Today I want to run through a Demo Of Our WealthVision Financial Planning Software.  

A lot of questions have been coming in about what exactly our software does and how we use the software to help our clients make financial planning decisions. So, in this video today, I’m going to run through a hypothetical example, Don and Betty, and we’re going to show what we do in WealthVision and how we work through some of these financial planning questions.

What we’re looking at here, essentially, is our home screen and this is Don and Betty’s scenario here, it may or may not necessarily look exactly like what your scenario is but I think you’ll still get a pretty good idea of what we’re doing here. Right here, we’re showing things like net worth, their total investable assets, which as of today total just under $900,000. One of the really great things that WealthVision does is it really helps to bring all of these financial assets in together. So there’s a lot of people that may have financial accounts at a bunch of different places, you might have a 401plan at work, you might have an old 401plan from a previous employer, IRAs, Roth IRAs, bank accounts, this financial planner can bring all of that in together and if you set it up from the beginning, we have the ability to aggregate this data as well.

That’s something I might get into later on but we have the ability to pull that financial data into the financial plan from wherever that is, whether it’s a Fidelity account, or a Bank of America account, most 401plans, so almost any financial institution that you have access to the internet to view that account information online, you can import into WealthVision typically.

What we’re going to look at, is what we refer to as a cashflow based financial plan, and what I’m going to do is I’m going to pull up our cashflow report here, which is the main screen that we’re going to look at here, throughout making some of these financial decisions and what I like, personally, about cashflow based financial planning, is not only does it tell you if you’re on track towards making your financial goals but it also gets into some of the specifics as to where, maybe, the money is going to come from to fund your goals like retirement, or if you have a big purchase, or you’re thinking about making decisions, we have the ability to kind of drill down and really see where this information is.

So, Don and Betty are 62 years old and they’re contemplating retiring this year, for 2017 and so, the way this is essentially laid out here, what we’re looking at is the cashflow screen and on the left here, obviously, is going to be the year beginning with this year, 2017, it’s also going to show the age of the client, so again, they’re both 62 years old and then basically everything, as you’re looking at the screen, the left half of the screen is going to be inflows, money coming in and then the left side is going to be money going out and at the far right, it’s going to show what’s happening to total portfolio assets as we make different decisions.

The first thing, is that Don and Betty, if they do retire this year, we made some assumptions for Social Security and for pension and everything but they are on track for being able to do that, but what we’re looking at here, essentially, is in the first eight years or so of their retirement, they have some pretty heavy negative cashflows so the way to kind of read this, if we’re looking at the first line of this, they have total income flows of $41,660 they have total expenses of $93,713 dollars which leaves them with a net negative cashflow of $52,053 so what that’s telling us, based on this plan, is that they’re going to have to take that $52,053 out of their total portfolio assets. Now, what this is showing, you might notice that total portfolio assets are actually going up a little bit here, but that’s because the growth of those assets is more than enough to offset that negative cashflow and if we scroll up here, to this graphical representation, this is showing us what is projected to happen to those portfolio assets over their lifetime, they’re basically running this out to age 90 assuming they both live to 90. So that’s a very nice looking chart, that’s what we generally strive for as we’re putting these plans together. But Don and Betty aren’t 100% sure if they want to retire.

One of the things that’s built into this plan here, if we click on this total income flows column, it’s going to show us where those numbers are coming from, get to the screen here, there we go, and what we see is that Don has a pension that’s beginning here in 2017, about $35,000 a year, so I know a lot of people may not necessarily have a pension but we’re going to assume that Don does and then they’re also going to be eligible for Social Security, the way the plan assumes this, is your, we turn Social Security on for Don and Betty at age 62 so we’re going to get kind of a partial year’s worth of Social Security there, $6,660 here the first year and then if we look out here to 2018, that’s going to give us a better idea of what Don and Betty might be able to expect from their Social Security going forward and I think the way we did this, let’s click on this for a second and double check, yes, so we have basically Don collecting his Social Security benefits now, to collect Social Security at age 62, it’s going to be reduced so for those of you that know and maybe have watched some of my Social Security presentations, collecting at 62, if your full retirement age is 66, you’re going to get about 75% of your full retirement age benefit. Betty is also eligible for a benefit as well, and if she takes her benefit she’s going to have that reduced by approximately 25% as well. Because Betty didn’t work a whole lot outside the house, she’s also going to be entitled to a spousal benefit so she’s going to get a little bit of extra there, in this case about $2,583 more per year for spousal benefit there. So, let’s take a look, let’s go back to our cashflow report.

