Advanced Option: Enable Indexing of Base Expenses in Real Dollars

By default, you will be able to enter the client's Base Expenses in real dollars and copy down this amount for the desired number of years.  The inflation setting in your scenario will be used to convert this real dollar spending amount to nominal dollars each year, meaning that the client's spending will keep up with inflation. 

In this example, the clients are spending the equivalent of $84,000 of today's dollars each year from age 65 onwards. In the year they both turn 68 years old, this would be like spending $101,277 when we take 2.1% inflation into account. Snap uses the nominal dollar amount for the Base Expenses for each year's calculations because that is the amount the clients would need to spend in that future year to keep up with the $84k of real dollar spending. 

If you would also like to index the client's Base Expenses separate from inflation, you can enable this setting under Scenario Setup -> Expenses -> Advanced Options. 

After enabling this feature, the pop-up window for Base Expenses on the Planning page will allow you to also index the amount entered. 

Here we have decreased the real dollar spending by 1% per year. Snap will still use the 2.1% inflation factor to calculate the nominal dollar spending each year, based on that real dollar amount. 

We don't enable this setting by default because it can be confusing for some users. Since we automatically index the real dollar spending by the inflation setting, you typically won't need to index the real dollar Base Expenses value unless you have a special case. We are trying to avoid the mistake of double indexation which can happen if users index the real dollar Base Expenses by an inflation factor manually, and then have Snap automatically take inflation into account on top of that.