First, the Income Discovery application that was one of the subjects in my last column is about a lot more than using just annuities.
In founder Manish Malhotra's own words (posted in the comments of my column online):
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“We at Income Discovery thank Davis for his article and complimentary view on our tool. From the title of the article, some of you may be misunderstanding Income Discovery to be a tool used in justification of annuity sales (one of the earlier comments from a user reflected that view). Although Income Discovery helps show the benefit of using an annuity in an income plan, it is far more powerful and supports many other type of income strategies.
Income Discovery is all about building creative retirement income plans, whether by using annuities or different social security claim strategies or using bond ladders or adding a reverse mortgage to an income plan.
The biggest benefit of Income Discovery is being able to compare any two strategies side-by-side and show the client which income strategy is better, why and by how much. Visit our home page for more details”
As I feared might happen in writing my last column, at least one skimmer of the piece left a scathing comment that would lead one to believe that I/InvestmentNews was somehow endorsing or recommending annuities over other vehicles or retirement-income-generating practices.
Not the case.
The fact is that many an adviser finds annuities useful in buttressing shortfalls in a client's retirement income — along with plenty of other things.
The three key things Mr. Malhorta wanted me to keep in mind: That Income Dircovery is all about retirement income planning and taking a lot of different income strategies into account.
Another point is that the application is really a single screen from which the adviser can reach and edit any tabs, fields, etc.
And that the application is meant for seeing/studying/comparing plans side by side in order to justify the strategy and the product being used.
In the demo that Mr. Malhorta did for me we went through three hypothetical scenarios.
The first took a single male named Robert who was planning to retire soon at 65.
“In this one we are demonstrating how Robert can reduce risk in his retirement income plan using a variety of fixed income annuities.”
I got to see first hand through the online demonstration how a user can add, edit or delete the rows on Income Discovery very easily.
“Or when you become comfortable with it you can double click the field and it opens a workbook field [like in a spreadsheet].”
So, in our hypothetical situation Robert has ‘Total Assets’ of $1,100,000.
His desired income, he wants $72,000 in income a year.
The planning horizon, in years = 35.
Plan Star Year = 2013
“In practical terms he will have three different phases, though you can have as many as 10 in the software,” Mr. Malhorta said.
“The adviser can configure any kind of capital market assumptions; our case study is set to ‘low return, moderate inflation.”
We now click on the “Build custom plan” feature (green plus sign).
The above is really just meant to give you an flavor for the type of inputs you will have to set.
Head over to Income Discovery to kick the tires yourself.
