April 7, 2021

Bogleheads® Chapter Series – NewRetirement Planning Tool

Michelle Dash and Stephen Chen, from NewRetirement, demonstrate and answer questions on their NewRetirement retirement planning tool.

Hosted by the Chicago Bogleheads chapter. Recorded on April 7, 2021.

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Bogleheads® Chapter Series – NewRetirement Planning Tool


Welcome to episode number three of the BogleheadsLife Stages Podcast. Bogleheads are investors who follow JohnBogle's investing philosophy for attaining financial independence. Today's episode features Michelle Dash and Stephen Chen from NewRetirement.This recording was made on April 7, 2021. This recording is for educational purposes only and should not be construed as investment advice.

Michelle Dash: So tonight we're going to go through a demo of NewRetirement. And let's see I have Stephen Chen with me, the founder of NewRetirement. And just giving us a little introduction of how NewRetirement started, and a little bit about the tool and where we're going. And then he'll turn things over to me and I will--I have a couple screens up on my end--and I will walk you through a live version of the demo.

Stephen Chen: Okay, awesome. Hey everyone, appreciate your time and attention. I'll try to keep this really short because I know we're here to talk about the product, and we welcome all feedback. So yeah, I'm the founder. Basically this got started because I was trying to help my Mom with her own retirement situation. She came to my brother and I when she was in her early 60s and needed to borrow some money.

And we looked around to try and get her advice and help from a financial advisor but couldn't really find anyone that focused on decumulation or was interested in her situation because her net worth was maybe $250,000 including her home which was more than half of it. 

So we ended up doing it ourselves on spreadsheets. And then a lot of it was expense management and looking at her whole life holistically. So healthcare, Social Security. You know what, we ended up helping her downsize and freeing up a lot of home equity. And then helping her think through investing that. And should she annuitize, and questions like that.

So we felt like, hey there's probably a really big need here given the size of the populations, you know 120 million people over age 50 in this country. And so we set about building--and it started out as a kind of a side project--and now has become a full-blown big effort. I mean we have 22 people, so we're still a relatively small company. But solely focused on building this platform and helping people think through decumulation,  and give them a central free or low cost way to manage themselves.

So that's how it got started. Really the way we think about this is we're building a platform. So it's not just a tool but it's really a way to create, like enable, an ecosystem. So we  have the tool. We also have a community around it. We have a bunch of educational content around it. In the future we do want to enable people to be able to find curated experts that can help them but in a completely transparent way. So we are paid by our customers and no one else. So people can pay us through subscribing, or they can hire us to coach them up or we provide CFP [Certified Financial Planner] advice, but on a flat fee basis, like a coach. A coaching session is like $150 an hour or 45 minutes. We'll do a flat fee plan review for $1,000. That's it,  there's no AUM  [Assets Under Management] or anything else wrapped up in this. But because it's software it enables us to go through partners at a very low cost, in a very low cost space. So we're talking about employers and media companies and there's some stuff coming down the pipe that way.

A little bit about where we're going. So today it's really like you can think of as like a TurboTax for planning. So it's like you just do it all yourself, you pull the knobs and levers and you can see what's coming and how your plan might change. And then where we're going. We're looking at the data at an aggregate level and what's working to achieve better outcomes for our partners, or sorry, for our users.

And then we're surfacing things that are relevant for them. So, for example, we're about to roll out Social Security optimization that will run 12,000 simulations for an end user to say, hey we looked at your plan all of your income, expenses, taxes, future withdrawals, conversions, Roth conversions. Stuff like that. And here's how you might be able to get more money from Social Security.

So we can do that. Users can initiate that. What we can also do is run it automatically behind the scenes for 155,000 people and surface like hey, it looks like there's an opportunity for you Michelle to do this and point it out for them proactively. So we are going to automate Roth conversions, which you'll see demonstrated in here. But we can do that, Social Security optimizations. I mean essentially anything around planning we’ll be able to proactively do for you in advance. And at least won't do it like surface, like hey there might be an opportunity here that you haven't thought about. So we think a little bit differently about this, and we are sucking in lots of data behind the scenes if people decide to opt in for that. If you want to sign the link accounts.

And yeah, if you want to go back one slide, just real quick and then I'll be quiet. Basically, you know, completely independent platform, consumer focused, we have this platform technology first approach. And that's I think  what differentiates us from other companies. Anyway, sorry if this was too salesy but I just want to give you the quick overview. I'll turn it back to Michelle.

