Stress Testing a Portfolio in Income InSight

Stress Tests

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Income Insight employs a metric dashboard to gauge whether a plan is successful based on portfolio longevity, income floor, and estate value.

Portfolio Longevity: Based on the expected life expectancy used in the initial inputs.

Income Floor: Determined by the income need and illustrates if you can meet your income need each year.

Estate Value: Illustrates what will remain for the client's beneficiaries. This value is presented as an after tax net present value number. 

Immediately to the right of these figures is a series of stress tests that determine if the portfolio will be successful when adverse conditions exist. The icons appear in green if the client’s money will last through a difficult financial situation. A red icon indicates that the portfolio does not last throughout retirement. Each failed stress test or undesirable success metric can be mitigated through plan changes. 

Stress Tests

Everything is Fine: We assume that the economy stays stable which is modeled across your accounts.

Down Market: We assume that the economy experiences a recession in the first year, followed by a recovery period. The down market is modeled across your accounts.

Early Death: Income InSight assumes that the specified spouse will die at age 70 and 1 month.

Long-Term Care Need: Income InSight assumes that the specified spouse will need long-term care in the last four years of life and will incur an additional monthly cost of $4,000 that inflates annually by 5%.

Social Security Benefit Cuts: Income InSight assumes that Social Security benefits are cut for all beneficiaries across the board by a specified amount. The advisor has the option to specify the percentage cut and when it will take place. This stress tests illustrates what happens if Social Security becomes insolvent.