WhatIfTab Documentation

The WhatIfTab is a powerful stress-testing tool that allows financial advisers to model various life events and assess their impact on a client's financial plan. By simulating scenarios such as market recessions, insurance events (death, TPD, trauma), income disruptions, inheritances, and career changes, advisers can identify vulnerabilities in the plan and ensure adequate protection.

This tab controls:

Life Event Scenarios: 12 different event types covering financial shocks, health events, career changes, and windfalls
Event Configuration: Detailed parameters for each event type including timing, magnitude, and financial impacts
Event Toggles: Enable/disable individual events and insurance payouts to test different scenarios
Payout Allocation: Flexible allocation of lump-sum payments (insurance, inheritance, severance) across savings, investments, and debt paydown
Multiple Events: Layer multiple events to test compound scenarios and identify cumulative risks

Event Types and Inputs

1. Market Recession

Simulates a market downturn affecting all investment and KiwiSaver funds based on their risk profiles.

Inputs:

Age: The age at which the recession occurs
Market Loss (%): The baseline percentage loss in market value (typically 20-50%)
Rebound Type: The recovery profile after the recession:
- Good: Fast, front-loaded recovery (V-shaped)
- Average: Steady, linear recovery
- Bad: Slow, back-loaded recovery (L-shaped)
Rebound Period (years): Duration for market to recover to pre-recession trend (1-15 years)

Use Cases:

Testing plan resilience against major market crashes (2008 GFC, 2000 dot-com bubble)
Understanding impact of timing (recession at retirement age vs. accumulation phase)
Comparing aggressive vs. conservative portfolio strategies during downturns

2. Death

Models the death of the main client or partner, including insurance payouts, income cessation, and expense adjustments.

Inputs:

Person: Main client or Partner
Age at Death: When the death occurs
Insurance Payout ($): Life insurance benefit received
Include Insurance: Toggle to test scenario with/without insurance payout
Payout Allocation: Distribution of insurance proceeds across:
- Investment Funds (1-5): Dollar amounts to each active fund
- Savings: Dollar amount to savings fund
- Property Debt Paydown: Dollar amounts to pay down specific loans on specific properties
Expense Reduction (%): Reduction in household expenses after death (default 40%)

Important Notes:

Only ONE death event can be active at a time (enabling a new death event disables all others)
Deceased person's income immediately stops permanently
If partner dies, their KiwiSaver balance transfers to surviving partner
Insurance toggle allows testing adequacy of coverage vs. no coverage

3. Total Permanent Disability (TPD)

Models permanent disability preventing the person from ever working again, with insurance payout and permanent income cessation.

Inputs:

Person: Main client or Partner
Age at Disability: When TPD occurs
Insurance Payout ($): TPD insurance benefit received
Include Insurance: Toggle to test with/without payout
Payout Allocation: Distribution across investments, savings, and property debt
Expense Reduction (%): Reduction in household expenses (default 40%, may increase due to medical/care costs)

Key Differences from Death:

Person remains alive (no KiwiSaver transfer)
May have different expense impacts (medical expenses vs. reduced living costs)
Affects household size for benefit calculations

4. Trauma/Critical Illness

Models a serious illness (cancer, heart attack, stroke) with temporary income and expense impacts during recovery period.

Inputs:

Person: Main client or Partner
Age at Event: When trauma occurs
Insurance Payout ($): Trauma insurance benefit (often $50k-$200k)
Include Insurance: Toggle to test with/without payout
Payout Allocation: Distribution across investments, savings, and property debt
Effect Period (years): Duration of recovery phase (typically 1-5 years)
Income Reduction (%): Percentage of income lost during recovery (default 50%)
Expense Reduction (%): Reduction in household expenses during recovery (default 20%)

Important Features:

Temporary event: income and expenses return to normal after Effect Period
Allows modeling partial return to work (50% income reduction = part-time work during recovery)
Payout helps cover income shortfall and medical expenses

5. Redundancy

Models involuntary job loss with severance package and unemployment period.

Inputs:

Person: Main client or Partner
Age at Redundancy: When job loss occurs
Severance Pay ($): One-time payment received (typically 1-6 months salary)
Unemployment Period (months): Duration without income before finding new job (typically 3-12 months)

Calculation Details:

Severance pay added directly to savings fund at event age
Person's income set to $0 for duration of unemployment period
Income resumes at previous level after unemployment period ends
No KiwiSaver contributions during unemployment period

6. Maternity/Paternity Leave

Models parental leave with two phases: primary leave period and gradual return-to-work transition.