Michelle Dash: Okay. So there's a few more slides I just want to walk you through. Kind of the key stats of what we do. As Steve mentioned, the way we get paid is by consumers and that really helps us stay unbiased. We have different levels of the program. There's a free version. It's always free. It's really meant for people who want to see if they're on track. It has limited functionality in terms of assumptions, and some of the more advanced tools and charting that Steve was mentioning, the Planner Plus option is about $100 a month, a little bit less, and this is going to unlock all of the charts that we have. Although the projections, lots of suggestions and everything that you see in the demo today. And then on top of that we have Planner Plus Live, which is the Planner Plus service as well as a couple coaching sessions. And then we have the option for Advisor. So we're really trying to provide something for everyone at every stage of their financial planning journey.

When you come in the tool, and we'll look at all this live, the first thing you do is you work on your plan. So you want to go in. You want to make sure that you check the dashboard, see how you're doing, and then go back and refine your plan, add more detail, make it as accurate as possible and then you can use our coach suggestions, which is like an automated rule engine to help figure out what's going on with your plan. Where are there areas where you can improve, where there are areas that you can learn about strategies that you didn't know about. And if you have some inaccuracies in your plan, or assumptions that are different than averages or historical averages, then we're just going to let you know.

After you create a plan, then there's a lot of different places where you can find optimizations. So we just actually launched today the Insights Library, which is just an overview of all the different charts that we have. So this is like the debut of that. And then Steve mentioned we have a Roth Explorer, which helps you figure out the optimal estate value,the optimal savings for your estate by doing Roth conversions earlier in your plan.

We also have, what we really want to do, is we want you to stress test your plan, right. So we're giving you a platform to create a plan, but we don't want you to just create one plan. We want you to create a plan and then experiment with what if scenarios and think about all the different things that can happen along the way. Because it's impossible to plan for a year from now, let alone 20 or 30 years from now. But what we can do is think through potential outcomes and have rough ideas of what we would do in different situations and really plan for them in a time where we're not stressed out or need to make any split-second decisions.

Another thing I wanted to bring to everyone's attention is that we have a lot of free communities, free webinars, and free education. So I leave most of the demos,if you have questions about the tool, on a webinar. Every couple weeks I answer questions live. I go through different demos. We also sponsor events with leaders from all different parts of the financial industry.

So all of that is free because our goal is really fully educated [investors]--and learning about different opportunities and strategies that can help them with financial wellness. We also have a Facebook group. We have almost 4,000 people in it right now. It's extremely dynamic. A lot of you are already members. We have a lot of great conversations about withdrawal strategies, news articles, how to use the tool, what assumptions people use. So it's a great place to collaborate and be able to plan with others and learn from others' experience because retirement is something that most of us only do one time.

And then finally we've mentioned a couple times that we have additional services. So you can certainly schedule live appointments to review your plan for accuracy or for just help understanding some of the charts.  I run most of those sessions. And then we also have a CFP [Certified Financial Planner] in-house, who will help you with your plan and we really try to keep this low cost. And we're able to do that because we're really leveraging our technology platform to do that. So any questions before I get started with the demo?

[no questions]

Okay. So the first thing I want to take everyone through is the onboarding process.Here you're going to start the plan. You have an option to go through a quick version or a comprehensive version. Tonight I’m going to go through the quick version just to give you a sense of the types of questions that are in the onboarding process.

So we're going to ask you a little bit about yourself. If you're married and have a spouse we're going to ask you generally about your household income, what you think your Social Security estimates are, how much you have in savings, at a very high level. Because once you go into the plan you'll have an opportunity to refine it and add more assumptions. We're going to ask if you have a pension, if you own your home. And then we ask also about medical expenses and your other monthly expenses or the things that you're paying for on a monthly or an annual basis.

Once you finish up you're going to go to a dashboard and I'm actually going to switch to my demo account here, and you're going to land on the dashboard page. When you're here the first thing you might notice is your scorecard. So we're going to give you a score. This represents the ratio of income to expenses, and it's just one indicator that's letting you know how you are doing. Are you on track to have enough income to cover your expenses?

We're also giving you the current net worth based on the information that you entered into your plan. Your average monthly retirement income, your end estate value, so how much you're projected to have at longevity age, and if your savings are going to run out. I recommend that you come back to these key indicators as you're making updates to your plan because they kind of benchmark where you start versus where you end up, after you spend some time revising your plan, adding detail, or doing what-if scenarios.

