Recommendations

Clients often have questions that include "How much can I spend in retirement?", "Am I saving enough to reach my goals?" and "Could I retire earlier?". To help you quickly answer these questions we've developed a Recommendations feature that will provide options to adjust your client's savings, spending, retirement age, and more.

In this article:

  1. Accessing the Recommendations Feature
  2. Retirement Goal
  3. Retirement Age
  4. Sustainable Spending
  5. Required/Available Savings
  6. Required/Available Lump Sum
  7. Navigating throughout the modal
Check out our recent 1-hour webinar to see this feature in detail.
1

Accessing the Recommendations Feature

Once you've completed the Scenario Setup data entry and your initial Planning page adjustments (e.g., setting the client's retirement spending, entering Contributions to investment accounts), you can click Recommendations in the top-right corner of the Planning page.

Prefer to watch a short video on this topic? Here's a 10-minute summary video of the Recommendations feature.

The Recommendations modal provides information about the client's Retirement Goal, whether it's over or underfunded, and ways that you can make it fully funded through adjusting their retirement age, spending or savings. To see what changes would allow you to make the plan fully funded, you can select Calculate in any of the 4 adjustment tiles. For instance, if you click Calculate in the Required Savings tile, it will determine the minimum additional annual savings required to make the plan fully funded.

Once you've selected Calculate and you see the adjustment that would be required (i.e., 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. 

NOTE: Once you Apply & Run the recommendations to your plan, your projections will be changed. There is no automatic way to revert back to your previous version. Therefore, it is highly recommended that you copy your existing plan first so that you can compare the two plans and your base plan is not lost.

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

Back to top
2

Retirement Goal

The first tile of the Recommendations feature is an overview of the client's Retirement Goal as it's currently entered into the plan. Key information includes the client's retirement age(s), target retirement spending, and whether the plan is over or underfunded.

It's not possible to directly change these numbers from the Recommendations modal. You can change the Retirement Age from Scenario Setup -> General. You can change the target Retirement Spending by adjusting the After-Tax Spending in real dollars on the Planning page. The goal status is a summary of the resulting plan and is defined as Overfunded if the Cash Balance plus Capital Assets minus Debts in the final year of the plan is greater than $0.

The rest of the Recommendations feature works by showing you what changes you can make to the plan to bring the funded status to 100% funded (where there's no excess and no shortfall).

There are 4 tiles that can help you to vary the assumptions in your plan to achieve this 100% funded status: Retirement Age, Sustainable Spending, Required/Available Savings, and Required/Available Lump Sum.

Back to top
3

Retirement Age

The Retirement Age tile finds the earliest retirement ages that make the goal funded.

If the goal is Underfunded, and you select Calculate, then 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 if so 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, after-tax spending, CPP/QPP start age) to be adjusted in line with the new Retirement Age.

The first three checkboxes are selected by default and you have the option to uncheck any of these or to check additional adjustments as you see fit. Here is a full overview of these adjustments and their assumptions. Once you Update your preferred adjustments, Snap will save these as your 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 (with the option in the bottom left of the modal to "Copy scenario before applying recommendations"). Or, you can 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.
Back to top
4

Sustainable Spending

The Sustainable Spending tile finds the maximum sustainable level of consistent spending beginning from the CFM Start Age.

If the goal is Overfunded, and you select Calculate, then Snap will determine how much more your client could spend starting from the stated 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 (with the option in the bottom left of the modal to "Copy scenario before applying recommendations"). Or, you can 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.

A full overview of Sustainable Scenarios is available here.

Back to top
5

Required/Available Savings

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 select 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 key numbers. The first is 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. The second number is the gross average annual savings/withdrawals without considering any tax implications. The third number is the net of tax average annual savings/withdrawals including both existing savings/withdrawals and the recommended additional savings/withdrawals. And the fourth and final number is the total gross average annual savings/withdrawals included in the plan before retirement.
You can then choose to Apply & Run (with the option in the bottom left of the modal to "Copy scenario before applying recommendations"). Or, you can 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.
This calculation uses a new tool called the CFM After-Tax Savings column.  If you select Apply & Run, the calculated value will replace your current values in the CFM Savings column. The CFM Savings column uses the CFM Order that allows you to specify your preferred order of deposits/withdrawals (e.g., registered accounts, then TFSA, then non-registered accounts). If you change your preferred CFM Order, the results for additional savings/withdrawals may also change.

