Insurance Dynamic Plan

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Summary Graph

The Insurance Results section consists of two tabs, the Summary and the Spending tab. Each tab has two basic elements, the graphical portion at the top and the controls section at the bottom.

The charts in the Summary tab are intended to quickly show you the total amount of insurance coverage needed vs. your current coverage, and how much of a shortfall there is, if any. The “street light” provides a visual cue to the status of the plan, whereas the legend and the “two bars” chart give you a visual representation of the actual values. As you select different “what if” options, the charts show you the outcome of each specific scenario.

insursummary.png

NOTE: Term insurance refers to any term life policy for which “years to pay premium” is set to a value other than “for life”.

The “What If” controls

The two tabs show different graphical results, but the controls section at the bottom is always the same. On the right hand, under the charts, you will find the “Include expenses with priorities” drop down. On the left hand side of the controls you will find the “Insurance Assumptions” section at the top and the “Insurance What If” at the bottom.

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Include expenses with priorities drop down allows you to quickly filter lower priority expenses out of the plan. As you may remember, you were able to set the priority level when you entered “Other Expenses” in the retirement worksheet, under the goals/cash flow tab. Filtering lower priority expenses is very useful when trying to show how reducing one’s life style can mean the difference between a successful and a failing plan.

Insurance Assumptions list controls which “sliders” you will see on the right hand side. Each slider controls a specific variable and allows you to dynamically update the plan and the result charts at the top. You can interact with the sliders by dragging the marker, clicking on the plus and minus, or by simply typing the desired number in the slider’s value box.

generalassumptions.png

Insurance What If is a simple list of options that will show you the effects of the specified What If on your plan. Clicking on the various options will update the charts above, but it will not modify any of the plan’s data.

IMPORTANT: Depending on the inputs you gave while filling out the worksheets, some options may not be available. If the plan is for a single client there will be no Life insurance planning available. The financial engine operates within the confines of the combined life span of the client and the spouse. The Insurance Needs are calculated as the amount of coverage needed to replace any loss of income and to cover of all of the expenses for the remainder of the plan (or for a specific term in the case of an LTC). This means that if the plan is for a single person there will not be any expenses beyond his/her death, hence no life insurance needs. Beneficiaries are external parties to the plan in that assets can be transferred to them, but the financial engine cannot plan for their needs.

Spending Graph

The Insurance Results section consists of two tabs, the Summary and the Spending tab. Each tab has two basic elements, the graphical portion at the top and the controls section at the bottom.

spendinggraph.png

The Spending chart shows how each “what if” scenario affects the client’s ability to meet their spending obligations, for every year in the plan. The four main categories of spending listed are the Cost of Living, Education, Other Expenses, and Taxes. Moving the cursor over the chart will show the values for each year in the legend on the left. The items in the legend are calculated as follows:

  1. “Cost of Living” is the amount of Living Expenses, adjusted for the survivor ratio when applicable.
  2. “Education” costs are all of those contributions and expenses that come from the Education module.
  3. “Other Expenses” are all those expenses that were entered on the cash flow/goals tab in Client Data worksheet.
  4. “Taxes” represents the total of the federal, state, and capital gain taxes.
  5. “Shortfall” is the portion of the total expense obligation that will not be met in the specific year.

The “What If” controls

The two tabs show different graphical results, but the controls section at the bottom is always the same. On the right hand, under the charts, you will find the “Include expenses with priorities” drop down. On the left hand side of the controls you will find the “Insurance Assumptions” section at the top and the “Insurance What If” at the bottom.

Include expenses with priorities drop down allows you to quickly filter lower priority expenses out of the plan. As you may remember, you were able to set the priority level when you entered “Other Expenses” in the retirement worksheet, under the goals/cash flow tab. Filtering lower priority expenses is very useful when trying to show how reducing one’s life style can mean the difference between a successful and a failing plan.

Insurance Assumptions list controls which “sliders” you will see on the right hand side. Each slider controls a specific variable and allows you to dynamically update the plan and the result charts at the top. You can interact with the sliders by dragging the marker, clicking on the plus and minus, or by simply typing the desired number in the slider’s value box.

Insurance What If is a simple list of options that will show you the effects of the specified What If on your plan. Clicking on the various options will update the charts above, but it will not modify any of the plan’s data.

IMPORTANT: Depending on the inputs you gave while filling out the worksheets, some options may not be available. If the plan is for a single client there will be no Life insurance planning available. The financial engine operates within the confines of the combined life span of the client and the spouse. The Insurance Needs are calculated as the amount of coverage needed to replace any loss of income and to cover of all of the expenses for the remainder of the plan (or for a specific term in the case of an LTC). This means that if the plan is for a single person there will not be any expenses beyond his/her death, hence no life insurance needs. Beneficiaries are external parties to the plan in that assets can be transferred to them, but the financial engine cannot plan for their needs.

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