Step Up / Step Down - Schedule future changes to savings and investments

Scheduling Future Changes in Savings and Investments

The Time panel, Event tab, New Event button can also be used to add events to the timeline to schedule future increases or decreases (steps) in contributions, growth rates, as well as future changes to liquidation limits and planned withdrawals.

Future changes to savings can be scheduled to occur at events on the Savings screen’s Advanced Settings > Step Up / Step Down panel. To be used in stepping, the event must fall within the account’s timespan. The event must be positioned in a year following the start of the income and prior to the end of employment.

Enter the Full Stepped Amount: When entering a future steps in contributions, be sure to enter the full, edited amount and not merely the difference between the old contribution amount and new.

Present Value / Future Value and Stepping Contributions - There is one additional consideration when stepping contribution amounts. Expand the Advanced Settings > Growth (or Growth & Yield) panel. Here you can edit the growth rate applied to the savings account or investment. This rate can also be altered in the future, if necessary, using steps. Moreover, you will find on this panel Present Value / Future Value settings. These two options determine whether growth will be applied to the stepped contribution amount.

Present Value is selected by default. This means that the contribution amount entered on the Step Up / Step Down panel are in today's terms. For example, your client plans to contribute more to savings or an investment in his late career, to £15,000 per annum in today’s value. Since the amount is considered to be a present value, in today's terms, inflation will be applied to the £15,000 from the start of the plan until the ”Increase Contributions” event, at age 60, when the stepped increase is scheduled to occur. So the increase to £15,000 will be an increase to an inflated £15,000, which will be a greater amount.

Future Value - If you want to take inflation out of these future steps, ensuring that the £15,000 will indeed be £15,000 at age 60, select instead the Future Value option.

The system default is Present Value because in most cases we believe it safe to assume that people are thinking of amounts in today's terms and the software works out the inflationary difference for you; however, you have the option to treat these future amounts differently.