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

  • The Gross Average Annual Savings (the second number in the tile, $17,783 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 $11,820 After-Tax Savings amount may allow for $19,000 Gross Savings if an RRSP is being used, instead of the previously calculated $17,783. Snap Projections will keep the plan updated for any changes so that the impact on the client's After-Tax Spending (ATS) remains constant.
  • Required/Available Savings are only calculated for the period in the plan before the year that 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 evenly. If the calculated required savings is $20,000, then Snap will enter $10,000 into the CFM After-Tax Savings column for each spouse. 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 Lump Sum value to your plan may result in a negative After-Tax Spending 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.
Back to top
6

Required/Available Lump Sum

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

If the goal is Underfunded, and you select Calculate, then Snap will determine how much more your client needs to save in the first year of the plan to achieve a 100% funded goal. If the goal is Overfunded, then Snap will determine how much your client could withdraw in the first year of the plan without running out of money in the projection.
The calculation provides four key numbers. The first is the total 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. The second number is the gross amount of savings/withdrawals without considering any tax implications. The third number is the net of tax savings/withdrawals including both existing savings/withdrawals and the recommended additional savings/withdrawals in the first year of the projection. And the fourth and final number is the total gross annual savings/withdrawals included in the first year of the projection.
You can then choose to Apply & Run (with the option in the bottom left of the modal to "Copy scenario before applying recommendations"). Or, you can 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.
This calculation uses a new tool called the CFM After-Tax Savings column.  If you select Apply & Run, the calculated value will replace your current values in the CFM Savings column in the first year of the plan. The CFM Savings column uses the CFM Order that allows you to specify your preferred order of deposits/withdrawals (e.g., registered accounts, then TFSA, then non-registered accounts). If you change your preferred CFM Order, the results for the lump sum savings/withdrawals may also change.

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

  • The Gross Savings (the second number in the tile, $37,507 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 $25,175 After-Tax Savings amount may allow for $40,000 Gross Savings if an RRSP is being used, instead of the previously calculated $37,507. Snap Projections will keep the plan updated for any changes so that the impact on the client's After-Tax Spending (ATS) 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 evenly. If the calculated required savings is $100,000, then Snap will enter $50,000 into the CFM After-Tax Savings column for each spouse. 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 After-Tax Spending 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.
Back to top
7

If you notice that the Recommendations button is greyed out, this likely means that you must first run the scenario to update your projections. 

If you've made a recent change to your plan, click the red Run Scenario button to apply the changes, and then you'll be able to access the Recommendations feature.

In the Recommendations modal, you may experience one of the following: Goal Status: 100% funded and the Calculate buttons not displayed, Calculate buttons are greyed out, or the calculation is Unable to find an answer.

1. Goal Status: 100% funded, no Calculate buttons are visible.

If the goal is 100% funded then you'll see there are no options to Calculate throughout the modal. This is caused by the fact that all calculations would return a result of 0 since no changes are required to bring the plan to a fully funded status.

If you want to calculate the Sustainable Spending value from a different Starting age, you'll first need to change the age in that tile before you can click Calculate.

2. Calculate buttons greyed out.

All Calculate buttons are unavailable while Snap Projections is running the calculations required to answer one of the tiles. Once Snap has completed the calculation the Calculate buttons will become available.

3. Unable to find an answer.

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 if there are no overrides placed in its Contribution column. You can use the CFM Savings along with manual overrides as shown here; however, our suggested best practice is to clear your overrides on all accounts before applying the CFM Savings recommendations.
  • No Capital Assets - The CFM Savings tool uses existing Capital Assets in the plan to make deposits and withdrawals. If there are insufficient assets, the tool may not work. You can find more detail 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 prior to the CFM Start Age. The CFM Start Age on the Planning page determines the age at which you can enter the client's desired After-Tax Spending. In order to use the Recommendations feature, you need to move the CFM Start Age to at least the 2nd year of the projections. 

  • Back to top

    Still need help? Contact Us Contact Us