This main chart on the dashboard is called the Lifetime Retirement Projections Chart. Okay I like to call it the story of retirement because what it's doing is showing us how our income is going to cover expenses over time. So we start today here in 2021 and we're looking out at our income. So all the columns represent income. We have different sources of income, whether it's work, Social Security, annuities, pensions. And then we also count as income that we're pulling out of our savings account. So 401(k)s, when we're taking withdrawals in the future, we're considering that part of your income for retirement.

The blue line that goes through this chart represents expenses. So anytime you see the columns above the blue line that means you have more income coming in than expenses in a given year.  Also on this page we're showing you your whole plan highlights, but what I really want to do is show you all of the different areas of my plan that we can customize.

So when I look at my plan we kind of break it up into a lot of categories with goals--income, Social Security, annuities and pensions, savings and assets,withdrawals--we're going to just fly through some of these sections on basic profiling goals. You're asking for your single or married filing status for your tax structure in the plan. We're also asking you for your longevity and age of you and your spouse if you have one. So we know how long we want your plan to be funded.

The next thing I want to show you is work and other income .This is where we're going to enter any kind of earned income that you have. The nice thing about this section is it's really flexible. Not only do you put in what your current income is, you can model that in the future. So I'm going to be earning income from now through age 60. If you're someone who is thinking about modeling a sabbatical or retiring early, or maybe one spouse wants to stay home with kids. You're easily able to model different ranges of work times. Which can be really powerful when you're thinking through your scenario for your long-term projections.

I also want to call attention over here to your updates. So all of these charts are going to update in real time. You have the option to look at a chart to see if your savings will run out. Your savings balances over time, that same income versus expenses chart, you can look at your score or your taxes. So it's really helpful to toggle through these different charts, depending on what screen you're on and what supporting information that you have.

So for example, all this updates in real time. So if I change my monthly income to $20,000 we're going to see that my income, projected income, went up in real time. So it had a big increase. Also on this page you have the ability to model passive income. Most people use this to model income from rental property.

The next section gets into detail about Social Security. So we ask you to enter in your Social

Security based on your full retirement age. And that's so we can separately give you the option to choose when you want to claim Social Security. So you have the option to claim early or to delay until when you're 70.

And as Steve mentioned, we will be coming out with the Social Security Explorer tool to help you dig deeper into some of those lifelong benefits and how you can optimize your planning strategy. Social Security is one area where we do allow you to model assumptions separately. So you can separately enter the cost of living appreciation for Social Security.

Yes, I will demo Roth and tax modeling, absolutely.

The next section is annuities and pensions.So you have the ability, if you already own an annuity,  the cash flow, you can put that in here. If you're thinking about purchasing an annuity in the future, whether it's an immediate or deferred annuity, you can put that here. And entering all the information.  You also can model pensions. We have two different types of pensions. So we have a monthly pension when you know your cash flow, and we have a lump sum pension when you're expecting to receive a lump sum value. We let you select the destination account for where that goes.

This section can be particularly helpful if you're thinking about how you should take your pension, whether you should take it in a lump sum or whether you should take it over time. You can model one scenario that uses the monthly pension, another scenario that uses the lump sum. And then you're able to see how that affects your overall financial picture far into the future.

The next section is savings and assets. So here we have, this is where we might model all of our account information. This first topic is about tax deferred accounts, both retirement income and other accounts. So here we see that in this example we have a 401k. We also have a Roth 401k and a Roth IRA. The spouse has a 529 plan set up for children.  A former 401k, an HSA [Health Savings Account]  plan. And then we also have a catch-all for other pre-tax.

The account type is really interesting because when you make contributions to these accounts, based on the type, it's going to assume the tax treatment on the contribution and the withdrawal. So when I make a contribution to a Roth account it's going to know that it's taxed on the way in and when I make a withdrawal from the Roth account it's going to know not to tax at all.

Further down the page we also ask about other savings. So this is cash savings whether it's in a bank account or a brokerage account. When you select capital gains treatment that means that all the withdrawals coming out of this account are going to be taxed at a long-term capital gains rate instead of at ordinary income. As long as you enter the cost basis, the proportional amount of growth will be taxed at the long-term gains rate. So very important to enter in the cost basis.

We let you model contributing to different accounts.  So as you have new income coming in, if you want to direct it towards different savings goals, whether that's your 401k or HSA you can certainly do that here. And then if you're expecting a lump sum or an inheritance, a windfall, we allow you to add after tax contributions at a certain point in time in the future.

