Income Lab, a provider of retirement income management software, has announced the launch of a new tool for stress-testing retirement income plans. Designed for financial advisors, the tool illustrates how retirees can successfully navigate historical periods of high inflation or market volatility, usually by applying relatively small and temporary adjustments in spending.
The Retirement Stress Test tool is available as part of Income Lab’s retirement income management software.
Key features of Income Lab’s new Retirement Stress Test include:
“In the past, retirement stress testing primarily focused on how things get worse when portfolios take a hit, causing significant anxiety in clients. This new approach to realistic stress testing builds confidence by showing how adjustments – usually minor and temporary ones – can get retirees through the rough patches without major changes in their lifestyle,” said Income Lab CEO Johnny Poulsen.
What makes this tool unique is that it focuses on realistic retiree behavior, like spending adjustments, instead of on portfolio failure. Instead of stopping the stress test after a market shock, this new stress test tells the full story, continuing through and past the shock and showing how long it took for spending and account balances to recover.
“It gives clients a lot of confidence to see how their plan would handle some of the worst times in history and to understand that retirement isn’t pass/fail. This helps advisors move the conversation away from success and failure and into a can-do conversation about adjustments,” added Justin Fitzpatrick, Income Lab’s CIO.Advisors that participated in the beta launch have already seen the benefits of the tool. “We’ve
used it directly in client meetings during the market turmoil in late 2022 and 2023 and immediately saw the relief and confidence from the client when they realized that their retirement savings would have held strong through events much worse that what we are seeing now, like the Great Depression or the Stagflation Era of the 70s, says Eric Sajdak, ChFC and Partner at Safeguard Wealth Management. “We love that this feature allows you to show the guardrails relative to the portfolio moving through time,” he continued.