Now, there’s a couple things about retiring early, retiring at 62, one is that for this to work, Don and Betty thought they’d probably turning out Social Security benefits right away at age 62, would be one way to reduce the amount that they would have to pull out of those portfolio assets. The other thing, unless they have healthcare provided by their employer that they’re retiring from, they’re going to have to go out into the marketplace and buy healthcare insurance on their own.

So this is something I did a blog post about back a few weeks ago, if you want to look it up, I’ll put a link here somewhere in the post today but the title of the blog is How Much Should You Budget For Healthcare and in that blog post I referenced a great study that was done by J.P. Morgan and they did a couple of things, but according to the J.P. Morgan report, and some information that they accumulated from the Kaiser Family Foundation, an Affordable Care Act silver plan for a typical couple that’s 62 years old would cost about $8,420 a year and that would be a plan that would be, not the best, not the worst, but it would be a plan that would have about $6,600 a year of potential out of pocket, the max out of pocket expenses there. So that’s one of the things that I built into this plan and we’ll see this here, so when I click onto the expenses, I have this column called other expense flows and when I click on that, we’re going to see that combined. So I have Betty’s pre-Medicare healthcare costs, $8,420 per year and then I have Don’s pre-Medicare health costs built into there as well. Now, according to that same J.P. Morgan report, the average couple, 65 years old, that’s on Medicare with a plan that includes dental and vision as well as their prescription coverage and a Medigap policy, is about $4,660 per year so I have that built into this as well. That’s a little bit higher than the $4,660 because I have that indexed for inflation in there. So, as you can see, healthcare costs are going to be one of the biggest factors there, that are going to have people deciding when to retire, whether or not they should retire early. As you can see, almost $17,000 a year of healthcare costs before Medicare kicks in versus about $10,000 of costs afterwards.

Don and Betty, again, they’re not quite sure exactly what they want to do but they’re looking at this and this is really helping them to bring all this information together, to plan for some of these things like their everyday expenses as well as other expenses like healthcare. Now, one of the things that we have the ability to run a lot of alternate scenarios here within the WealthVision plan and one of those alternate scenarios is we can look at maybe they shouldn’t collect Social Security right away, maybe they should wait to collecting that and so we have a scenario that I created called delayed Social Security and basically, in this plan we waited until their full retirement age to take that Social Security benefit and one of the first things that we’re going to notice here, right off the bat, is by still retiring at 62, we still have those healthcare costs in there, but instead of taking out, or needing to take out roughly $30,000 a year for negative cashflows now we’re up to almost $60,000 a year so taking out almost $60,000 a year out of a portfolio that has maybe $900,000 in there is getting up to be almost an unacceptable percentage of withdrawal, so that might, you know, if we saw a bad market decline, that might put them in jeopardy of potentially running out of money and that’s something we can run through here as well. I’m not going to do it today but we do have the ability to run through, kind of stress-testing different situations. So we could see what does a 10% or 20% negative do to the portfolio and to the long-term ability for a particular client to be able to meet their retirement obligations and everything. So hopefully that’s helpful. So this might help them, in this case, we’d have to have some discussion, make sure what makes sense but probably, for Don and Betty, if they do want to retire at age 62, probably makes more sense to just take the Social Security benefit early, takes a little bit of pressure off the portfolio.

One of the things that I would talk to Don and Betty about, again, this is a hypothetical couple, but possibly either working longer or going into some type of semi-retirement. So let’s take a look and say that Don doesn’t retire at age 62, but he works until his full retirement age. Now we look at a much better chart of the portfolio assets there, almost, I think, double what it was in the first scenario, in fact we can compare these two side by side, compare the work longer scenario versus the base facts. Update that, and now we can look at these two things side by side. So yeah, pretty close to almost double the portfolio assets that are projected at age 90. But the other thing that really happens here too, is we have some positive cashflow in those first couple of years while Don is still working and Don, we assume he’s making some pretty good money here, $167,000 is his salary there, but when we get into his first couple full years of retirement there, like 2022, now his withdrawal requirement from the portfolio is only about $10,000 or $11,000 a year. So it’s really taking a lot of pressure off and in this case here, he has almost a half a million dollars more in portfolio assets that are projected at that time.

One of the things we could do, we could have some conversations with Don and Betty, not only show ’em this, that the retirement looks to be a lot stronger, obviously, by working a few more years, but I always like to put some purpose behind why somebody’s working longer as well. So if Don’s going to decide to work three or four more years maybe that’s so that you can do some more traveling with your family and so we could even go through and add some additional expenses, and maybe you want to take your whole family on a trip to Disney World, that’s one of my favorite places to go, we’ve been there many times, and maybe that’s something, take the kids and the grandkids all to Disney World and maybe you want to plan a European river cruise, you want to do some big things, and now we could even go back to this alternate scenario, add that additional travel expense actually very easily and see what kind of impact that has on the financial plan for Don and Betty.

