7:08

be so that's what you see here this is kind of this main dashboard for a plan

7:14

this you know the plan already knows all about the the households Financial Resources whether those are investments

7:21

Social Security pensions anything that can fund their lifestyle and it's answering the question what can I spend

7:27

per month um and then you know they have about two and a quarter million dollars in a

7:33

portfolio and it's saying you know we're not gonna drive this thing off a cliff Wiley Coyote Style

7:39

we're going to adjust if things get better than expected we'll be able to spend more if things get you know worse

7:45

than expected we will we will have to spend less um answering that question of what can I

7:52

spend given my resources you know there's not really one answer to that it there's a range of answers

7:59

that could work for people and it really depends on their preferences so this is showing you okay given these folks

8:06

um resources kind of a range and you can see down here basically bookends reasonable bookends on how much they can

8:13

spend so way down here on the very the more conservative Side Lower spending lower chance of adjustment thirteen six

8:21

a month up here on the higher end 15 to a month so you know pretty pretty

8:27

good range especially if you if you annualize that and you can see I can spend more

8:33

but it takes less of a loss in my portfolio to have an adjustment so I've got to be more willing to take

8:39

adjustments if I'm spending more if I'm spending less I have a bigger a bigger buffer here right and that's

8:46

that trade-off is something that clients tend to really understand right they

8:51

they get it um that yeah I can spend more as long as you know I'm willing to tighten my belt if I have to

8:59

um so the the stress test that we're launching

9:04

is really meant to address the next the next level of this and I would say

9:11

it it kind of rhymes with the the effect that even just seeing these basic guardrails

9:18

have so when you show a client that they're not going to fail in retirement

9:24

um generally we see the stress level come way down um when you say Hey you know people

9:30

people don't fail in retirement they adjust that's a big deal but showing them actual dollar amounts for what

9:35

those adjustments would be is maybe an even bigger deal because if you just say hey we're going to adjust

9:40

like kind of let people's imagination go wild and they might imagine it's a you know 40 or 50 adjustment if the global

9:47

financial crisis happens again so people will often say all right this looks good like I can live with this plan but

9:55

what does a longer term experience look like and when they ask that they don't mean if things go really well I mean

10:02

that you know if things go well well things are going to be good what they mean is what if we get hit with some bad

10:07

times right so that's what this stress test is about

10:13

um so the new retirement stress test

10:19

is a way to hit your plan with a bunch of actual historical

10:26

experiences um hopefully memorable ones in certain cases and see how that adjustment plan

10:34

how that retirement GPS would have guided you through these periods

10:40

um to see you know is this the kind of plan you can handle as a client or even

10:46

as an advisor or you know does it need to be more conservative or if maybe it's too

10:52

conservative maybe there's not enough kind of uh flexibility uh built into the

10:57

plan because because they're being so um so conservative so along the top here

11:02

you'll see five historical periods you have the global financial crisis the.com

11:07

bubble the stagflation era the post-war decade and the Great Depression and what

11:13

we do is we'll launch the plan um either before during or after each of

11:18

these kind of big events and see how it would have just adjusted over time see

11:25

um now the guard rails and things would have worked out so an example is this is

11:33

a very simple plan this is uh we don't even have the retirement smile built in here

11:38

um just two Social Securities and portfolio withdrawals but you can see as time goes on from

11:45

2008 to 2009 February of 2009 this plan it's a pay cut

11:52

they were hoping to be able to spend 12 700 but starting in February of 09 they

11:58

had to pull back in this case by 400 a month that belt tightening

12:05

lasted until December of 2014. when they got to pop up in fact in this

12:11

case their their pay raise took them above their planned level and they've never looked back

12:16

um if you're interested in why this was going on well down here you can see the

12:21

portfolio balance moving toward that lower guard rail so keep in mind those

12:26

this green and red uh uh lines we saw earlier and then we're

12:33

in the no change range in the in the clear here until December 14 right so you can kind of see if you were a client

12:40

living through this period and you were checking your your plan you're getting an update from your advisor

12:47

um you would have been seeing in this case your your portfolio balance approaching the lower guardrail

12:52

then it would have stuck toward the top and then 2022 came along and it is now

12:58

bouncing around really close to getting a pay cut right not not there yet but we're we are darn close

13:05

okay so a couple things that you can uh use this for as an advisor one is

13:10

what I just said which is um providing Clarity and specifics on

13:16

how adjustment based planning really works so not allowing people to just imagine you know the worst possible

13:23

things in the world really saying okay how does this methodology of of giving

13:29

you adjustment advice really work in in real situations um and allowing people to say you know

13:35

can I live with that another is you can really subject it to different stresses so we all remember the global financial

13:41

crisis and certainly um returns were not good but there

13:46

wasn't a lot of inflation actually I think inflation maybe had five percent um but

13:51

it it was actually deflation that in some months thereafter but you could say well let's look at let's look at

13:57

stagflation now we have a lot of inflation from 1968 through 19 you know

14:03

through the 80s certainly um and you can see okay this plant actually suffered more from inflation

