Lifestyle Recommendations

Clients often have questions that include "How much can I spend in retirement?", "Am I saving enough to reach my goals?" and "Can I retire earlier?". The Lifestyle Recommendations feature will help you quickly answer these questions by providing options to adjust your client's savings, spending, retirement age, and more.

Your clients will sometimes have a goal (e.g., a target retirement age, a target retirement budget) and wonder whether they're on track. If they're not on track, they'll want to know what they can do to get there (e.g., save more, delay retirement). Other times, they'll know what they're doing today (e.g., total savings), but not what it will get them in the future.

The Lifestyle Recommendations feature helps you to calculate what a client needs to do to be on track for their goals, or calculate what goals (e.g., spending, retirement age) are realistic given their circumstances.

In this example, the client's current savings are more than enough to reach their target Retirement Spending goal of $100,000 (in real dollars) per year. They have an initial surplus Goal Balance (personal net liquid assets at the end of the projection) of $2,397,131. The Sustainable Spending calculates that they could increase their spending by $15,717 per year to deplete their personal net liquid assets by the end of the projection. The Retirement Age calculates that they could retire 3 years earlier while remaining on track for their $100,000 target.

You can then choose which individual adjustment (e.g., Sustainable Spending, Retirement Age) the client is interested in and Apply & Run the change on your current scenario, or create a copied version with the recommended change applied.

When you open the Lifestyle Recommendations modal, the Sustainable Spending option is selected by default. This is the most common calculation advisors run. If you want to update your projection to the Sustainable Spending level you can simply click Calculate and then Apply & Run. Similar to other tools in Snap, while it's designed to be easy to use, it offers many customizable options to best meet your needs. You can:

• Adjust the period that the Sustainable Spending calculation applies to.
• Select the age that you want to deplete the Goal Balance as of.
• Calculate values without applying them to the projection, which automatically includes them in the Goal Status page in the Client Report.

The remainder of this article outlines how to use this tool to its full potential.

Once you've completed the Scenario Setup data entry and your initial Planning Page adjustments (e.g., entering contributions to investment accounts), you can click Recommendations just above the projections table in the center of the Planning Page and then click Lifestyle Recommendations.

There are two categories of Recommendations in Snap.

1. Lifestyle Recommendations (outlined in this article) are related to decisions the client can make that impact their lifestyle. These decisions include how much to save while working, when to retire, and how much to spend in retirement. The goal of the feature is to find the best lifestyle outcome (e.g., earliest retirement age, highest spending level) while keeping the projection fully funded.
2. Financial Recommendations (outlined in a separate article) are related to decisions the client can make without impacting their lifestyle. These decisions include when to take CPP/QPP and OAS and where to contribute and withdraw money over time. The goal of the feature is to find the highest Estate After Tax in your target year without impacting their lifestyle.

If your Planning Page has a lower resolution, or your window is smaller, the buttons will be displayed as icons. Click the button with the Recommendations symbol in the same location and then click Lifestyle Recommendations.

The Lifestyle Recommendations modal provides summary information about the projection, including the Retirement Age, Retirement Spending, Goal Progress (how much of the spending is funded through personal net liquid assets), Goal Balance (the remaining personal net liquid assets), and Estate After Tax. Below the summary metrics, you can select which decisions you'd like to modify to maximize the Estate After Tax at your target age.

To see what changes would fully fund the plan, you can select any of the 4 tiles (e.g., Sustainable Spending, Retirement Age, Required/Available Savings, or Required/Available Lump Sum) and click Calculate. For instance, if you select Required Savings and then click Calculate, it will determine the minimum additional annual pre-retirement savings required to make the plan fully funded.

Once you've selected Calculate and you see the adjustment that would be required (e.g., the new retirement age, spending level, savings required), you can decide if you'd like to Apply & Run to apply that change to the current plan. 

You can check the box in the bottom right corner of the modal to indicate that you'd like to copy your existing plan before Applying and Running any of the changes.

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The top section of the Lifestyle Recommendations feature is an overview of the projection, including the Retirement Age, Retirement Spending, Goal Progress, Goal Balance, and Estate After Tax.