Inputs:

Person: Main client or Partner
Age at Leave Start: When parental leave begins
Maternity Leave (months): Duration of primary leave (typically 6-12 months)
Income During Leave (%): Percentage of normal income received (typically 20% = parental leave payments)
Back-to-Work Period (months): Transition period with reduced hours (typically 3-12 months)
Income During Back-to-Work (%): Income during transition (typically 60-80% for part-time)

Calculation Phases:

Phase 1: Primary Leave

Duration: Maternity Leave months (e.g., 12 months)
Income = Normal Income × (Income During Leave % / 100)
Example: $80,000 × 20% = $16,000 (parental leave payments)

Phase 2: Back-to-Work Transition

Duration: Back-to-Work Period months (e.g., 6 months)
Income = Normal Income × (Income During Back-to-Work % / 100)
Example: $80,000 × 60% = $48,000 (part-time/flexible work)

Phase 3: Full Return

After both periods complete, income returns to 100%

Example Timeline:

Age 32, Month 1-12: Primary leave at 20% income ($16,000)
Age 33, Month 1-6: Back-to-work at 60% income ($48,000)
Age 33, Month 7+: Full return at 100% income ($80,000)

7. Inheritance

Models receiving a lump-sum inheritance or windfall.

Inputs:

Age at Inheritance: When funds are received
Amount ($): Total inheritance value
Payout Allocation: Distribution across investments, savings, and property debt

Features:

Tax-free lump sum (NZ has no inheritance tax)
Flexible allocation to any combination of destinations
Can be used strategically (e.g., pay down mortgage, boost investments, build cash reserve)

8. Temporary Leave

Models a career break, sabbatical, or extended unpaid leave with optional household scope.

Inputs:

Person: Main, Partner, or Household (both partners)
Age at Leave Start: When leave begins
Leave Duration (months): How long the leave lasts (typically 3-24 months)
Income During Leave (%): Percentage of income received (often 0% for unpaid leave)
Expense Reduction (%): Reduction in expenses during leave (e.g., 10% due to no commuting/work costs)

Use Cases:

Sabbaticals for travel or personal development
Extended unpaid leave for caregiving
Gap year or career transition periods
Household option for couples taking synchronized leave

9. Part Time Work

Models transitioning from full-time to part-time work, either permanently or temporarily.

Inputs:

Person: Main client or Partner
Age at Change: When transition to part-time occurs
Part Time Income (%): Percentage of full-time income (typically 50-80%)
Permanent Change: Whether the change is permanent or temporary
Duration (months): If temporary, how long part-time work lasts (only shown for temporary)
Expense Reduction (%): Reduction in expenses (e.g., 5% due to reduced commuting/childcare)

Calculation:

If Permanent:
  From Age at Change onwards: Income = Normal Income × (Part Time Income % / 100)

If Temporary:
  For Duration months: Income = Normal Income × (Part Time Income % / 100)
  After Duration: Income returns to 100%

Example Scenarios:

Permanent: Retire at 55, work part-time (50%) until 65
Temporary: Part-time (60%) for 18 months while caring for elderly parent
Semi-retirement strategy: Gradual wind-down via part-time work

10. Salary Change

Models a permanent change in income level at a specific age due to career progression or change.

Inputs:

Person: Main client or Partner
Age at Salary Change: When the change occurs
Income Change (%): Percentage change in salary (positive or negative)
- Positive examples: +10% (promotion), +20% (career advancement)
- Negative examples: -15% (demotion), -30% (career change)
Reason: Categorization for planning notes
- Promotion
- Demotion
- Career Change
- Industry Change
- Performance Review
- Other

Calculation:

New Annual Income = Previous Annual Income × (1 + Income Change % / 100)

Example 1 (Promotion):
Previous Income: $80,000
Change: +15%
New Income = $80,000 × 1.15 = $92,000

Example 2 (Career Change):
Previous Income: $120,000
Change: -25%
New Income = $120,000 × 0.75 = $90,000

Important Notes:

Change is permanent and applies from the specified age onwards
Normal inflation continues to apply to the new salary level
KiwiSaver contributions adjust proportionally to new income

11. Education/Training

Models returning to education or undertaking professional training with associated costs and income changes.