14:10

that it did from the global financial crisis so here these folks were

14:15

um you know having to having to pull back uh a lot more substantially for a shorter amount of time but but more

14:21

substantially in their spending um you might be interested in you know kind of a deep economic contraction uh I

14:29

mean far more than we saw in the global financial crisis and and to see how a plan would have reacted to that often

14:35

people are actually a little surprised by the Great Depression um I think the reason is that uh kind of

14:42

balanced portfolios and things did better than you might think mostly because there was a lot of deflation so

14:48

uh your your purchasing power actually held up okay even though you saw you

14:53

know portfolio balance is really suffering another way that you can use this as an

15:00

advisor other than painting this picture for clients and I don't want to minimize the value of that that's a that is

15:06

probably the number one value but it's you can use it to evaluate plans yourself and say you know is this the

15:13

kind of plan I think that that these clients really could live with is it are

15:19

these the types of adjustments they can handle um so for example

15:24

um if uh let's go to stagflation again all right so this is a this is a pretty

15:31

decent you know amount of belt tightening for for uh several years

15:37

I might have clients who really don't want bad news and and

15:43

they're they're willing to spend less now in order to kind of protect themselves more from from downturns so

15:49

they're basically they'll tighten their belt today in order not to have bad news and so I just pulled back remember those

15:55

bookends I just pulled that slider over to the more conservative side and now I

16:01

don't have any pickups during the during stagflation now there's a there's a cost to that I have to spend less but maybe

16:07

they uh live fairly Frugal lives another thing you can do is is test

16:13

um how different allocations um work during different periods so for example in the global financial crisis

16:19

if I add a lot more Equity I go to a 90 Equity portfolio now I now I actually

16:24

have a pay cut back in November and then a couple more

16:30

and now I'm down quite a bit less when before it was you know four hundred dollars

16:35

um now I'm you know this is these are these are quite um meaningful meaningful cuts

16:41

on the other hand go to the other side a very low Equity allocation

16:47

and again maybe not surprising but wouldn't have needed a pay cut at all during the financial crisis

16:54

um would have also been been right you can see what the experience

16:59

would have been here much much smoother much smoother ride they would have also

17:04

had to spend less though because an all Bond portfolio supports a lot less a lot less income in general

17:10

so those are a couple different ways to use this primarily for really helping people

17:16

understand long-term experiences realistic experiences when you kind of have the GPS turned on

17:23

um and then to to uh to kind of test different plan options and maybe even

17:28

run those by the client um you know something like um you know which would you prefer to

17:34

spend more but have to take this kind of pay cut or you know be more conservative and and

17:41

reduce the chances that you get a that you get a call from from me uh your advisor uh telling you uh that it's time

17:48

to kind of trying to find a place to to trim back

17:54

um so with that and we can definitely refer to back to uh the stress test

18:00

again I think um I'll kind of set up our panel I think

18:05

it's important to note that this is not the first retirement stress test it's

18:10

certainly not the first uh you know stress test of any sort in the world we've given you know bank failures and

18:16

things I think we hear about stress tests a lot um you certainly have seen portfolio

18:21

stress tests that I think are really um helpful in the market um but you've even seen retirement

18:28

stress tests before what's different here is we're not just kind of hitting a

18:35

portfolio with a downturn and then saying how did my probability of success

18:40

change um the answer to that question is always well it gets worse right I mean that's

18:47

of course that's just what it does but I think if we think about

18:52

client experiences when they see that kind of a stress test that just says you know hey if the global financial crisis

18:59

happened your 90 probability of success would go to 55. um if we think about the effect that has

19:05

on people it can't help but raise anxiety right that just seems to be the the main goal of a stress test like that

19:12

but um I would say I'm not sure that should be our goal as uh as as um advisors as

19:20

Financial professionals um certainly clients probably don't have that goal so that what we've tried to do

19:25

here is provide something that actually can um you know tell the tell the truth

19:31

about how these experiences work in a way that can raise client confidence

19:37

um so it's sort of a little bit of a different approach to um to retirement stress testing

19:44

um and I think from from that I'd like to to start uh asking our panel

19:52

um about plant stress client anxiety or really

19:58

just retiree um Stress and Anxiety and ask kind of What In your experience what things in

20:07

the retirement planning process tend to lead to Stress and Anxiety you know what

20:13

what role do emotions play in people's ability to make you know financial

20:19

decisions like whether to retire how much to spend and and so on

20:24

um Bonnie maybe we'll start with you I know you work in the in the retirement plan

20:30

world so I think your your um point of view on this is really interesting I'm sure you've uh you've there are

20:35

thousands and thousands of uh of plan participants who have been through this kind of um you know emotional uh

20:43

situation so um what would you say in your experience leads to Stress and Anxiety

20:49

yeah well Justin thanks so much for having me on and really love to see what you're doing here I think as you

20:55

mentioned I might approach this a little bit differently than the other panelists on the call because I approach it from

