A purple line represents the retiree’s minimum spending need a higher green line represents the retiree’s desired spending, and an even higher blue line represents the advisers proposed spending level. Three colored lines run horizontally across the width of the chart. (For a video, click here.) Each of the tightly packed vertical bars on the chart represents a month in market performance history, and the height of each bar indicates the maximum amount a particular client could have safely spent from his or her portfolio in such a month. This is Income Lab’s “Economic Context” tool. The grabbiest screenshot in Income Lab, of what I saw, is a chart that resembles a scenery artist’s grey and blue silhouette of a distant urban skyline. “We worked with 20 different finance professors when we were developing this, and nobody disagreed that there’s a need for a massive upgrade,” Poulsen told RIJ. Poulsen and Fitzpatrick believe that none of the existing tools do a very good job with income planning. With a financial planning software market that’s both crowded and concentrated in just a couple of firms, one has to wonder if there’s room for one more. We have a system that shows people the upside, and encourages them to ‘live a little.’” There’s no way to tell the hopeful story. But other software doesn’t capture that at all. “There’s more upside to their situations than downside. “Most people begin retirement with a lot of upside, relatively speaking,” said Fitzpatrick, who earned a Ph.D. The name sounds scientific-like the AgeLab at MIT.ĭenver-based Income Lab is designed to help quell the fearful client question: Will I run out of money? and emphasize the more common question, How much can I spend in retirement? The goal is to maximize annual income during retirement rather than maximize gains or final wealth. Their product, beta-launched a year ago and now available to advisers, is called Income Lab. ‘Shouldn’t they reach for 96% or 97%?”Īnxiety attacks like those are what Johnny Poulsen and Justin Fitzpatrick, two former Jackson National Life executives turned entrepreneurs, see their software curing. “Was 94% safe enough?’ she wanted to know. Their last meeting had ended on what the adviser thought was a positive note: a Monte Carlo simulation showed that the client’s portfolio had a 94% likelihood of success through age 90.īut now the client was bedeviled by bankruptcy goblins. True story: Around midnight, a sleepless retiree speed-dials her adviser.
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