Liquidation Order - US

In this training, we’re going to have a more detailed discussion about Voyant’s expense fulfillment and liquidation order logic.

It’s important to understand how this works so that you know how Voyant is fulfilling your client’s expenses during the retirement stage of the plan.

If we turn on the Details button, you can see that once the first client retires and another client transitions to part-time work, the software begins pulling from various assets to help meet the clients’ expenses.

But how does Voyant determine:

• Which assets to pull from
• And when to pull from them?

To answer that, let’s go down to Plan Settings and take a look at the Liquidation Order section.

The first thing to understand is that, by default, Voyant will first look for:

• Income
• Cash
• Available pensions
• And Social Security benefits

Only after those resources are exhausted will the software begin following the liquidation order displayed on the right-hand side.

In the example shown here, we are using my plan’s default liquidation order.

Your plan may look slightly different depending on your firm’s settings.

In my example, the liquidation order is:

1. Taxable assets
2. Qualified assets
3. Tax-deferred assets
4. Tax-free assets

This means the software will first look to available taxable assets — such as brokerage accounts — before eventually drawing from tax-free assets like Roth accounts.

Now, let’s look at our client’s plan to see this in action.

If we turn on the Details button, you can see that the plan is first using available income sources, including Other Income, and then it begins pulling from taxable accounts.

It’s not until later in the plan that the software begins drawing from qualified retirement accounts.

You may also notice that in certain years, the inflows shown in the chart rise above the client’s Total Need line.

For example, in this year at age 75, the inflows exceed the approximately $206,000 Total Need amount.

That is typically due to Required Minimum Distributions (RMDs).

Voyant honors the RMD rules associated with retirement accounts, so even if the client does not need those additional funds to satisfy spending needs, the software will still model those mandatory withdrawals.

If you ever want to verify whether a withdrawal is being driven by an RMD, you can:

1. Go into Year View
2. Open the Retirement Accounts section
3. Scroll to the appropriate year
4. Open the retirement account details

There, you can review whether the withdrawal is marked as Required, which indicates that it is an RMD.

Another important thing to understand is that you can either:

• Allow the software to automatically fulfill expenses based on the liquidation order
• Or you can take more direct control over withdrawals using withdrawal limits and planned withdrawals

For example, if you wanted to manually control distributions from an account, you could:

1. Open the account
2. Set the withdrawal limit to Scheduled Only
3. Go to Planned Withdrawals
4. Add a withdrawal

Let’s walk through a quick example.

We’ll create a planned withdrawal called 401(k) Withdrawal.

You can choose from several withdrawal methods, including:

• Fixed amount
• All available
• Percentage
• Or amount with inflation

In this example, we’ll select a Percentage Withdrawal and withdraw 5% annually from the account.

We’ll update the timing so that the withdrawals begin when Philip retires and continue until his mortality event.

We’ll set the timing and click Done.

Now, if we turn on Details, you’ll notice planned withdrawals appearing in yellow within the chart.

If we then go into Year View, in the year the planned withdrawal begins, you’ll see the withdrawal appearing:

• In the Cash Flow tab
• And within the Retirement tab

This gives you additional flexibility if you want specific amounts or percentages to come from certain accounts at specific times within the plan.

Otherwise, you can simply allow the software to follow the liquidation order automatically.

I hope this was helpful.

If you have any questions, remember that you can always click the name of your client in the top-right corner, select Request Support, enter your question into the text box, and share client access with our support team.

Thanks for listening.