This video will walk you through the basics of creating a what-if scenario where you model how an earlier retirement would affect a client's plan in Voyant.
Transcript:
In this video, we will walk through how to model an early retirement scenario and assess the potential impact of retiring sooner than originally planned.
Begin by opening the client’s plan and reviewing the information already entered. Confirm that the client’s income, expenses, assets, pensions, investments, and retirement assumptions are accurate before making any changes.
Next, create a What-If scenario so the client’s current plan remains unchanged.
Within the What-If scenario, locate the client’s retirement event on the timeline. Move the retirement event to the earlier date the client is considering.
When the retirement date is moved, review any employment income linked to that event. Confirm that the client’s salary and other employment-related income stop at the new retirement date.
Next, review the client’s retirement expenses. Confirm that the retirement spending goal begins on the new retirement date and continues for the appropriate period.
You should also review each of the client’s expected retirement income sources, including:
- Social Security or government benefits
- Defined benefit pensions
- Retirement accounts
- Investment accounts
- Rental or other income
- Part-time employment income, if applicable
An earlier retirement date does not necessarily mean that all retirement benefits will begin earlier. Confirm the intended start date for each pension or benefit and adjust it only when appropriate.
This may create a gap between the client’s early retirement date and the date their pension or Social Security benefits begin. During this period, the client may need to rely more heavily on cash, investments, or retirement accounts to meet their spending needs.
After updating the retirement date and reviewing the client’s income and expenses, run the projection.
Review the results to determine whether the client has sufficient income and accessible assets to support the earlier retirement date. Pay particular attention to:
- Cash flow during the years immediately following retirement
- The timing and amount of account withdrawals
- Any periods of unmet expenditure
- The sustainability of the client’s assets
- The value of the estate later in the plan
- Whether assets are depleted earlier than expected
You can then compare the early retirement scenario with the client’s current plan to illustrate the impact of retiring sooner.
If the early retirement scenario creates a shortfall, additional changes may be modeled, such as:
- Reducing retirement spending
- Increasing contributions before retirement
- Working part-time during the early retirement years
- Delaying Social Security or pension benefits
- Using cash or non-retirement investments first
- Selling an asset or property
- Adjusting the proposed retirement date
Continue updating the What-If scenario until you have modeled the strategy you would like to discuss with the client.
Once complete, save the scenario and use the results to demonstrate how an earlier retirement date may affect the client’s cash flow, withdrawals, asset values, and long-term financial outlook.