It's not possible to directly change these numbers from the modal. You can change the Retirement Age on the Scenario Setup -> General page. You can change the target Retirement Spending by adjusting the Base Expenses on the Scenario Setup -> Expenses page or directly on the Planning Page. The Retirement Spending shows the average combined Base Expenses (in real dollars) beginning in the first year that either spouse is considered retired.

The Goal Progress represents how much of the spending is funded through personal net liquid assets. This is calculated by dividing the Goal Balance (in real dollars) by the number of years in retirement, and comparing this to the Retirement Spending. For instance, if a client has a Goal Balance of $600,000 (in real dollars) and 30 years of retirement, their average surplus per year is $20,000. If their goal is $100,000 per year, they have a Goal Progress of 120%.

The Goal Balance represents any remaining personal net liquid assets at the end of the projection, or how much has been borrowed personally if it's negative. This is calculated by subtracting any personal Debt from the client's personal Financial Assets. This value is displayed in nominal dollars.

If the Goal Balance is positive, the projection is considered Overfunded and the Lifestyle Recommendations will provide ways to use up the surplus.

If the Goal Balance is negative, the projection is considered Underfunded and the Lifestyle Recommendations will provide ways to address the shortfall.

The Lifestyle Recommendations feature calculates and provides options to bring the Goal Progress to 100% funded (where there's no excess and no shortfall).

The bottom section provides selectable options for what changes can be made to your projection to bring the Goal Progress to 100% funded. These tiles include Sustainable Spending, Retirement Age, Required/Available Savings, and Required/Available Lump Sum.

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The Sustainable Spending tile finds the maximum level of Base Expenses that the client can spend while bringing their Goal Balance to $0 at the end of the projection.

If the goal is Overfunded, once you click Calculate, Snap will determine how much more your client could spend starting from the displayed age(s). If the goal is Underfunded, then Snap will determine how much less your client would need to spend to avoid running out of money in the projection.

You can then choose to Apply & Run to your current scenario to update the Base Expenses automatically. Or, you can check the box for "Copy scenario before applying" to create a duplicate copy of the projection with the change applied.

Another option is to choose not to Apply & Run and instead use the information for discussions with your client or to inform other adjustments you may make to the plan.

Here is a full overview of Sustainable Scenarios.

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The Retirement Age tile finds the earliest retirement ages that the client(s) could achieve while keeping the goal funded.

If the goal is Underfunded, and you click Calculate, Snap will determine how long your client would need to defer their retirement to achieve their target retirement spending. If the goal is Overfunded, then Snap will determine whether your client could retire early and at what age(s).

To help with the calculations, before selecting Calculate, you can customize the adjustments that will be applied to the plan when changing the Retirement Age. This allows you to customize whether you want other aspects of the plan (e.g., Employment Income, Base Expenses, CPP/QPP Start Age) to be adjusted in line with the new Retirement Age.

Please see the article on changing the Retirement Age for more details on these checkboxes. The first four boxes are checked by default and if you update your preferences, Snap will save these as your new default settings.

Once you've clicked Calculate with your preferred adjustments checked, Snap will determine if a change to the Retirement Age is possible and if so, how early your client could retire while achieving their target spending goal.

You can then choose to Apply & Run to your current scenario to update the Retirement Age(s) automatically. Or, you can check the box for "Copy scenario before applying" to create a duplicate copy of the projection with the change applied.

Another option is to choose not to Apply & Run and instead use the information for discussions with your client or to inform other adjustments you may make to the plan.

Additional Notes on this tile (for advanced use and full assumptions):

• The calculation works best when the CFM Start Age is the same value as the Retirement Age (the year that the first spouse retires). If the plan is Overfunded and the CFM Start Age begins after the first retirement age in the plan, then the recommended new retirement age may be incorrect. For instance, if the first spouse retires in 2025 and the CFM Start Age begins in 2028, then if the goal is overfunded you may be best to manually determine the retirement age that would still achieve a fully funded retirement goal.

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The Required/Available Savings tile finds the additional annual after-tax savings/withdrawals before retirement to reach a 100% funded goal.

If the goal is Underfunded, and you click Calculate, then Snap will determine how much more your client needs to save each year before retirement to achieve a 100% funded goal. If the goal is Overfunded, then Snap will determine how much your client could withdraw each year before retirement without running out of money in the projection.