Inputs:

Person: Main client or Partner
Age at Education Start: When education begins
Duration (months): How long the education period lasts (e.g., 24 months for 2-year degree)
Income During Education (%): Income level while studying (often 0% for full-time study, or 30-50% for part-time study)
Annual Education Costs ($): Yearly tuition and associated costs
Post-Education Income Increase (%): Permanent income boost after completion (e.g., 20% after gaining qualification)

Calculation Timeline:

Phase 1: During Education

Duration: Education Duration months
Income = Normal Income × (Income During Education % / 100)
Additional Expense = Annual Education Costs (prorated monthly)

Example:
Normal Income: $70,000
Income During Education: 0% (full-time study)
Education Costs: $25,000/year
Monthly Shortfall = ($70,000 - $0 + $25,000) / 12 = $7,917/month drawn from savings/investments

Phase 2: After Education

From completion onwards:
New Income = Normal Income × (1 + Post-Education Income Increase % / 100)

Example:
Previous Income: $70,000
Post-Education Increase: 25%
New Income = $70,000 × 1.25 = $87,500

Strategic Considerations:

Evaluate return on investment: cost of education vs. lifetime income increase
Plan for cashflow impact during study period
Consider timing relative to other goals (e.g., before having children)

12. Income Protection

Models a temporary inability to work with optional income protection insurance coverage.

Inputs:

Person: Main client or Partner
Age at Event: When the inability to work occurs
Income Reduction (%): Percentage of income lost (often 100% for complete inability)
Income Protection (%): Insurance coverage percentage (typically 75-80% of income)
Include Insurance: Toggle to test with/without insurance
Duration (months): How long the inability to work lasts (typically 3-12 months)

Calculation:

If Insurance Included:
  Actual Income Loss = Income Reduction % × (100% - Income Protection %)
  Effective Income = Normal Income × (1 - Actual Income Loss / 100)

If Insurance NOT Included:
  Effective Income = Normal Income × (1 - Income Reduction % / 100)

Example Scenarios:

Scenario 1: With Income Protection

Normal Income: $100,000
Income Reduction: 100% (complete inability to work)
Income Protection: 80%
Duration: 6 months

Actual Income Loss = 100% × (100% - 80%) = 20%
Effective Income = $100,000 × (1 - 20/100) = $80,000

Result: Receive $80,000 during 6-month period (80% replacement from insurance)

Scenario 2: Without Income Protection

Normal Income: $100,000
Income Reduction: 100%
Duration: 6 months

Effective Income = $100,000 × (1 - 100/100) = $0

Result: $0 income for 6 months, must draw from savings/investments

Strategic Planning:

Compare insurance cost vs. risk of income loss
Understand waiting periods (often 4-13 weeks before payments begin)
Consider benefit period limits (often 2-5 years maximum)

Payout Allocation System

For events that generate lump-sum payments (Death, TPD, Trauma, Inheritance, and in some cases Redundancy), the system provides flexible allocation options.

Monetary Allocation (Current System)

The system uses direct dollar amounts for precise control:

Investment Fund Allocations:

Allocate specific dollar amounts to each of up to 5 active investment funds
Funds are labeled with their custom descriptions (e.g., "Growth Portfolio", "Conservative Fund")

Savings Allocation:

Direct dollar amount to add to the savings fund
Builds cash reserves or increases liquidity

Property Debt Paydown:

Property-Level: Each enabled property is listed with its title
Loan-Level: Within each property, all active loans are shown individually
Current Balance Display: Each loan shows its balance at the event age
Individual Paydown Amounts: Specify exact dollar amount to pay down each specific loan
Maximum Validation: Cannot exceed the current loan balance

Real-Time Tracking:

Total Allocated: Sum of all allocations
Remaining: Difference between payout and total allocated
Color-Coded: Green when fully allocated (remaining = $0), red otherwise

Loan-Level Debt Paydown Example

Scenario:

Age at Event: 45
Total Insurance Payout: $500,000

Property 1: Main Home (2 loans)
  Loan 1 - Original Mortgage: Balance at age 45 = $280,000
  Loan 2 - Renovation Loan: Balance at age 45 = $45,000