21:01

the perspective of the plan side so I work mostly with plan sponsors or

21:06

employers uh with retirement plan advisors and then with the participant side of things but I think to your

21:12

question of kind of what causes stress or anxiety um it's interesting to me that it's it's

21:17

all about the uncertainty and it's in kind of two respects right it's looking at how we have

21:23

participants who they don't retire or they don't leave work because they don't

21:29

realize that they can so just by not having the tools and resources to realize hey I actually can retire

21:35

um that has the negative impact on their employer of having to you know incur additional costs from folks who don't

21:41

retire when they should and then likewise we end up with some some folks who actually do go ahead and retire

21:46

because maybe they have to for health reasons or otherwise but again and they retire and then they have that fear of

21:52

outliving their savings or they end up outliving their savings because of the longevity issues and I think it's pretty

21:58

interesting I'll just maybe throw out the to see a Retirement Research Center recently um published some research

22:04

about the fact that participants have a preference for safety and steady income

22:09

over having a high return and so I think sometimes we see at least in the plan

22:15

side just by not having the tools or or resources or being able to work with an

22:20

advisor outside of the plan because we know many participants will never have that opportunity by not knowing we have

22:26

people who make sometimes poor choices because they just don't have that plan in place and so in in lieu of that

22:33

they're willing to go for the safe router the the steady income route or what they perceive as safe and give up

22:39

higher return just because they they don't know and so I think that's what leads to that fear and anxiety is just

22:45

not knowing so I'm sure others will approach that question a little bit differently but that's how the the plan

22:51

side translates that question that's that's really interesting yeah I

22:57

think I've thought about this before this sort of trade-off hey I could spend less now and have less variability in my income

23:05

and and from you know someone like me I sort of say well why not live a little you know deal with it if you have to but

23:10

that's that really is just a choice it's just a preference some people might just prefer to have less variability even if

23:16

that means living on less I don't know Jamie what are your thoughts yeah it's uh you know the whole question

23:22

about like what do people want and what do they say versus how they behave is such an interesting Dynamic too so I'm

23:29

out at the FPA Retreat and I was talking about some of these pieces earlier today uh on stage which is you know we all

23:36

know this adage of the you know people want sustainable income through their life right that lifetime income Source

23:42

but as soon as you mention annuity the behaviors change just based off the word people say they want to age in place and

23:48

you're like hey here's a reverse mortgage and like oh I don't want that like well you said you wanted to age in place and have lifetime income we've got

23:54

two things that do those two things but it but like there's this immediate reaction and when you start diving into

24:00

a lot of it in my view it's because kind of what we've taught people is like the

24:06

opposite of how we then want them to behave in retirement and that's this like you know when I first thought about

24:12

this I was at the American college and we built a little bit into ricp and I wrote my book requirement and came up

24:19

with that term around it uh but like I'm still super early into that and like every week when I spend time on it I

24:26

kind of understand more and more about the behavioral side so I'll start with like two concepts here that I think are

24:31

really interesting which is the whole like saving for retirement so I call it SNS saving not spending and like Dave

24:38

Ramsey says save your money everybody listens to them they save their money and then you get to retirement and we're

24:44

just like just kidding you need to spend it and we're like you just told me for 35 years the only thing I need to do is

24:50

save more than I spend and I'll be okay we're like yeah but that was then like like you don't work here anymore you've

24:55

got to spend your money and we don't really teach people from a behavioral from an emotional from a systems

25:02

perspective anything on that side and I got to meet uh Richard thaler and had him on my show this summer and like we

25:08

talked about that a lot that like the nudge system that we created is mostly

25:13

around the savings side like that's at least effectively right we haven't really created like a spending or DQ

25:20

relation as many parameters you know guard rails right any of that in the

25:26

system so we just have like we kind of lead people down a path and they get there and all the variable outcomes like

25:32

you can spend all of your money day one or none of it and we just don't have guidance for that super well

25:38

and then another part that's really interesting is that spending for people then becomes painful because we've told

25:44

them that saving is good spending is bad and you do that for 30 years without any

25:50

other change in their life like a lot of people you look at the JP Morgan spending data what you see is a lot of

25:57

people with wealth like understand what they could for retirement that we haven't given them permission to spend

26:03

and so a big part of what advisors do I I believe for clients especially with truck tire and income planning is giving

26:10

them enough confidence that they're not going to run out of money so they can actually spend and have a decent life

26:15

that we don't self-insure every risk and every concern and hold on to everything so that's why being able to show right

26:21

guard rails and volatility and variability over time to somebody so they can visualize it it's super healthy

26:29

I think to giving somebody the that piece and I also use this term return on

26:34

sleep Ros that like they can actually sleep knowing that they're not going to run out of money based off what they're

26:39

spending today so you start putting all those things together and it's really fascinating and um I'll end with this one then maybe

26:46

pass over to Johnny or something too which is uh the visualization of everything is really important

26:52

you know I remember a speaker one time that said anything you can explain to somebody in words you can show in a

