Income Planning 2.0

September 17, 2021 | Brandon Peters, Sr. Product Manager

A new approach to retirement income planning

The typical approach to retirement planning software is showing its age; now there is a new approach that is starting to disrupt the old way of doing things. One of the main goals of financial planning software is to help advisors select the most efficient and effective plan for their clients, but most software struggles to do this. Many planning tools have features which help advisors have deeper planning and goals-based conversations with their clients, but when it comes to crafting an optimal plan, these existing solutions tend to fall short. We call this Income Planning 1.0. Income Discovery’s Income Planning 2.0 capability solves this problem for advisors.

For most popular financial planning tools today, calling them financial probability calculators might be a more accurate title. If you’re in the wealth management space, then there’s a good chance you’ve used a few of them: Advisors move some levers around, trying to guess which combination of retirement age, retirement income, Social Security claim age, lifetime annuity allocation, Roth conversion tax target etc, might allow the client to retire earlier or increase their retirement income. Additionally, the advisor has to make sure the probability calculator (the one that indicates how likely the plan is to fail or succeed) stays green or above a certain target – no small feat. Unfortunately, when you have tens or hundreds of thousands of potential strategy combinations, the advisor might have a better chance of winning the lottery than guessing the most efficient combination of lever selections across each plan. In many cases, instead of being able to help a client truly optimize their plan, the advisor is forced to tell the client to, “spend less or work longer”. 

Rather than looking at each potential plan input individually in isolation, advisors should be analyzing how all of the levers work together, in concert, considering each possible combination to pick the best one. Of course, there is no way for an advisor to do this manually, and that is where Income Planning 2.0 comes in. Income Discovery’s software looks at every possible combination of the levers, then shows the advisor the exact result that optimizes every aspect of the plan for their clients. The advisor no longer has to guess, or spend time playing with levers, they simply click a button and the software finds the best combination for them. Full plan optimization with a single click. 

Example of optimization results

Now clicking one button may work for many clients, but others may have personal situations or preferences that aren’t always straightforward. The solution to this is to add some flexibility to the optimization process. Income Discovery’s Flexible Plan Builder within the Income Planning 2.0 software solves this exact problem. Maybe the client doesn’t want to add any lifetime income to their plan, or maybe they want to claim Social Security a bit earlier than recommended. In the Income Planning 1.0 approach, the advisor moves the lever, gets a new probability and delivers the results. In Income Planning 2.0 with Flexible Plan Builder, the advisor changes only the specific options the client doesn’t feel comfortable with and then reruns the analysis. The difference is subtle, but incredibly impactful. Removing a single option, or locking down a single lever, can result in a completely different set of optimal options. Flexible Plan Builder doesn’t just remove an option and give a new probability, it reconsiders all other available options again with that one option removed in order to find the best possible combination.

Income Planning 2.0 helps eliminate the guesswork for advisors so they can focus on building deeper relationships with their clients. It does this by providing a clear, actionable, optimal plan with a single click. It is designed to be easy for an advisor to use, yet sophisticated enough for a detailed advisor to dig into specifics if they want to. Retirement decumulation can be complex and messy, which advisors may avoid, but Income Discovery has simplified this process with Income Planning 2.0.

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