Hopefully on this page you can model if you have cash value for business, you have collectibles or other assets. This section in particular, it's included in your net worth, but it's not considered liquid cash flow. So it's not included in most of the calculations when we think about withdrawal strategy and our liquid cash.

So on this page and I'm scrolling back up is an area for Roth conversions. I know that's a big topic for everybody in this group. When I think about Roth conversions I really like to look at taxes. So I’m going to toggle to the tax area and click on the federal toggle. So here on this chart we're able to see our projected tax  liability broken down by tax bracket between now and the end of our plan. So we can see that in the future, like right now I’m working, I'm in the 22% tax bracket. In the future because of all the growth and the good savings that I'm doing, I might be in the 24% tax bracket. So that means that I could be eligible for Roth conversions as part of my strategy.

And you're able to model that here. So I see that I have a tax window. I started filling this out and as I enter in more information for the conversion amount, converting from my 401k into a Roth IRA account, you can see in real time that we're adding tax liability, but we're also reducing our future tax liability. The area in red on that chart is going to continue to slightly decrease as we're moving our tax liability forward. So using this chart and this section of the tool together to really experiment with a Roth conversion strategy on a Roth conversion ladder can be really powerful.

You can also see here that it is telling you on each click of the button whether your lifetime tax liability has increased or decreased. As well as showing you up here your lifetime tax liability. So adding in all of your tax liability between now and the end of your plan.

While we're on the topic of withdrawals, I’m going to talk about  the withdrawal section next. So until we model several different withdrawal strategies.  The based on spending age strategy assumes that you're modeling exactly what you put into the plan. If your expenses exceed your income then you're going to start withdrawing from some of your accounts. So the tool actually has an order of operations for how we do this. We always take withdrawals from new income. Then we take withdrawals from taxable, then tax deferred. then Roth and HSA. So this strategy right here is not necessarily showing you which account it's coming from, it's just showing you if it's taking a withdrawal from your accounts to meet your expenses modeled in the tool.

The blue is representing your RMDs, your required minimum distributions, and as we make changes in the tool and change our expenses or bring forward withdrawals, your RMDs will change and update in real time as well. We have two other withdrawal strategies that you can model. Maximum spending is actually the opposite of spending needs, when you're taking out only the expenses modeled in your plan. Maximum spending is actually taking out, it's reducing your plan, it's running an optimization to say what if I wanted to deplete my assets for the entire plan by my longevity age. So I want to deplete my assets by longevity. How much can I take out every single year to maximize my spending and my enjoyment of my money throughout time?

So from here you're able to set the date of when you want that to start and then experiment with how much money you can take out. So this can really help you have more comfort when making decisions. If you're thinking about can I afford to go on vacation or can I afford to buy an RV or a second home. 

We also have a fixed percent withdrawal strategy that uses the 4% rule. So we calculate 4% of your portfolio and inflate that over time, and use that strategy for your withdrawals.

For expenses, we have lots of different ways to model expenses. So you can just put in your monthly expenses. You can model it by different phases of time, so maybe before retirement or after retirement. Maybe you're more into early retirement, mid-retirement, and later retirement. So this can be really helpful.

If you want to have a more detailed budget and do line item modeling, then we have a Planner Plus Budgeter where you can enter in all of these expenses. You can also take advantage of the ability to create multiple budgets, one for your basic expenses and one for more discretionary expenses, so that you can match these up to your pessimistic or your optimistic assumptions.

Next we can model our real estate. So whether your primary residence is, you own it outright, you have a mortgage or you rent. You can model that here and we'll calculate the mortgage payments for you. The most important part of this section is putting in the zip code of your primary residence because that's going to actually determine your state tax structure.

For Roth conversions we looked at the federal tax structure.  For this section I want to look at the state tax structure. So living in California, it's a very high tax state, we can see in the future while I'm working there's a lot of taxes, as well as when I'm taking RMDs there's also a lot of taxes. So one thing we can do is model a change to our primary location. Maybe we're thinking about relocating to Florida or Washington or Texas, a lower tax state.

So in this case, in this scenario, I'm thinking about, okay at 65 I'm retired, I'm going to sell my primary home, and I'm going to  buy a home in Florida. Okay, and when I look at this chart I now can visually see the difference that I'm saving in taxes. Which is pretty neat. So if you're thinking about moving this is a great thing to experiment with.

If you have other properties you can also enter those and then you can also model purchasing or selling real estate in the future. So we're not limiting you to just what you own now. We really want you to be modeling everything because we want to show your whole financial picture.