26:59

picture and I thought that was super powerful and we learned better via seeing things but most of like our

27:05

industry is you know it still spreadsheets and charts and stuff like that so I love that you guys have built in the timeline and you know brought in

27:11

like visuals Great Depression and things like that to help people kind of actually visualize what might be

27:16

occurring during that time period versus just us talking through things I think we're going to get better and better at

27:22

that as an industry right but like we're paying attention to that photo right like yeah like every time I'm like okay

27:29

we know the experiences and the stories that start coming out of these photos so I think that's a great way to layer that

27:35

in here but yeah I'll pass off I think uh the Johnny maybe I'm sure you have a little bit you would like to add there

27:42

sure as you know Johnson this is this is deeply personal to me so I was very

27:49

little story with you guys I left a long career in Corporate America in 2018 in

27:54

January and at the time my wife and I sat down and we seriously thought about retirement and we thought about the

28:02

possibility of taking our children back and had the expense of living in in Europe where I grew up and so we had a

28:08

finance plan built and he came back and it had a really nice probability of success I remember to this day it was 89

28:15

and I've actually put some nice nice sort of balance in there so I was

28:21

projecting that we're going to spend far beyond what probably in reality reflected but then we got a stress test

28:27

and the stress test said that if we would see a period like the global financial crisis from 2007 to 2009 our

28:36

probability of success would have gone to 51. and I remember my wife and I look at each other in the face saying that

28:41

there's no way we can retire I mean that that it feels like we're one bad Market away from being in deep trouble and so I

28:48

guess the irony is income lab sort of was see that kind of my experience around that right how it it really made

28:55

us set to our stomach to look at at the probability of success that felony we're a kind Taurus a very convenient deep

29:02

travel so I think it more than being good analytics it's really about the experience here how does our clients

29:09

actually experience the data the visualizations to Jamie's point that we put in front of that and is that helping

29:16

them getting more comfortable with the plan that you're developing for them or is it it's scaring them but I don't

29:22

think any of us intend to have clients leave our office being more concerned when when they came into our office

29:30

Justin I'll pass it on to you I have done that before though Johnny where where I've used scare tactics on people

29:37

so it's uh in my estate planning world when I first started I would tell terrible stories of families fighting

29:43

over money because you know sometimes you know the fear is an action item too right and it's like hey you don't want

29:48

that uh but usually probably with our money we don't want them leaving more fearful

29:55

yeah and just a note on the on the visual I believe that this is literally uh Al Capone's uh soup kitchen there so

30:05

um yeah Johnny I mean I think that's there there is a thing about this which is

30:11

just that it it tells the other half of the story

30:18

um which is you know you can run a plan from uh you know 07 to the beginning of

30:25

09 and things are gonna look they're gonna look really bad um

30:31

but in a way you know if you see a stress test that says oh well it will hit it with uh you

30:36

know the global financial crisis and then we'll run another Monte Carlo I was like well hang on we actually know what

30:42

happened after um so it is helpful to show yeah I mean

30:47

there was pain right but then a very very long recovery after so we don't

30:52

have to guess what what people would have done now could the future be worse in the past sure but the past is really

30:58

it's the only real data we have so it's it's really helpful to um to actually show people what real

31:04

experiences would have looked like and honestly if the if the future is worse than the past we'll you'll still want to

31:09

adjust right I mean the adjustment is really still the right way to approach

31:14

um to approach uncertainty um yeah I think um

31:22

I don't know if uh if Jamie or Bonnie if you kind of have um looked at tools that involved stress

31:29

testing before or you know given what you've seen of this kind of thoughts on

31:34

um where you could imagine this being um you know most useful to actually use

31:40

stress testing uh maybe even if you've seen other types of stress tests be effective maybe it's a portfolio stress

31:46

test or things like that I think a lot of people on this uh webinar are we're

31:51

always looking for very practical um you know experiences and and ways to

31:56

use tools so maybe we'll flip it around and start with Jamie this time

32:01

yeah I'll add uh two thoughts here uh one is being clear I think whenever

32:07

you're communicating with people about like what you're actually stress testing because you know Justin you you kind of

32:13

hinted at that there are actually stress tests for lots of different things out there in the world and you know it's

32:19

kind of one of the sales tactics that's been used in this industry for a long time which you know I'm not putting any

32:26

shame on it it's totally fine but you'll you'll see somebody hey we stress tested your portfolio and it failed in our

32:32

thing it's like well what were you testing it for what was it tested for before uh so you know way Wade foul who

32:38

I imagine most people here know and he was at American college with me we did like eight different stress tests on

32:44

retirement income portfolios but they were all for different things so it's like what was the volatility of your

32:50

spending what was your average ending value what was the like you know uh you

32:55

know average returns like and you could test all these different things and what you would find out though is that the same portfolio might do really well in

33:03

one stress test and really pour in another stress test right like so ultimately if the client's goal is to

33:09

maximize total ending value it's a different test that you're trying to maximize right if their goal is to keep

33:16

income between some spending level for retirement you know that's the stress test then you want to run and so to me

