New User Video 3 of 5: Exploring Spending and Guardrail Options

welcome to getting started with income

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laab a video series that jump starts

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great retirement income planning and

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management the main dashboard of an

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income lab plan shows how much a

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household can spend given their

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resources and goals what would lead to

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an adjustment in that spending and what

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those adjustments could look like all in

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dollar terms this completely avoids the

Exploring Spending

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unrealistic and scary success failure

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framing that clients may have seen

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before retirement spending isn't past

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fail it's about the clear tradeoff

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between spending and the chances of a

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future spending

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adjustment you can click on the guard

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rails card to explore this tradeoff here

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we see the proposed spending level as

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well as upper and lower guard rails

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these guard rails show how much the

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portfolio balance would have to change

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over the near- term for the plan to call

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for an adjustment in spending

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and it shows what those adjustments

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would be both to the upside and the

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downside the slider below the guard

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rails graph provides bookends to

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spending capacity for this household

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within a reasonable range there's no one

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right answer here clients can spend less

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if that fits their needs and in exchange

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they would have a bigger buffer before

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any belt tightening would be needed on

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the other hand perhaps the clients want

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to spend more and they're comfortable

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accepting a higher chance of having to

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adjust from that

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point this guard rails Explorer is one

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place to discuss that

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tradeoff but of course a plan could have

Retirement Stress Test

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multiple adjustments over the years and

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decades a great place to evaluate the

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trade-off between spending and long-term

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income experiences is the retirement

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stress

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test here you can test how a given plan

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with all of its idiosyncrasies would

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react to the returns and inflation

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from some of the most difficult and

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memorable periods in

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history here the originally planned

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income level is shown with light blue

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shading the actual income that this plan

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would provide including adjustments when

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it encounters these returns and

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inflation is shown by the dark blue line

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when you Mouse over the graph you can

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see how far above or below the plan the

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income is at any given

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point often in these stress tests

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we see that a good plan can navigate

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tough times with minor and temporary

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adjustments and that can really provide

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some perspective and comfort for

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clients in order to compare how

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different planning decisions could

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affect income and income volatility it's

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a good idea to create multiple plan

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scenarios that differ only on one

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dimension like initial spending and

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guard rails or asset allocation you can

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then use the compare mode in the stress

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test to look at both plans at once for

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example this plan begins with a more

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aggressive income and guard rail setting

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and has higher income to start out with

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but in 2009 it begins to see more

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volatility in income the more moderate

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plan on the other hand gets through this

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period without a downward

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adjustment the retirement stress test

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also shows you how guard rails develop

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over time plans and circumstances change

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so of course guard rails have to change

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too

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here we can see how this plan's

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portfolio balance and guard rails

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developed through the financial

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crisis this stress test guard rail view

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can be turned on and off so it can be

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used when needed but not be a

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distraction

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otherwise together the plan dashboard

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the guard rails Explorer and the

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retirement stress test provide great

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tools you can use to explore and discuss

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spending and spending adjustments with

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clients and

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Prospects