In terms of medical, we have a couple calculations.  We want you to model your expenses before Medicare and then we will estimate your Medicare cost based on a variety of different combinations of policies. This is really neat because if you say you smoke, we're going to increase your estimate. This uses Medicare's API so all the information is up to date. If you have other medical conditions you're going to see your costs increase, of course, these are estimations. When you use estimated projected Medicare expenses, it will add in IRMA [Medicare Income-Related Monthly Adjustment] if that is something you’re subjected to, the additional amount of Medicare fees that you have to pay if you're above a certain adjusted gross income.

And lastly we do model long-term care. You can often see that spike towards the end of your plan, in terms of expenses.  That little spike is for long-term care. It’s based on your longevity age and it kicks in three years before your longevity age.

So that's kind of the big overview of things that you can do in the tool. After you go through all of your plan, you get all your information really accurate, then we recommend that you do a few things. We recommend that you go to Coach Suggestions. This is going to run through your plan and it's going to actually generate a series of rules that are going to help you. So if you have gone through and created, made adjustments, to your plan, these are going to change. So if you looked at it at the beginning, as we did, you want to come back here to see if there are any changes.

I think I'll pause here and maybe start taking questions.

Jim: Michelle a question for you. I was trying to solve some user technical issues so I might have missed it if you talked about it. I was just wondering about any incorporations of the recent rules for the 8.5% percent healthcare and its effect on the subsidy or premium tax credit on the ACA  [Affordable Care Act] stuff.

Michelle Dash: Yeah. So right now ACA is not included. That is something that you'd have to manually adjust for, but it is in our plans to add some time later in the year.

Jim:  Okay, thank you. I think you mentioned too that I think you said $100 a month when I think you meant to say  $100 a year when you went on the slide with the costs, that's the membership cost, or the sign up cost.

Stephen Chen: Yeah. We charge $8 a month but we charge it annually so it's $96 a year.and that's an annual fee.  And then someone was asking, we do have a 14-day trial where you can try out everything she's showing you and if you decide to cancel in the 14 days. We do ask for a credit card upfront, but we will never charge you. But for what it's worth we do, we are, like you know, this is the challenge we have. Really what's interesting is we see, traditional not bulldozed people,but you know many folks they go to wealth advisors and they'll pay one percent of their million bucks, ten thousand dollars a year, and they're fine with it. But then if you're like, oh it's $100 for this they're like, wait but I’m paying. You know it's just a psychological difference that we see.

Jim:  Yeah. We've heard that as we review tools. You know somebody says, well you have this free tool, but the other one's $5 for 400 features and they balk at the $5. So it's amazing to me when talking about the money, you're talking about here people's savings.

There's a question. Is the plan in the demo a reasonable one? The question is, it looks like having huge incomes, like greater than 500 grand a year in the later years while spending very little in the early years. Or is just the first cut applying suggested improvements?

Michelle Dash: Yeah. So this plan is very heavy in assets.  It's a demo plan so you want to take advantage of all of the different areas and also want to be able to show Roth conversions in a very visual way. So in order to do that I did inflate the assets of savings and assets to give this person very large 401k and tax deferred balances.

Jim:  Okay. Could you talk a little bit about your privacy policy?

Michelle Dash: Yeah. So all of our data is encrypted and we use like think level security where we go through constant iterations of taking security audits and risk measures. And our security policy is on our website. 

Stephen Chen: Yeah it's been validated. We have a privacy policy in terms of years. We use a third party group called TrustArc that reviews it every year, and we're also running our own security penetration tests and kind of auditing ourselves. And in fact I mean one interesting thing is we also have members of our community, we actually have a member of our community right now who's a recently retired security expert, who's like, hey listen. I'll volunteer my time to help you out. I mean one thing that we see is actually our audience is full of very smart people who are super interested in this, who are helping us out. And so, you know, where it makes sense we'll definitely collaborate with folks.

But we take it super seriously. We know that we're holding people's super important information. Now another way, one of the thoughts on this is we did actually purposely construct the tools so that you do put an email in to create an account, but we don't ask for your full name, your phone number, your address, or anything else. And if you don't want to link accounts, you can just do it manually. So you end up with you could semi anonymize, you know, where your accounts, what your account names are, and then roughly put in your account values and you're not giving away that much information. So we did that on purpose.

But you can make accounts, if you want to and we work with Plaid, who's our data account linking provider. They power many of the top sites out there or most of them.