33:23

it's what are you trying to show what are you trying to elicit in that client conversation and not just use it as a

33:29

be-all for everything but being super clear in your communication that you know we're testing where your income

33:34

might fall during these time periods versus total returns total ending value total Estate Value some of those things

33:41

you'll you actually would test in a different way but what does the client's main outcome what's their main objective

33:47

what are they worried about and then if it's on this side where it's around the income that's why this is super useful

33:52

which I do think right anecdotally from from my world we have 46 000 households

33:58

now this is the number one concern right ultimately Middle America is concerned

34:03

about the retirement income now some of our high net worth clients it might be a concern but you know like I was me

34:10

prepping an advisor for a meeting that they're having today with the CEO of a public company

34:15

his concern is not his retirement income right his concern is Legacy risk stock

34:21

options taxes stuff like that so you'd want to test it in a different manner but yeah I think that's kind of where I

34:27

see Bonnie I would just Echo Jamie some of your points around you know who is this

34:33

concern really targeting and I think again approaching it from my perspective which is really in the retirement plan

34:39

side if we look at it today you know we have you know around 9 trillion in DC

34:45

plan assets around what you know around 11 trillion in IRAs and so we think about in the plant side so much money

34:52

has been put into these qualified plans and when we think about it we have you

34:58

know for for a lot of Americans and kind of that Middle America segment this you know the retirement plan is where

35:04

they've built up all these assets and for many of these folks they don't have typically access uh during their working

35:11

years to a wealth management advisor and so it's how can we start to use some of

35:16

these um you know these tests or these stress tests and I think as Jamie said

35:21

how can we really be clear about what we are communicating to show them you know here is where you've done a really good

35:28

job of saving or you started save but here's where you can actually be in the

35:33

decumulation side and what does that start to look like in the deacumulation side that's where the in-plan solutions

35:39

or like the record keeping tools and resources that are available to most of the Savers they're woefully inadequate

35:47

and so it is you know there's not a lot of opportunity to help folks really understand what that looks like in the

35:52

decumulation side and I think there's a really good opportunity to Target kind of those middle middle income households

35:58

with these types of resources in a really efficient and cost-effective way

36:04

Bonnie I know um probably to kind of to Jamie's point about like how we've taught people to

36:10

think in the saving years um in the plan world it's it's really

36:15

hard not to pay attention to your your portfolio balance as like the the core

36:21

measure and I just want that number to be high you know that's why so often if you ask somebody what their legacy goal

36:26

is it'll just be whatever their balance is today um what has happened in the plan world I

36:32

know there was some talk about kind of trying to give people a better feel for okay but what kind of Life can you

36:37

actually live because one thing we've done here to Jamie's point about what are we stress testing we're stress testing standard of living really I mean

36:44

that's that's what you're talking about here so like can you adjust your your your stand and what does that have a big

36:51

effect on your standard of living or not maybe you're you know you've got a lot of cushion already and you could just I don't know go to the group Hub instead

36:57

of the steakhouse is there has there been motion on that side and the plan side to help people

37:03

understand how much they can spend yeah great question I think it's such a um

37:08

terrible debate on the plan side with really inadequate resources uh not not

37:13

to sound like the pessimists but again I think um what what people are looking at is this like number that they're trying

37:20

to achieve and what is that right number that they're seeking and I think you know Justin to your point it's the what

37:25

is this big this big number that we're trying to achieve in for a long time it's like well if I've got a million bucks I'm set because if I just reached

37:32

that number and one of the things that we've seen and if we go from kind of the the pendulum swing from the deep b side

37:39

to the DC side and now it's starting to swing back to the middle mostly because of I think regulators and legislators

37:45

who are recognizing we've got to do something to help participants right and what I mean by that is you know with DB

37:51

plans going away and then we really put participants on their own in the DC side where we said hey we're going to help

37:58

you accumulate all these assets we're going to do that with things like you know Richard thaler and the nudge Theory

38:03

it will help you accumulate through Auto enroll and auto escalate but then you're just going to get to that big number and

38:09

we're not going to help you with what to do with that at all now we're starting to swing back a little bit more to the

38:15

Middle where we've got regulators and legislators with certain regulations and secure one and secure 2.0 where we've

38:22

got this push towards things like putting disclosures on participant statements that came out of a 2013

38:29

proposed reg and now a final reg that came from secure one but it's this idea

38:34

of how do we start to show participants what this account balance is going to

38:40

look like as it actually translates into your retirement now I think again it's

38:45

somewhat inadequate to just put that on a participant statement as here's what this actually translates to in your

38:51

retirement but that's kind of one of the nudges coming from the government I think much better are certain tools like

38:58

what you're producing you know in in this sort of resource and I think that can be a much better way of helping

39:04

participants to see the different stress tests and and that sort of things but

39:09

the government's trying to make that push in plan for those who don't have that available out of plan to them

39:17

yeah that makes sense and you're right I mean when you're talking about standard of living I mean balances matter