The calculation provides four numbers:

1. The average annual savings/withdrawals once taxes are considered. This represents the overall impact on your client's annual cash flow as a result of the savings/withdrawals.
2. The gross average annual savings/withdrawals without considering any tax implications.
3. The net of tax average annual savings/withdrawals including both existing savings/withdrawals and the recommended additional savings/withdrawals.
4. The total gross average annual savings/withdrawals included in the plan before retirement.

Most clients think in terms of number 2, how much more they need to set aside each year to be on track. Number 1 is valuable to highlight expected tax refunds to have a discussion about what to do with them. Numbers 3 and 4 help the client understand what percentage of their income is being saved with the change in place.

You can then choose to Apply & Run to your current scenario to update the savings/withdrawals automatically. Or, you can check the box for "Copy scenario before applying" to create a duplicate copy of the projection with the change applied.

Another option is to choose not to Apply & Run and instead use the information for discussions with your client or to inform other adjustments you may make to the plan.

Additional Notes on this tile (for advanced use and full assumptions):

• The Gross Average Annual Savings (the second number in the tile, $22,365 in the screenshot above) can fluctuate if changes are made to the plan. For instance, if you later add rental income to the plan then this will increase the client's taxable income and potentially their marginal tax rate. As a result, an $18,340 After-Tax Savings amount may allow for $24,000 Gross Savings if an RRSP is being used, instead of the previously calculated $22,365. Snap Projections will keep the plan updated for any changes so that the impact on the client's Base Expenses remains constant.
• Required/Available Savings are only calculated for the period in the plan before the year the first client retires or the year that the CFM Start Age is applied (whichever is earlier). As a result, if a client is already retired, retires in the first year, or the CFM Start Age is set to the first year of the plan, this feature will not work because there are no years available for savings/withdrawals.
• Required/Available Savings are split between spouses based on their available Contribution Room and Financial Assets. If the calculated Required Savings is $20,000, Snap will attempt to save $10,000 into the CFM After-Tax Savings column for each spouse. If one spouse doesn't have Contribution Room available, they don't have an account to deposit to, or there are overrides on the Financial Assets then Snap may have one spouse save more than the other. You may wish to further optimize the planned savings approach once you know the amount required to reach their goal. For instance, if one spouse has a higher marginal tax rate and more RRSP Contribution Room, you could change the CFM After-Tax Savings values from $10,000 each to $15,000 for one spouse and $5,000 for the other.
• Applying the Required Savings value to your plan may result in negative Base Expense values for the client. For instance, if the client has $40,000 available for spending based on their current income and savings rate, if you Apply & Run a Required Savings amount of $60,000, this will reduce their available spending to -$20,000.

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The Required/Available Lump Sum tile finds the after-tax savings/withdrawals in the first year of the projection to reach a 100% funded goal.

This can be helpful if a client is looking to sell a business and is wondering what they need to receive from the transaction to be on track for their goals. It also helps clients with a surplus to understand how much they could withdraw today for other goals (e.g., purchasing a cottage) while leaving the rest of their projection funded.

The calculation provides four numbers:

1. The total savings/withdrawals once taxes are considered. This represents the overall impact on your client's cash flow as a result of the savings/withdrawals.
2. The gross savings/withdrawals without considering any tax implications.
3. The net of tax savings/withdrawals including existing savings/withdrawals and the recommended additional savings/withdrawals.
4. The total gross savings/withdrawals including existing and recommended values.

Another option is to choose not to Apply & Run and instead use the information for discussions with your client or to inform other adjustments you may make to the plan.

Additional Notes on this tile (for advanced use and full assumptions):