Jim: Thank you. There's another question out there about state tax intricacies and the detail required at the state level compared to the federal level. How do you deal with the states?

Michelle Dash: Yeah. So we try to keep the state data as up-to-date as possible. So it does correlate with all our different account types. So contributions and withdrawals going in withdrawals coming out, we update everything once a year. 

Stephen Chen: Yeah. I mean this also goes back to learning with our community.  We do hear, especially when we first roll this out, we'll hear from like a teacher. This is a true case. You know, in like New York and they'll say, ”Hey, my teacher's pension is federally taxed, but not state taxed because it's a state pension.” And so we'll actually adapt the platform to handle that edge case. So we do have to continually update the platform so the projections stay as accurate as possible. And then we'll also shape it based on what we're hearing from live users. You know we have thousands of users every day on this platform.

Jim:  And could you speak to the, let's say, the architecture of the system. Is it in the cloud or where is it? Not in your basement, I hope.

Stephen Chen: Yeah, running against the laptop it is on the cloud. We actually did use to run our own data center way back, but it's all in the cloud. And we use industry standard best practices. I mean it's built to scale. I mean one thing you'll see is when you're using the tool, we are running thousands of Monte Carlo simulations behind the scenes. We have built the platform to be able to run so in our future visions--there's 150,000 people have created plans--in the not too distant future we want to top that to go to one and a half million people. We want to be able to run thousands of simulations per user on a regular basis. So this will be billions of simulations we're running all the time. So we have architected the system and then you'll see it's pretty responsive and fast to do that.

We believe that planning can help not just people in the US, when we have people from India, Europe, all over the world using this thing, that  it can help planning and education in a completely aligned way, can help hundreds of millions of people. I mean there's seven billion people on this planet. A billion people have money and more are going to get it as globalization happens. And they need to make good financial decisions. The people in this group represent the top point zero zero zero one percent of financially educated people. And in an ideal future we would leverage these kinds of communities to help other people that are much earlier in the education curve to make good choices for their whole lives.

Jim:  When you Michelle, when you showed us those recommendations after you put in the rough cut plan, you went into a screen that had like six or eight recommendations - from your experience with all your users, what are the most common recommendations that people are missing that they should be doing?  The suggestions from the coach, let's say, in bulk, with all your users and what you guys have seen.

Michelle Dash: So we run this across over a hundred different schools and regulations. Almost everybody we recommend review your plan with your spouse. Socialize it, talk about it, use this as an opportunity to talk about values, especially with someone who's not quite as interested in money. Because usually the person who's super interested and makes this their hobby is the one filling out this plan.

We'll also run different calculations to see, oh this is out of average or you missed an input. Often people will forget to put in medical expenses before Medicare, that's a very common one Sometimes people will forget to put in a zip code in home and real estate, which is really important to take advantage of the more detailed state tax calculations. 

We'll run a lot of scenarios to say you know what, you've selected to withdraw money before you're 59 and a half, there might be a penalty. Now we don't model that, what the penalty would be, but we do try to alert you of any potential risks in your plan so you know where to investigate further.

Jim:  I think you may have mentioned it, but do you take care of the IRMA surcharge on the high income look back for Medicare?

Michelle Dash: We do. We definitely take care of IRMA in the background, it’s part of your medical assumption when you think about medical estimates. One thing I didn't show are a lot of the insights charts. Once you enter your accurate plan, then we have all these charts that show very detailed assumptions. So here we're looking at the projections of estimated income and estimated expenses. So here when we look at just this blue or our lifetime medical expenses. This is inclusive of all your premiums, all your co-pays, long-term care insurance, IRMA, everything is all wrapped in these. And then you can click on any year to kind of freeze it in time for that year.  So I'm looking at when I'm 77, it's telling me exactly what my medical projections may be, and then these are all in future dollars.

Keith:  Michelle there was a question earlier and I don't know if you covered it. I stepped away for a minute. It asked about if there was a spot for real estate taxes. Obviously we have people from around the country with vastly different property taxes. Is there a spot for that in there?

Michelle Dash: Yeah. So one thing that we do is we  ask for your current home value and then we estimate what you might sell it for. But we actually don't calculate the tax because so many people customize strategies with depreciation, 1031 exchanges. So what we do recommend is that you kind of figure out what you think that your tax liability will be, based on what you bought the house for, we don't ask for that, and then put that amount in expenses, modeled as an expense because that's going to make your plan a little more accurate.

Keith: Thank you.

