What If Planning

What If Planning and modeling is a key part of the financial planning work Jerry engages in with clients.

Jerry feels very strongly that “what if planning” is one of the most important aspects of work he offers to his clients.

It will allow you to more fully understand the implications of various changes in activities, habits, and spending patterns.

(By the way, this is all sample data and not actual client information)

What’s in the video

You are here because you want to learn about what a “what if” situation is. So in this video I going to show you some examples. I am going to illustrate this using the planning software that I use. It is called EMX. It is a wonderful planning tool. It is flexible enough to handle just about anything what if examples you can think of.

In this illustration and I’m going to do that using a sample client Frank and Joanna Miller. These are not real clients.  We have just entered sample data so that I could then illustrate some examples for you.

So imagine you are Frank or Joanna and you are sitting with me. This is all your financial information. This planning is on a cash flow basis. What I mean by that is money coming in to your accounts and money going out. So what this graph shows the total value of liquid and invested assets. In other words, the pool of money for assets that you will be using to create cash flow. Not just for themselves but also for their family, for now and the during the rest of your life or lives.

Example : Frank and Joanna

Frank and Joanna, they are now 52 and 51 and they will live to the age 95. With the current Cash Flow, they will run out of money when Frank is 91 and Joanna is 90.

So is this were you, and you were assuming that you live to 95, you would might wonder “how are we going to make this work?” This is where the “what if” comes in to what if planning.

Frank says ” What if…”. “I was planning on retiring at age 65. When I retire I could continue to work. I could just cherry-pick and work with my best clients”.

In this example Frank has a pretty high paying job. He is a Management Consultant and he is thinking he could get some added income after retirement. So what would happen if we did that?

What we then added to the  plan is for him to continue to consult for 5 years. This would be from age 65-70/ He felt an income of $60,000 a year for 5 more years was reasonable. He also stated that he felt he would enjoy continuing to work and be engaged at that level of activity. What you can see is now they can almost make it.  The change due to this funding for five more years results in an increased value of 1.1 million dollars. There’s still more they can plan for.

They happen to have another property. After Frank retires he doesn’t want to work so hard maintaining that property. So Frank says “we have a vacation home, what if we sold it next year. Let’s be conservative and say it’s only worth $275,000”

So we then remove the projected income and calculate for the sale of the property. With the sale of the vacation home they now have got a lot of room for error. They now have a plan that works. And it actually reduces their property taxes and maintenance by $1,500 year.

Located in Durham, NC, Integrated Life and Financial Planning is an independent financial services firm founded by Jerry Bergner, AAMS CMFC. As a Durham, NC-based Financial Planner, Jerry’s mission is to help you achieve the life YOU envision. His mission is to assist you in supporting the life you envision for yourself and those you care about. If you need help in clarifying that vision, he can work with you on that as well!