39:23

um but you know depending on who you are what resources you have is it Social

39:28

Security is a loan do you have a pension maybe um you know people might have rental

39:33

properties the timing of things how you spend it there's so much that goes into it and really if I can live my life I I'm not really

39:41

sure I cared who's writing me the check so um yeah that's that's pretty interesting

39:46

um Johnny I know um we kind of started out this conversation with this sort of

39:53

giving people permission Bonnie you mentioned kind of giving people permission to retire which from a sponsor standpoint is huge giving people

40:00

permission to live you know their their life in retirement and spend some money

40:07

um I think I'd like to talk a little bit about that I know we've had some feedback from advisors who've already

40:13

had a chance to use the um retirement stress test and some you know anecdotes about that being an

40:20

effective way to to help people kind of shift their thinking

40:25

um should we want to share some of those yeah I guess I'll start out with sharing

40:31

with everyone that we take feedback and and stores good and bad with your clients very serious love to get more of

40:38

them so please share them with us um but one story that is very reasoning

40:43

comes to mind we did receive an email from an advisor sharing with us that

40:48

he's been working with a couple for the better part of three years and this particular Cabo wanted to

40:55

retire but every single time they were about to pull the trigger they would freak out they just couldn't get

41:00

themselves at that point mentally and even though their financial situation

41:06

clearly did call for every time if they wanted to it just it was too scary for

41:11

them and it was so powerful that when we used or this particular advice or used

41:16

retirement stress test it was one of the beta users said that this little ages he

41:22

could see the stress in the room just came down and it's like oh it's not a past failed conversation it's a

41:29

conversation about Minor Adjustments and so we've had many stores like that to

41:35

that point I also saw some research that I highly recommend people look into so David Blanchette just did some research

41:41

buying I think more sort of into your part of the business into retirement plan participants I think he surveyed

41:47

1500 of them between the ages of 50 and 70 and what he found was Peter must more

41:53

willing to adjust we tend to believe he actually found that 85 of the participants found that an adjustment up

42:01

to 20 was really unnot event and what we see in the vast majority of these stress

42:07

test is you you never get close to 20 right so I think we can provide a lot of

42:14

confidence to our clients by understanding that it should never be a pass fail sort of conversation and again

42:20

the more stories we see like that please share that with us I mean we enjoy it

42:25

but I think it's good to share with the community yeah I think that's uh that's another

42:32

key point is um I know uh Derek Tharp who could not

42:38

join us today uh here's a little new baby at home and wasn't able to to pull

42:44

it off but um I know he did some research with Michael kitsis on uh framing of retirement income plans

42:51

and I think sometimes I've heard from advisors who say I'm not sure my clients want to adjust so is showing them

42:58

adjustments is that going to scare them you know it will it kind of mean oh you

43:03

know I gave you bad advice to begin with and what Derek and Michael found was it's quite the opposite setting things

43:08

up to to be an adjustment conversation from the beginning um a it's actually it's very intuitive

43:16

because people have already lived that way through their working years so when they've gotten raises or you know lost a

43:22

job or something they've adjusted spending so it's really not a a foreign concept to them but what Derek and

43:28

Michael found was that the advisor credibility was much higher having set the stage that hey there will

43:35

you know we we plan with adjustments um and then if they came to them with another you know a year later things had

43:42

gotten worse and it was time for an adjustment it was a much different conversation if they had already set it up where adjustments would be part of

43:48

the plan versus coming and saying well you know you're 90 your score of 90 went to went to 60.

43:55

um you know I think of it as uh you know you gave somebody an A minus on their final exam and the next year you come

44:00

back and say hey I graded it again and it's a it's a d now right that doesn't make any sense to people so I think the

44:07

framing um and the the evidence is that actually clients clients are willing to think in

44:15

terms of adjustments and like Johnny said to a surprising level retirees or people

44:21

in their later career feel that they actually could adjust on the downside

44:26

um maybe more than we would think um the other thing we sometimes see I know I've focused almost exclusively on the

44:32

downside because that is what stress testing is primarily for but it can also help you you know if you switch to you

44:39

know during well then you're you're watching a recovery right um so

44:45

you know you could maybe you're during the Great Depression so you've already experienced so in the future if there

44:51

are positions where you know you want to say hey we just took a huge hit there are ways to kind of show people reality

44:58

of how markets kind of go up up and down um that you know it's not always uh it's not always as as Grim

45:07

as uh as we might think um

45:12

okay so I think I want to uh we'll just take a couple of uh questions

45:19

before we uh you do have two good questions in there right now Justin all right so

45:27

Brian thank you for your question um so during the financial crisis when

45:33

income decreases how do they know when they can start taking out more income again do guard Wheels reset or stay the

45:41

same and the portfolio balance has to go over the bottom guard rail again that is a really really good way to ask that

45:47

question so I think what's important to understand is guardrails always have to be

45:53

specific and unique to to the planet itself and so one way like

45:58

the guardrails in a way should not stay the same uh you know probably the best

46:04

way to view this would be imagine you you set off on your on your journey and these are your guard rails and 10 years