So we’re going to go back up here to plans and we’re going to edit that scenario, we’ll add a new expense and we’ll call this travel and we should have a category for that, we’ll put in $10,000 a year and I think that should get them to a couple of very nice destinations there with that. We’ll keep it indexed for inflation, and we’ll say that we’re going to keep that going until, as long as both of them are alive, so we’ll have that go out to 2045, at the first death between, whoever dies first and we’ll save that and now we can go back to our cashflow and we can see what kind of impact that $10,000 additional expense had. And really, it doesn’t have that much of an impact at all, because Don working those few extra years, putting more money into his 401plan, it allows them to get a larger Social Security benefit and really just more money, takes the pressure off of the portfolio, really has very little impact on that. So working longer is another scenario that we can play around with a little bit and see when an optimal time for somebody to retire might be.

One last strategy that I want to show you here within our WealthVision demonstration, is a scenario that actually is getting somewhat popular here with some of our clients, it’s a semi-retirement scenario and we’re here in Detroit, we’ve got a lot of automotive workers and like a lot of companies, these companies have frozen their pension plans and so for many of these employees, they’re no longer getting any additional pension benefit growth so they might be able to take an early pension, sometimes as early as age 58, and have it be unreduced and basically the same amount that they can collect at 58 that they can get at age 62 or 65. So, we’re going to look at an additional scenario that I have built in here to the WealthVision plan and we’re going to illustrate this. So Don, as we had talked about, has a pretty good income, he’s making $167,000 a year, but let’s say at age 62 he goes into a semi-retirement and for this scenario we’re going to say he doesn’t have to find a new job making $167,000 a year but here we assume he’s making $90,000 a year so a little bit, maybe, over half of what he was making but the nice thing about this, is he’s going to be able to do something that we kind of call double-dipping, so he’s going to be able to collect that $90,000 a year salary hopefully, if he can go back and find a job. Many of our clients actually have their second job already lined up before they actually do this strategy, which is nice, so that takes a lot of pressure off of that and then he’s also going to be able to collect the pension benefit as well. So I have that all built in here and we can go in and look at the cashflow for that. And that looks significantly better, and we can even compare that to the work longer scenario, which was the previously best scenario in terms of their overall wealth and you can see, if you can look at these charts here, they’re almost identical to one another. In fact, if we start looking at the assets, that’s one thing that we look at, you’re a little bit better off by working longer but maybe that other job that he’s able to get is maybe something a little less pressure than what he was doing, so there’s a lot of things that we can play around with here.

We’ve got some clients that maybe go into a semi-retirement and they don’t even work in their same field, so maybe Don wants to be the starter at a local golf course and maybe he’s going to make $25,000 or $30,000, we can illustrate that here within the financial plan too and you’d be surprised, sometimes, how, you know $20,000 or $30,000 of income may not sound like a lot, especially for somebody who was maybe making $167,000 but that could allow him to delay that Social Security benefit, so he can get up to full retirement age, help cover some of those healthcare expenses before Medicare kicks in, all kinds of things that we can do there. So I hope this demonstration has been helpful, hopefully you got a pretty good understanding of what we’re able to do here within the WealthVision financial plan, it’s really, almost unlimited as to the various scenarios that we can illustrate there and there are lots of decisions that people are potentially making as they go into retirement, We just talked about a few of them here, other strategies that we sometimes look at, sometimes people want to downsize their home, move into something smaller, they want to see how that could potentially affect their retirement. Oftentimes that’s something that might help somebody get into retirement a little bit earlier because they’re taking, maybe reducing their mortgage applications and things like that. So that’s it for this video, I hope you enjoyed it. If you’d like to learn more about WealthVision and learn more about our financial planning services, please send me an email, I’ll be happy to do what we call an introductory phone call, we can talk a little bit about your individual situation, talk maybe about how WealthVision could address some of your unique and individual needs or concerns and see if WealthVision is something that’s right for you.

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What I Do

I help individuals make the transition from working to retirement.

As you approach retirement you will be making some of the most important financial decisions of your life. Most of these decisions don’t get a do-over, once you’ve made them your stuck.

My goal is to help you get the most out of your retirement resources. I do this by coordinating and optimizing what I call the 7 Core Elements of Retirement Planning.

It all starts with a plan!

We use advanced financial planning software to help you understand your retirement cash flow so you know where the gaps are.

Understanding your retirement gap is the foundation to getting the most out out of your retirement resources and avoiding costly mistakes.

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