• The Gross Savings (the second number in the tile, $100,822 in the screenshot above) can fluctuate if changes are made to the plan. For instance, if you later add rental income to the plan then this will increase the client's taxable income and potentially their marginal tax rate. As a result, a $95,332 After-Tax Savings amount may allow for $110,000 Gross Savings if an RRSP is being used, instead of the previously calculated $100,822. Snap Projections will keep the plan updated for any changes so that the impact on the client's Base Expenses remains constant.
• Required/Available Lump Sum is only calculated for the plan's first year provided neither client is yet retired and the CFM Start Age hasn't been set for the first year.
• Required/Available Lump Sum is split between spouses based on their available Contribution Room and Financial Assets. If the calculated Required Lump Sum is $100,000, then Snap will attempt to save $50,000 into the CFM After-Tax Savings column for each spouse. If one spouse doesn't have Contribution Room available, they don't have an account to deposit to, or there are overrides on the Financial Assets then Snap may have one spouse save more than the other.  You may wish to further optimize the planned savings approach once you know the amount required to reach their goal. For instance, if one spouse has a higher marginal tax rate and more RRSP Contribution Room, you could change the CFM After-Tax Savings values from $50,000 each to $80,000 for one spouse and $20,000 for the other.
• Applying the Required Lump Sum value to your plan may result in a negative Base Expenses value for the client in the first year of the plan. For instance, if the client has $60,000 available for spending based on their current income and savings rate, if you Apply & Run a Lump Sum Savings amount of $100,000, this will reduce their available spending to -$40,000.

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By default, the Lifestyle Recommendations feature calculates values that bring the Goal Balance to $0 in the final year of the projection.

You'll typically want to leave this setting at the default value in the final year of the projection as this creates a more conservative illustration. However, in some cases, you may want to deplete the Goal Balance in an earlier year of the projection. Many scenarios in Snap are projected to age, 95 or 100. It's useful to project to these lengths to understand how clients would fare if they lived that long. However, some clients may want to consider options that maximize their lifestyle for years earlier in the projection, when they're more likely to pass away. Depending on their current age, health, gender, and relationship status, this could range from 80 to 85. You can change the age that is used for calculating Lifestyle Recommendations from the top-right corner of the modal.

As you adjust the age and click Calculate for one of the tiles (e.g., Sustainable Spending) you'll see that the value will be different than if they were depleting their Goal Balance in the final year. In this case, the client could spend more if they're comfortable depleting their investments at age 85.

If we apply this to the projection, we'll see that the client runs out of Financial Assets as of age 85 and a shortfall begins accumulating.

We can then discuss how the client could handle the shortfall if they live past age 85 (e.g., selling their home, reducing their spending).

We can use the Sustainable Spending calculation beginning at age 86 to see how much their lifestyle would drop once they only had access to government benefits. We'll also need to change the To age back to 100.

The decline in spending for these clients is substantial due to their high Financial Asset base (which allows for high early spending) and limited pension income (which provides low spending later). For clients with more pension income and limited Financial Assets this approach may make more sense.

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a. Ensure the Run Scenario button is green

If you notice that the Recommendations button is greyed out, this likely means that you must first click Run Scenario to update your projection and apply any recent changes to your plan.

Once you've clicked the yellow Run Scenario button to apply the changes you'll be able to access the Recommendations feature.

b. The Calculate button is greyed out when the Goal Progress is 100%

If the Goal Progress is 100% funded, the Calculate button is greyed out because the scenario is already considered solved. The goal of the feature is to bring the Goal Progress to 100%. If you adjust the projection so that the Goal Progress is no longer 100%, you'll be able to Calculate new Lifestyle Recommendations.

c. The Calculate button is greyed out when a calculation is in progress or complete

The Calculate button is unavailable while Snap Projections is running the calculations required to answer one of the tiles. Once Snap has completed the calculation the Calculate button remains greyed out until you select a tile that hasn't be calculated yet.

d. Calculations may be unable to find an answer in some circumstances

Some calculations may not provide an answer. This can occur if there are:

• Insufficient balances - A plan may be overfunded through resources that can't be withdrawn from before retirement (e.g., DCPP, DBPP, the sale of a Real Asset in retirement).
• Contribution overrides - The CFM Savings can only deposit to or withdraw from an account without Contribution (Withdrawal) overrides. You can use the CFM Savings along with manual overrides; however, our suggested best practice is to clear your overrides on all accounts before applying the CFM Savings recommendations.
• No Financial Assets - The CFM Savings tool uses existing Financial Assets in the plan to make deposits and withdrawals. If there are insufficient assets, the tool may not work. You can find more details on how to avoid this here.
• The CFM Start Age is the first year of your projections - The CFM Savings tool only works in years before the CFM Start Age. The CFM Start Age on the Planning page determines the age at which you can enter the client's desired Base Expenses. To use the Recommendations feature, you need to move the CFM Start Age to at least the 2nd year of the projections. 

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