Michelle Dash: One other thing that I didn't show was the Roth Conversion Explorer. So Steve has mentioned this a few times. It's actually an engine that's been looking at your plan and calculating thousands of different combinations to try to figure out what strategy for Roth conversions is going to generate the largest estate at longevity. So this ran through my plan and it's projecting that if I do Roth conversions I might have over two million more dollars at the end of my plan or my longevity. It's going to give me the year to convert at each age, what Account, and the amount that it should come from.

Now right now this tool is separate from the plan, so you actually have to manually enter it in your plan. But what this does is it really gives you a starting point for your strategy and it helps you think about it in a way that is very hard to calculate on your own because it's including all of the different aspects of our plan. It's including new income coming in, it's including taxes, it's including IRMA, it's including how your expenses change from year to year.

So it's pretty neat. As I scroll down the page you can actually see the comparison of taxes between the plan that you have modeled and the plan and the Explorer. So you notice that in your current plan you're paying less taxes up front, but then it switches. And in the future, the Roth optimized plan, you're paying less taxes.

And this is actually one place where we do expose IRMA, so if you are looking for that you can see it here. In the optimized plan, by doing those conversions earlier for a long period of time, in the future you're actually reducing your IRMA surcharge completely.

Stephen Chen:  Michelle, we have also a question about: can we handle income from an s-corp or not all income is taxed the same way?

Michelle Dash: Yeah. So for real estate and s-corps the way that we recommend doing it is instead of putting in the gross amount, that you put in the profit amount as income.  That's where we are today.

Jim:  Michelle I think there was a question earlier about changes in asset allocation through time.  Could you speak to that a little bit more?

Michelle Dash: Yeah. So what we do right now is– sorry let's go to the right page on the savings and assets page-- we ask for two different values, an optimistic and a pessimistic growth rate. And that's so you can toggle between these. You'll see your whole plan update in real time depending if you choose optimistic or pessimistic. The optimistic and pessimistic growth rates are how we mirror the asset allocation that's actually in this account. So when I look at my 401k and I see a growth rate of 8% and 5%. I think it's invested in growth stocks. Now today this represents the same value every single year. So you really want to choose a value that is like a rolling average, not necessarily representative of just a couple years. You want to think about the entire time span.

There are ways to override it and shift money into another account if you really want to completely change your asset allocation. In general we just recommend that you pick a happy medium that is representative of the entire lifespan of your…

Jim:  Yeah, I think what they're asking for is - I'm 45 and I don't mind being 100% in the stock market, but the time I get to be 65 I want to be 50% in the market, and by the time I’m 80 I want to be 90% in bonds, or something like that. I think that's the idea.

Michelle Dash: We'll be making updates to asset allocation to include that functionality and some other stuff around just being able to pick– I would make growth funds, I'm in bonds– and make these projections a lot easier. In general, this tool is super flexible and there's definitely a work around for everything. So today the work around for completely shifting your asset is to actually just create a second temporary plan that will be in the future and then manually transfer the balance into that new account using our manual withdrawal and transfer area. And then you're able to, in the future, shift the money. And then it starts growing at a different rate that might be more conservative.

Stephen Chen: Yeah. I  mean to be fair I mean we are definitely we're hearing this from other people too. So we are working on a UX  [User Experience] redo of this whole section to make it simpler to do what we're hearing from users. Which one of them is like, hey I'm planning on essentially de-risking my portfolio as I get older.

Jim: Do we have any other questions, you can put them in the chat.

Michelle Dash: Let's go to one more chart because I didn't show this yet. This is pretty nifty. It's our tax projection chart. So we've looked at some of these values already as a small chart, but this is a much larger chart. This is showing you your projections for estimated taxes. It's showing you the actual source of the tax, of how we're figuring it out. And then it's also showing your tax deductions, whether you're taking a standard deduction or you're able to kind of benefit from some other information.  And then at the bottom we have this larger chart again, that's showing the different tax brackets. Something crazy is going on with this chart, but normally it shows standard deductions.

Stephen Chen: We have a question about modifying values, yeah, we basically restricted Planner to limit the changing of rates. And that's only available in Plus. But again if you really want to not pay anything, you can sign up for Plus, put a credit card, and change everything, print your plan, cancel, and you'll have a complete plan.  And we'll also save the data. What you'll lose is the ability to make changes in the future and manage it over time.

And we have had some users game us, where they'll do that, cancel, come back a year later, sign up, cancel. But really, we're trying to build a business that does this in a very different way. But we can only do it if the model works at scale. Like we get enough users that support how we're trying to do business.