Property 2: Investment Property (1 loan)
  Loan 1 - Investment Loan: Balance at age 45 = $320,000

Allocation Decision:
  Investment Fund 1 (Growth): $150,000
  Investment Fund 2 (Conservative): $50,000
  Savings: $50,000
  Main Home - Loan 1: $150,000 (reduces to $130,000)
  Main Home - Loan 2: $45,000 (pays off completely)
  Investment Property - Loan 1: $55,000 (reduces to $265,000)

Total Allocated: $500,000 ✓

Result:

Main Home: Loan 1 principal reduced by $150,000, Loan 2 completely paid off
Investment Property: Principal reduced by $55,000
Future monthly payments on paid-down loans are reduced accordingly
Tax-deductible interest on investment property loan is reduced (less interest to claim)

Debt Balance Calculation at Event Age

The system automatically calculates the remaining balance on each loan at the event age, accounting for:

Years of standard principal+interest payments made
Additional lump sum repayments (if configured in Property Tab)
Interest-only periods (where only interest is paid, principal remains unchanged)
Property purchase age (if purchased after starting age)

Formula:

For each loan at event age:
1. Determine actual start age of loan (purchase age or starting age)
2. Calculate years of payments made = Event Age - Loan Start Age
3. If years >= Loan Term: Balance = $0 (loan already paid off)
4. Calculate remaining balance using standard amortization formula
5. Subtract any additional repayments made between start and event age
6. Return max(0, calculated balance)

Event Toggles and Insurance Controls

Event Enable/Disable

Each event has a toggle switch allowing it to be enabled or disabled without deletion:

Enabled Events: Included in financial calculations and impact the plan
Disabled Events: Retained in configuration but excluded from calculations
Use Case: Quickly compare scenarios with/without specific events

Insurance Payout Toggle

Events with insurance components (Death, TPD, Trauma, Income Protection) have a second toggle:

Include Insurance = ON: Event occurs AND insurance payout is received
Include Insurance = OFF: Event occurs but NO insurance payout (tests adequacy of coverage)
Strategic Use: Compare insured vs. uninsured scenarios to justify insurance recommendations

Example Comparison:

Death Event at Age 50:
  Scenario A (Insurance ON):
    - Income stops
    - $800,000 payout received and invested
    - Plan remains viable with 85% success rate

  Scenario B (Insurance OFF):
    - Income stops
    - No payout
    - Plan fails at age 62 (investments depleted)

Conclusion: Demonstrates critical need for $800,000 life insurance

Death Event Exclusivity

Only one death event can be active at a time:

Enabling a new death event automatically disables all other death events
This prevents illogical scenarios (both partners dying at different ages in the same scenario)
Other event types can have multiple active instances

Calculations and Financial Impacts

1. Market Recession Calculations

Step 1: Calculate Equity Factor from Standard Deviation Each fund has a standard deviation representing its risk/volatility. This determines its sensitivity to market downturns:

Equity Factor = Fund Standard Deviation / 10

Examples:
Conservative Fund (Std Dev 5%): Equity Factor = 0.5
Balanced Fund (Std Dev 8%): Equity Factor = 0.8
Growth Fund (Std Dev 12%): Equity Factor = 1.2
Aggressive Fund (Std Dev 15%): Equity Factor = 1.5

Step 2: Apply Adjusted Market Loss

Adjusted Loss % = Base Market Loss % × Equity Factor
Fund Value After Recession = Current Fund Value × (1 - Adjusted Loss % / 100)

Example with 30% Base Market Loss:

Conservative Fund (Std Dev 5%, Equity Factor 0.5):
  Adjusted Loss = 30% × 0.5 = 15%
  Value Before: $200,000
  Value After: $200,000 × (1 - 0.15) = $170,000
  Loss: $30,000

Growth Fund (Std Dev 12%, Equity Factor 1.2):
  Adjusted Loss = 30% × 1.2 = 36%
  Value Before: $200,000
  Value After: $200,000 × (1 - 0.36) = $128,000
  Loss: $72,000

Step 3: Market Rebound Over Recovery Period The rebound path is determined by the Rebound Type over the specified Rebound Period:

Good Rebound (V-Shaped): Front-loaded recovery

Year 1: 50% of recovery completed
Year 2: 30% of recovery completed
Year 3: 20% of recovery completed

