Lately, there have been a lot of conversations surrounding the current market state, and many retirees are worried about their investments. One of the most challenging aspects of financial planning is setting reasonable performance expectations. Of course, no one can predict the future, but the right financial planning software can help you make wise investment decisions based on available factors.


You're making decisions based on how accounts will likely change over time. While most advisors will update their client's information at least annually to see if they are on track, those projections should be grounded in reality. Our retirement income planning software, Income InSight®, uses asset classes rather than historical returns of different securities that might be in a client's portfolio. There is a good reason for this. It is improbable that the stocks or asset classes that have dramatically outperformed throughout history will continue to do so indefinitely. Income InSight groups individual securities based on a factor model and rolls them up into an asset class with defined return characteristics. 


Once a security has been mapped to an asset class, Income InSight uses the following asset class assumptions.

Relevant Assumptions Associated with an Asset Class

  1. What percentage return would the client expect from capital gain? 
  2. What percentage return would the client expect from dividends? 
  3. What percentage return would the client expect from ordinary income?
  4. What kind of turnover should the client expect in a year? 

For example, a mutual fund that typically turns over about 20% of its holdings throughout the year would be listed as having a 20% turnover. The capital gains accumulating inside the fund are distributed to holders. That's where the turnover statistic comes into play. 



Planning for a Market Downturn

 Income InSight uses a default set of down market assumptions. The current down market for US Stock has -43% capital gains and 2% dividend yield. Users can specify  their own down market assumptions if they prefer. The software tests the retirement strategy to determine if the client is still on track if they experience a down market during their first year of retirement. Ultimately, asset classes are built into portfolios, and portfolios are projected out through the course of retirement. 


With reasonable asset class statistics, projections will be much more effective. For instance, you put a client's more aggressive holdings in a Roth and put bonds in an IRA since they are likely to spend from the IRA before the Roth, and you want the highest growth items in the Roth because all that growth is going to be tax-free. You can model this situation in Income InSight. Either use our pre-built defaults or set up your asset class statistics within the system. (You will define the four characteristics above for each asset class you set up.)


A financial advisor created Income InSight. The retirement income planning platform has everything you need to develop robust retirement strategies that can withstand difficult situations like down markets and inflation. Start a 10-day free trial.

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