Step Up / Step Down - Schedule future changes in expenses (aside from inflation)

When entering an expense, use the Time panel on the right side of the screen to select the overall time span over which the expense will be incurred. This is done by selecting a start event (green dot) and end event (red dot).

Expenses are by default set to be incurred over the span of the entire timeline and are set automatically to be co-owned, in plans with a client and spouse/partner.

You may increase or decrease an expense at any point between the selected start and end event using events. These increases and decreases are scheduled using the Step Up / Step Down panel, also found on the expenses screens.

Before stepping the expense, consider whether the future stepped amounts are to be considered in today's values (present value), which will be inflated in the future, or in tomorrow's values (future value), which will not be inflated.

Expand the Inflation panel. On it you will find the inflation rate applied to the expense, taken initially from Plan Preferences and which can be edited, and the Present Value / Future Value settings.

If you want to consider the future stepped amount of the expense in today's terms, which will be inflated from the start of the plan going forward, leave the default Present Value selected. If you want the future stepped amount of the expense not to be inflated (i.e. only inflated going forward after it is adjusted) then select Future Value.

Next, expand the Step Up / Step Down panel. Select the event at which you want to increase or decrease the expense (e.g. Retirement) and enter the altered expense amount.

Note: Enter the total altered amount of the expense, not funds to be added to the existing expense.

Also Note: Be consistent about your values. If you have entered the expense as monthly value, also enter a monthly value on the Step Up / Step Down panel; if the expense is a yearly value, be sure to enter a yearly value on the panel.

The line graph at the bottom of the chart will adjust showing the step.

When you select an event on the Step Up / Step Down panel, a new set of fields will appear below. You will find this functionality throughout the software. We display these fields so that additional steps might be added if needed. You may step an item up or down any number of times while it is still active in the plan. If you don't need to add a second step, simply disregard this set of fields.

Note: You do not need to step an expense down to 0 to end it. Expenses will begin and end based on the selection on the Time panel, to the right side of the screen. Steps are used to change expenses, if necessary, at various points in between.

Enter the full stepped amount. When entering a future steps in expenses, be sure to enter the full, edited amount and not merely the difference between the old expense and new.

Be consistent. If the expense is entered as an annual amount in the main fields on screen, be sure that the adjusted amount you enter on the Step Up / Step Down panel is also an annual amount and vice versa for monthly expense amounts.

If you were to enter an expense initially as a monthly amount and were to switch to an annual amount on the Step Up / Step Down panel, the stepped amount will still be multiplied by twelve, probably yielding some less than desirable results in your client’s cash flow.

There is one additional consideration. Expand the Inflation panel. Here you can edit the inflation rate applied to the expense. 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 inflation will be applied to the stepped amount.

Present Value is selected by default. This means that the values entered on the Step Up / Step Down panel are in today's terms. For example, a client plans to increase living expenses to £60,000 per annum in retirement. Since the amount is considered to be a present value, in today's terms, inflation will be applied to the £60,000 from the start of the plan until Retirement, when the stepped increase is made, and will continue to inflate thereafter. So the increase to £60,000 will be an increase to an inflated £60,000, which will be a greater amount.

If you want to take inflation out of these future steps, ensuring that the £60,000 will indeed be £60,000 at age 60, only to be inflated thereafter, 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, but you have the option to treat these future amounts differently.