Average Rebound: Linear recovery

Recovery % per year = 100% / Rebound Period years
Example (3-year period): 33.3% per year

Bad Rebound (L-Shaped): Back-loaded recovery

Year 1: 20% of recovery completed
Year 2: 30% of recovery completed
Year 3: 50% of recovery completed

Complete Example:

Growth Fund (Std Dev 12%):
  Value Before Recession: $300,000
  Base Market Loss: 30%
  Adjusted Loss: 30% × 1.2 = 36%
  Value After Recession: $300,000 × 0.64 = $192,000
  Loss to Recover: $108,000

Rebound: Average, 3 years
  Year 1: $192,000 + ($108,000 × 33%) = $227,640
  Year 2: $227,640 + ($108,000 × 33%) = $263,280
  Year 3: $263,280 + ($108,000 × 34%) = $300,000 (fully recovered)

Important Notes:

During rebound period, normal return calculations are overridden by recovery path
After full recovery, fund resumes normal Monte Carlo return simulation
Lower standard deviation = lower loss but also potentially slower rebound
All investment and KiwiSaver funds are affected simultaneously

2. Death Calculations

Step 1: Income Impact

Deceased Person's Primary Income = $0 (immediately and permanently)
Deceased Person's Additional Incomes = $0 (all additional incomes stop)
Deceased Person's KiwiSaver Contributions = $0 (no contributions)

If Partner Dies and Surviving Partner Exists:
  Surviving Partner's KiwiSaver Balance += Deceased Partner's KiwiSaver Balance
  Deceased Partner's KiwiSaver Balance = $0

Step 2: Insurance Payout Allocation (if Include Insurance = ON)

Total Payout = Insurance Payout amount

For each Investment Fund allocation:
  Investment Fund Balance += Allocated Amount

Savings Balance += Savings Allocation Amount

For each Property Debt Paydown:
  For each Loan on Property:
    Loan Principal Balance -= Paydown Amount
    (Cannot reduce below $0)

Step 3: Expense Adjustment

New Annual Expenses = Previous Annual Expenses × (1 - Expense Reduction % / 100)

Example:
Previous Annual Expenses: $85,000
Expense Reduction: 40%
New Annual Expenses = $85,000 × (1 - 0.40) = $51,000
Savings: $34,000/year

Complete Example: Death of Main Client at Age 55

Before Event:
  Main Client Income: $120,000/year
  Partner Income: $60,000/year
  Main Client KiwiSaver: $250,000
  Partner KiwiSaver: $180,000
  Annual Expenses: $90,000
  Investment Fund Balance: $400,000

Event Configuration:
  Insurance Payout: $600,000 (Include Insurance: ON)
  Allocation:
    Investment Fund 1: $300,000
    Investment Fund 2: $150,000
    Savings: $100,000
    Main Property Loan 1 Paydown: $50,000
  Expense Reduction: 40%

After Event (Age 55+):
  Main Client Income: $0 (deceased)
  Partner Income: $60,000/year (unchanged)
  Household Income: $60,000/year (50% reduction)

  KiwiSaver Balances:
    Main Client: $0 (deceased)
    Partner: $180,000 + $250,000 = $430,000 (inherited)

  Investment Balances:
    Investment Fund 1: $400,000 + $300,000 = $700,000
    Investment Fund 2: $0 + $150,000 = $150,000

  Savings Balance: Previous + $100,000

  Main Property Loan 1: Principal reduced by $50,000

  Annual Expenses: $90,000 × 0.60 = $54,000

  Net Annual Cashflow: $60,000 - $54,000 = $6,000 (positive)
  Plus: Investment returns, KiwiSaver growth

3. TPD Calculations

Similar to Death calculations with these differences:

No KiwiSaver Transfer: Person remains alive, retains their KiwiSaver
Household Composition: Both partners remain for benefit calculations
Expense Considerations: May have different expense reduction (could be lower or negative if medical/care costs increase)

4. Trauma/Critical Illness Calculations

Temporary Impact (During Effect Period):

Affected Person's Income = Normal Income × (1 - Income Reduction % / 100)
Annual Expenses = Normal Expenses × (1 - Expense Reduction % / 100)

Duration: Effect Period years

Insurance Payout (at Event Age, if Include Insurance = ON):