46:11

later um if they were the same there would that would be strange because now we're

46:16

we're 10 years older our plan should be shorter and so on so the guardrails are always adjusting to whatever whatever

46:23

has happened um including any change in your income so um the guard rails now here you don't

46:30

see it maybe as here the the upward is maybe a little bit more obvious here so once they've gotten a pay raise

46:37

um in the future you see that the the green line jumps up right because it's giving you you want you want some time

46:43

for momentum to to build up you don't you don't want to be telling your client every month uh yeah I'm going to send

46:48

you five dollars more this month so the guardrails change so in this example

46:54

they hit their lower guard rail they got a pay cut we can see above it was four hundred dollars

47:00

um and then we are just waiting for the Blue Line the portfolio balance to hit that upper guard rail you can see again

47:06

in the 2010s it actually got got pretty close again and it just it bounced around it took a

47:12

really long time but we're always just waiting for it to get to the upper guard rail again so

47:17

um another way to say this would be your your balance is never going to be below your lower guard rail it's uh you know

47:24

the lower guard rail will readjust and say hey um you know if things get bad again I

47:29

can I can take it I'll get another pay cut I think I can probably find you one in stagflation

47:35

um so here we go where it just bounces along

47:40

and does hit again so this is another also also a great place to show people

47:46

um that yeah I mean things could be bad enough that there would be multiple pay

47:52

cuts right so it's not sort of a a one one chain one change in income is uh is

47:58

the only thing we'll ever have to do um any thoughts on that from the from the panel as well

48:05

no it's a good point and I think you you hit the bottom end one but it's the same on the top right like you're you will

48:12

always bounce between the guard rails anytime you hit the top or bottom it will reset right and that you'll get the

48:18

pay increases or pay decreases kind of based in this modeling that's exactly right you can actually in the software

48:25

you can set an income ceiling so we've sometimes had people say hang on a

48:30

second and here said collection is also good if I if I start during or or maybe even after

48:38

okay so yeah if I start in 1982 um I mean it's just like the best time

48:43

you could possibly have retired in in history it would have felt terrible at the time you didn't know it was going to be great but it was

48:50

just [Laughter]

48:56

so these folks were planning to spend 12 700 a month and if they had followed this plan they would have been spending

49:02

forty six thousand three hundred now that's in original dollars right so it actually would have been much more given

49:07

inflation so the the question is just well is that is that reasonable would they really have increased their

49:13

Lifestyle by so much probably not so you can put a a ceiling that says hey yeah

49:20

I'll increase my income that would be great I'll increase my spending but maybe no more than 50 or no more than

49:25

double or you know decide and in that case you would actually see this blue line go into the green and then you

49:32

could almost imagine like the difference between the green and the blue that's just like your slush fund you know you can just spend that anytime you want and

49:40

you'd still be between the guardrails um

49:45

um okay his income lab planning to release the raw data Behind These scenarios

49:50

[Music] um more normal less bad so we are um there

49:56

are some you know we as software developers we can't help always learning

50:01

to make things better so we've taken input from from people and there definitely are some

50:07

some additions to the stress test that we do plan uh including you being able

50:12

to choose the start date so we have 15 right now but maybe you know you want to start it when I don't know in your birth

50:19

month or something uh just see how it went um you can you'll be able to do that the other is to be able to compare directly

50:26

these scenarios so you know I was saying um if you

50:34

if you compare you know uh something with lower income to something

50:40

with higher income or a high Equity to the low Equity you'll see differences so we're working on some ways to really

50:45

allow you to directly compare that to compare those

50:53

um will income lab ever start analyzing Investments inside the portfolio as

50:59

opposed to assigning a portfolio allocation yeah this is a I mean I think uh Bunny

51:05

and Jamie you might have some thoughts on this as well for really any financial planning software that deals with

51:10

Investments this is a um place where I think there are always

51:16

challenges there for two reasons one is you're making um

51:21

generally you're doing some kind of simulation of the of the future right so you need a way to to do that to you know

51:28

make assumptions and the easiest way to do that and the cleanest is to use asset

51:33

allocation rather than you know bigger symbols or or things like that

51:38

the other is we do a lot of history and it's going to be really hard for me to show you what Tesla did in 1970

51:45

um and so I think those two restrictions um generally have have met kind of

51:51

longer term planning has had to focus on um assets asset um classes instead of

51:58

particular assets um and I I mean personally I'm comfortable with that I don't know if Jamie if you have some thoughts there

52:05

yeah so this is something that people actually bounce around a lot with uh so

52:12

I'll use like uh you know your e-money and money guy Pro too right you can put in your own investment assumptions

52:19

running forward or use like historical ones and you know I have you know at

52:25

Carson we have bounce between those for a long period of time because it's like it's just a very challenging even when

52:33

you have your own data you have your own models like we do we can input our models then with our Capital Market

