Transcript
In this video, we’re looking at where to see surplus money in the plan and how to save this surplus. We’ll set up three scenarios:
All surplus money from employment income is spent.
All surplus money from employment income is saved.
An advice plan where a portion of the surplus is saved.
Let’s get started with the first scenario: spending all surplus income.
In this plan for Julia Newton, if we click on the first year of the plan, we can see her earnings in Cash Flow. Under Expenses, we see the taxes on her earnings, contributions into her savings account of $1,200 a year, and her basic living expenses.
If I hover over that first year of the plan, we can see she has $10,923 in surplus income. By default, Voyant assumes this money is spent. We can confirm that by going to Investments and checking that there are no contributions into the cash sweep account.
If we go to Plan Settings → Dashboard Calculation Settings, we can see that “Transfer all excess income to savings” is set to No. So, in this base plan, Julia is assumed to spend everything she receives, apart from the $100 a month that goes into her savings account.
Now, let’s create a What-If scenario to show Julia what would happen if she saved all of her surplus income.
In this scenario, we go to Plan Settings → Dashboard Calculation Settings, set “Transfer all excess income to savings” to Yes, and click save.
Now, when we hover over one of the years of the plan, we see no more surplus money—it’s now considered savings. If I double-click on the bar and go to Investments, we see a contribution of $10,924 into Julia’s cash sweep account, which was her surplus income.
At this point, we can compare plans. In the base plan, surplus money was spent. In the “Save Surplus” plan, all that surplus (shown as the blue above the black line) is considered saved and deposited into the cash account.
If you want to automatically move money from the cash account into an investment account, you can go to the cash sweep account, choose Sweep Options, and select the investment account. This means any money deposited into the cash sweep account will automatically transfer into the investment account.
If I double-click on the bar and go to Investments, you’ll see the contribution into cash being immediately withdrawn and swept into the investment account. This way, it grows at the investment growth rate instead of the cash growth rate.
Now, let’s look at the third scenario: saving only $5,000 of the surplus. Julia feels she can’t save everything, but she does want to set aside $5,000 each year.
To do this, we’ll create another What-If scenario from the base plan. In this plan, we’ll add a contribution of $5,000 annually into the investment account. We’ll set the timing so that the contribution only happens in the pre-retirement years, when there’s surplus income.
After saving, you’ll notice the black line has moved up, showing contributions into savings. The surplus income has reduced to about $5,000, with the remainder assumed to be spent. If I double-click on that bar and go to Investments, you’ll see the $5,000 being contributed annually.
We can now compare these three plans:
Base Plan (all surplus spent)
Save All Surplus (all surplus saved)
Save $5,000 Surplus (partial savings)
If we compare the $5,000 savings plan to the base plan, we can see when the shortfall starts. Compared to the “Save All Surplus” plan, there’s still some red in the projection, since not all of the surplus is saved.
One helpful insight here is the Annual Savings Insight, which shows how much more Julia would need to save between now and retirement to eliminate the shortfall. In this case, the answer is about $2,000 per year.
These What-If scenarios, combined with the insight, can open up meaningful conversations about savings, the impact of different strategies, and the direction of travel in various savings scenarios.