Payout allocated to investments, savings, and debt paydowns as configured

After Effect Period Ends:

Affected Person's Income = Normal Income (resumes to 100%)
Annual Expenses = Normal Expenses (resumes to 100%)

Example: Trauma Event at Age 48

Normal Annual Income: $95,000
Normal Annual Expenses: $78,000

Event Configuration:
  Insurance Payout: $100,000
  Allocation: $60,000 to Investments, $40,000 to Savings
  Effect Period: 2 years
  Income Reduction: 50%
  Expense Reduction: 20%

Year 1 (Age 48 - Event Year):
  Income: $95,000 × 50% = $47,500
  Expenses: $78,000 × 80% = $62,400
  Shortfall: $14,900 (drawn from payout/investments)
  Insurance Payout Received: $100,000 allocated

Year 2 (Age 49 - Still in Effect Period):
  Income: $95,000 × 50% = $47,500
  Expenses: $78,000 × 80% = $62,400
  Shortfall: $14,900

Year 3+ (Age 50+ - After Effect Period):
  Income: $95,000 (full recovery)
  Expenses: $78,000 (normal)
  Surplus: $17,000 (resumes positive cashflow)

5. Redundancy Calculations

At Event Age:

Severance Pay added to Savings Fund
Affected Person's Income = $0

During Unemployment Period:

For each month of Unemployment Period:
  Affected Person's Income = $0
  (Other income sources and expenses continue normally)

After Unemployment Period:

Affected Person's Income = Normal Income (resumes)

Example: Redundancy at Age 42

Normal Annual Income: $110,000 (= $9,167/month)
Severance Pay: $30,000 (3 months salary)
Unemployment Period: 6 months

Month 1 (Age 42):
  Severance received: Savings += $30,000
  Income: $0

Months 1-6 (Age 42-43):
  Monthly Income: $0
  Monthly Income Shortfall: $9,167
  Total Shortfall: $9,167 × 6 = $55,000
  Source: Drawn from severance + savings + investments

Month 7+ (Age 43+):
  Monthly Income: $9,167 (re-employed)
  Income resumes at previous level

6. Maternity Leave Calculations

Timeline with Monthly Cashflow:

Phase 1 - Maternity Leave (e.g., 12 months):
  Monthly Income = (Annual Income / 12) × (Income During Leave % / 100)

Phase 2 - Back-to-Work (e.g., 6 months):
  Monthly Income = (Annual Income / 12) × (Income During Back-to-Work % / 100)

Phase 3 - Full Return:
  Monthly Income = Annual Income / 12 (normal)

Example: Maternity Leave at Age 33

Normal Annual Income: $85,000 (= $7,083/month)
Maternity Leave: 12 months at 20% income
Back-to-Work: 6 months at 60% income

Months 1-12 (Age 33-34, Maternity Leave):
  Monthly Income: $7,083 × 20% = $1,417
  Monthly Shortfall (vs. normal): $5,667
  Annual Shortfall: $5,667 × 12 = $68,000
  Source: Government parental leave payments ($1,417/month) + drawn from savings

Months 13-18 (Age 34, Back-to-Work):
  Monthly Income: $7,083 × 60% = $4,250
  Monthly Shortfall (vs. normal): $2,833
  6-Month Shortfall: $2,833 × 6 = $17,000

Month 19+ (Age 34+, Full Return):
  Monthly Income: $7,083 (normal)
  No shortfall

Total Income Shortfall over 18 months: $68,000 + $17,000 = $85,000

7. Inheritance Calculations

At Event Age:
  Inheritance Amount received as lump sum (tax-free in NZ)

Allocation:
  For each Investment Fund: Fund Balance += Allocated Amount
  Savings Balance += Savings Allocation Amount
  For each Property Loan: Loan Principal -= Paydown Amount

Example: $200,000 Inheritance at Age 52

Allocation:
  Investment Fund 1 (Growth): $80,000
  Investment Fund 2 (Balanced): $40,000
  Savings: $30,000
  Main Home Loan Paydown: $50,000

Result at Age 52:
  Investment Fund 1: Previous + $80,000
  Investment Fund 2: Previous + $40,000
  Savings: Previous + $30,000
  Main Home Loan: Principal reduced by $50,000