Keith: Michelle there's a question about tax rate assumptions and future tax rates changing or sun setting. If you want to maybe talk about how that would be modified or such in there.

Michelle Dash: Yeah. So the tax structure that we use is today's current tax structure and that's used for the duration of the plan. So we use today's tax structure for today and in the future. We do get a lot of requests to be able to model projected, the potential change in 2026, and even change, be able to adjust to make the future have a higher tax rate. So it's something that we're thinking about and considering, we know it's a highly desired feature.

Keith: Thank you, and then there was a question there about matching an advisor with a client. How do you do that?  Do you have any criteria for that?

Stephen Chen: So we're talking a lot about our service model right now. And Michelle, actually in addition to managing and doing all these demos and everything else, runs services for us. So today we have a very limited– we have advisors internally– but we are looking at making this available through other advisors that offer at least flat fee and completely transparent pricing.

Users can definitely take this and many of them do, they sign up themselves and they have an advisor, and they share it with their advisor, either the printed version, or they collaboratively do it with them. We are going to be making collaborative planning. We do it internally, but we'll make that easier for the user to control. Or they can grant access to other people if they want to. You'll see that evolve over the course of this year. We're not really-- I mean our main focus is the software and supporting the user base, and changing it very quickly.  Our expertise is not building a giant CFP network.

Jim: Steve, on one of the screens, you talked about refactoring the UX for asset allocation things. Could you just tell us about that process when you get a bunch of requests on the same thing and you guys decide to go down the path and make the changes?  And how does that actually happen?  And then how do you test what you did and didn't blow up other things? And how do you roll it out?

Stephen Chen: Sure. So our team has grown and we've basically doubled in the past year. And we did get a little institutional funding, but we're still relatively lightly funded company.  We've raised a total of five million dollars as a company, which is nothing compared to a Personal Capital that's raised 250 million dollars. Which is good because we're focused on keeping our costs low and keeping our infrastructure costs super low so we can keep our prices low.

But basically, yeah we hear from users. What we do- a lot of support. So Michelle's team does all the intercom chat support. So you'll hear your news that way, office hours. We definitely are listening to users all the time and seeing what they want. And then we have a road map that where we're decking up. Hey this is what users want, this is where we think the product needs to go. We design those things. We use some various back office testing platforms so we can test the UX. We also have a beta program which you can be part of and certain features you'll see are marked as beta. 

So if you're in the beta program there's actually two levels. There's hey, you have to be part of the beta program to even see it. And then we'll make something better and publicly available, but it's still marked as beta because it's still being worked on. So we roll it out in phases.

Jim: Okay thank you.

Stephen Chen: And just to answer your testing questions and accuracy questions, I mean we write unit tests for the software. We can run simulations. So this past quarter we created the ability to run it. We actually used to run forecasts locally on your machine. Now we run them server side. So, for instance we're rolling out some changes to our scoring methodology right now. So we are running scores for hundreds of thousands of people behind the scenes, or accounts behind the scenes, to make sure that the changes that we're doing, as a way to test them all at once-- I mean this is all kept internal-- but we basically run simulations and unit tests at scale today behind the scenes in order to see how are these changes are affecting people's plans.

Jim:  Okay there's a couple more questions in the chat. Does the plan model the indexing of the standard deduction and tax bracket?  Basically does it assume the top of the 22% bracket in 20 years is the same dollar amount as today or does it go up by some amount?

Michelle Dash: So we increase the brackets and the deductions. The rates stay the same and those increase based on your inflation rate that you've put in. So we model- I pointed out that you can model the Social Security inflation rate. You can also model home and real estate separately, medical inflation separately, and then a general inflation rate for expenses. And so the taxes increase with the general inflation rate that you've modeled.

Jim:  Okay. And here's the question. Did you see the question there about the MFJ first?

Michelle Dash:  Well the other part of that question was about standard deductions and  itemized. So the tool actually goes through and only if you use the Budgeter for expenses, it will calculate whether or not it thinks you're better off itemized taxes or standard deduction. And within the budget you can actually set different items to be tax deductible, so if you're making charitable gifts or you're taking write-offs for business or other purposes, property taxes, it will factor that into your tax calculation.

Stephen Chen: Yeah, here I'll take the question about Monte Carlo income. I mistyped in there. So basically we're rolling out Monte Carlo for every investable asset class that has risk and giving users more and more control over that, and then, you know . . .



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