52:38

assumptions or do you just use like default historical ones I don't know if

52:43

there's a great answer one way or another there but to your point like it's actually just a really challenging

52:49

piece of kind of the data set world to deal with and then interestingly enough

52:54

if you really there's kind of this other balance of like are you like are you

53:00

still just being a different way of inaccurate like they're both going to be inaccurate right is it just a different

53:05

way to be inaccurate and is it worth like the squeeze is it worth all the work that it takes to do that I'll use

53:11

this example it's like we run into firms all the time when we're acquiring places or partnering and they say hey we have

53:17

this model but we don't always necessarily know like do they have trading fees associated with it because

53:22

they're not super large with the custodian do they have XYZ cost built into it and so something that might look

53:28

like a very similar you know fund or ETF actually could have varying share classes varying trading fees and end up

53:35

with like decently different performance even though you're looking at the same thing so that's often a lot of the

53:40

arguments like just go back to a general asset class view versus the underlying

53:46

portfolios in each account now when you can get an individual and start working with them you can get a little deeper

53:52

into that but from like global company Tech offerings that's been a challenge for like any player really in this

53:58

planning space yeah and I think typically you know even if you have a user experience where

54:06

you're putting in Holdings what they're really doing is mapping those to asset classes right so it's not that they have

54:12

that they're matching it necessarily to again I'll keep using Tesla it's not like they're saying oh well our

54:17

projection on Tesla growth and and uh standard deviation is this now it's just mapping it to a particular asset class

54:23

so I mean I I think I I agree with Jamie it's it's not it's just a it's just a

54:31

challenge um that there will probably always exist and there are trade-offs

54:37

yeah and I think just the other point I made is I don't know that anyone's shown that that's any more accurate

54:42

performative lies long term right and I think if anybody ever proves that out

54:48

then maybe but that's almost more saying that we've been able to predict how things will occur in the future better

54:55

than historical which did basically we haven't been able to prove out in the investment world right

55:01

like we just we're not predictive of the future yet so it's a but it's a great question but I think it's a little bit

55:07

of where you start going down that route on yeah yeah actually maybe I'll I'll close on

55:12

this since we're kind of coming to the end of our time um I think that's a that's a kind of a really good point this kind of long-term

55:19

planning it really it requires that you make some assumptions um and I think sometimes people will ask

55:26

with historical stress testing like this well as you know is this is this all that useful

55:31

um I think like Jamie said that the evidence is really that um

55:36

histories sort of the when you compare it to some other options it tends to perform better

55:43

that doesn't mean it performs really really well it just means it performs better than the others so I think one

55:50

thing that like Derek and I just put out an article about producing Capital Market assumptions and what's you know a

55:56

good way to do that and we did find like using history is better regime based uh

56:02

so having multiple periods in your Capital Market assumptions so that you can allow things to be bad and then good

56:07

and things like that those are better um but I think the key finding was

56:12

there they all have errors and so the adjustments like being keeping up and

56:18

learning from what's happened between when you started the plan and now and um making

56:23

you know sort of I'll take 1982 as a good example you would have thought things were really terrible But as time

56:29

went on you learned that you were gonna that you were living through a good period where returns were really good

56:34

inflation was coming down Bonds were going up and so as you learned that you were in a good period you would have been able to make adjustments so yeah

56:40

you wouldn't have started spending you know huge amounts because you would have been concerned but you would have

56:46

learned over time and so I think the adjustment piece of this it's kind of the superpower of of retirement planning

56:53

because these plans play out over decades um that as an advisor like it's it's okay you no one is going to pick exactly

57:00

the right number this is what I know you'll be able to spend so having guardrails in place and allowing people

57:05

to adjust is kind of the the key to getting as much out of or you know letting people live their best

57:11

retirement um like we're not going to get it right from the very beginning but if you keep up and make adjustments you can at least

57:17

you know hope to adjust in in the right direction so with that I think um we'll we'll

57:24

close up uh if anybody's interested has questions on the stress test a couple of

57:29

great ones that we got already um please let us know um and yeah Jamie Bonnie are there

57:36

places that you know people if they're interested in hearing more about your work

57:41

um Jamie you mentioned to show that you had uh Richard Taylor on uh yeah so we

57:47

could um I'll try to give soda you probably have everybody's email after this so we did a 10-part retirement

57:53

income Series this summer which was super fun so that's where Richard thaler Bonnie's on that Ed slot Wade foul uh so

58:01

a lot of the the known researchers in this space came on that one that one was really fun to do so we can actually

58:07

share that out but that's on uh you know pretty much every podcast area that's called framework

58:12

I don't always do retirement income planning on that and then carsongroup.com is our company's one and

58:19

uh Bonnie over to you yeah and thanks again for having me um I do a variety of things including

58:26

talking about uh in-plan retirement income Solutions and you can learn more at endeavor.retirement.com so uh looking

58:33

forward to seeing more of your work um Justin and team in the the plan space

58:39

thank you so much um Jimmy Hopkins playing track of thank you so much for being here and thank you

58:45

to everyone for joining us take care