Every retiree would like to know how their plans will work. If they could take a retirement test drive of their plans, they could have more confidence in the future. Retirement Test Drive is one of PlanLab^®’s programs for just that purpose. It performs a detailed cash flow analysis incorporating expected incomes and expenditures and uses assets as you designate, for some of the expenditures as part of your plans. No software can accurately predict the future, but Retirement Test Drive lets you see how your plans, including your best assumptions and your objectives, might work. Knowing how your plan might work, allows you to make adjustments now to increase the chances of it performing as desired.

But what if things you never anticipated happen? Retirement Test Drive lets you make those adjustments, and repeat your test drive. With the revised analysis, you can reconsider your retirement plans and make the necessary adjustments.

Retirement Test Drive: Case Study 1

Dr. Rusty Scalpel and his wife had just been working with their advisor on their retirement and estate planning. Much of the planning dealt with estate planning manners, as their retirements seem to be well funded. In fact, he had worked closely with the advisor to consider exactly when to retire. PlanLab’s Estate Tax Analysis was used to formulate an estate plan. Then Retirement Test Drive was used to see how it would work and the advantages and disadvantages of various retirement dates. The whole process was being finalized. Then the economic crisis of 2008 occurred.

Rusty and his wife became very concerned—would their plans still work? Should they take their losses and convert everything to cash? Did their plans allow time for the market to recover? Should they start over? It was time to take another Retirement Test Drive.

Their advisor modified their plan to reflect the current values of their investments and retirement plans. The results were favorable; the program showed that even after adjusting the values for the current market losses of almost 40% in the past year, their plan could still provide for the lifestyle spending they desired.

But October 2008 was a very scary time. Had the economy reach bottom? What would the new president and new Congress do? At what point would their plans not work?

The advisor, using alternative scenarios with their Retirement Test Drive analysis, made additional changes. The cost of living assumptions were adjusted upward in the event of increased inflation in the future. Values of investments and retirement plans were set to twenty-five percent (25%) of their 2007 values. Retirement Test Drive showed that their plans still could support their desired retirement lifestyle through year 2040, although their net worth would be significantly decreased and the net to heirs would be somewhat decreased. Rusty and his wife now felt confident that their plans did not need to be changed at this time.

Retirement Test Drive, with its scenario “what-if” planning features, can reassure clients when things change. Its graphics (Illustration 1) makes it simple to see the effects of changes. The second illustration (Illustration 2), using Monte Carlo Simulations, showed that the probability of success for the first ten years was about the same in both scenarios, but that continued success after that were less. The advisor was able to put some of their fears to rest—they did not need to make any immediate changes.

Retirement Test Drive: Case Study 2

Take the case of Robert and Andrea. Their planning had required considerably more adjustments in the initial planning. Using Retirement Test Drive last year, they were able to make a number of adjustments so that their retirement lifestyle could be met. They had not prepared for retirement to the degree of the Scalpels in the prior sample. However, they were able to make the adjustments that could meet expenditures for many years. Of course, in October 2008 their advisor received their panic phone call, “What should we do?”

By adjusting the values for the current market conditions, and using the revised scenario, they were able to retake their Retirement Test Drive. The results showed that for the next eight years (8), their plans would continue to work. However, unless the market recovered some of its recent losses, adjustments would have to be made. Again, a simple graph (Illustration 3) was used to show Robert and Andrea the effects of the current conditions on their plan. It showed when the shortfalls were likely to occur. By retaking their Retirement Test Drive from time to time, they would know when changes would be necessary.

Retirement Test Drive is not just a great tool for analyzing retirement plans, but it is a great tool for restoring a clients’ confidence in their retirement plans.  Retirement Test Drive can be used with any plan developed with one of PlanLab’s analysis tools. Retaking a Retirement Test Drive lets you see how your plans work in a world of changing conditions.