Tax Impact: None (NZ has no inheritance tax)

8. Temporary Leave Calculations

Person-Level:

If Person = Main or Partner:
  Affected Person's Income = Normal Income × (Income During Leave % / 100)

If Person = Household:
  Main Client Income = Normal Main Income × (Income During Leave % / 100)
  Partner Income = Normal Partner Income × (Income During Leave % / 100)

Expense Adjustment:

Annual Expenses = Normal Expenses × (1 - Expense Reduction % / 100)

Duration:

For Duration months: Apply income and expense adjustments
After Duration: Resume normal income and expenses

Example: Household Temporary Leave for 9 months

Normal Main Income: $95,000
Normal Partner Income: $70,000
Total Household Income: $165,000
Normal Expenses: $88,000

Event Configuration:
  Leave Duration: 9 months
  Income During Leave: 0% (unpaid sabbatical)
  Expense Reduction: 15% (reduced living costs while traveling)

During 9-month Leave:
  Main Income: $0
  Partner Income: $0
  Household Income: $0
  Expenses: $88,000 × 85% = $74,800

  Monthly Expense: $74,800 / 12 = $6,233
  9-Month Expense Total: $6,233 × 9 = $56,100
  Source: Drawn from savings/investments

After Leave (Month 10+):
  Income: $165,000 (normal)
  Expenses: $88,000 (normal)

9. Part-Time Work Calculations

If Permanent:

From Event Age onwards permanently:
  Affected Person's Income = Normal Income × (Part Time Income % / 100)

If Temporary:

For Duration months:
  Affected Person's Income = Normal Income × (Part Time Income % / 100)

After Duration:
  Affected Person's Income = Normal Income (resumes to 100%)

Expense Adjustment (both cases):

Annual Expenses = Normal Expenses × (1 - Expense Reduction % / 100)

Example 1: Permanent Part-Time at Age 60

Normal Annual Income: $92,000
Part Time Income: 50% (3 days/week)
Expense Reduction: 8%
Is Permanent: Yes

From Age 60 onwards:
  Annual Income: $92,000 × 50% = $46,000
  Annual Expenses: Previous Expenses × 92% = 8% reduction
  Income Reduction: $46,000/year

Age 65+:
  Still earning $46,000 (plus inflation adjustments)
  Plus NZ Superannuation begins

Example 2: Temporary Part-Time for 24 months

Normal Annual Income: $78,000
Part Time Income: 70% (4 days/week)
Duration: 24 months
Expense Reduction: 5%

Months 1-24:
  Annual Income: $78,000 × 70% = $54,600
  Monthly Income: $4,550
  Income Reduction: $23,400/year

Month 25+:
  Annual Income: $78,000 (returns to full-time)
  Monthly Income: $6,500 (normal)

10. Salary Change Calculations

Permanent adjustment applied from Event Age onwards:

New Annual Income = Previous Annual Income × (1 + Income Change % / 100)

All future income (including inflation adjustments) based on new level
KiwiSaver contributions recalculate based on new income

Example 1: Promotion (+20%) at Age 38

Age 37: $85,000
Age 38+ (after promotion): $85,000 × 1.20 = $102,000

With 2% inflation:
  Age 39: $102,000 × 1.02 = $104,040
  Age 40: $104,040 × 1.02 = $106,121
  etc.

Example 2: Career Change (-30%) at Age 44

Age 43: $135,000
Age 44+ (after career change): $135,000 × 0.70 = $94,500

Impact:
  Income reduction: $40,500/year
  KiwiSaver contribution reduction: $40,500 × (Employee % + Employer %)
  May improve work-life balance, reduce stress (qualitative benefit)

11. Education/Training Calculations

During Education Period:

For each year of Education Duration:
  Affected Person's Income = Normal Income × (Income During Education % / 100)
  Additional Annual Expense = Education Costs
  Net Annual Shortfall = (Normal Income - Adjusted Income) + Education Costs

After Education Completion:

From completion year onwards permanently:
  Affected Person's Income = Normal Income × (1 + Post-Education Income Increase % / 100)

ROI Calculation:

Total Cost = (Income Reduction × Duration) + (Education Costs × Duration years)
Annual Benefit = Normal Income × (Post-Education Income Increase % / 100)
Payback Period = Total Cost / Annual Benefit

If Payback Period < Years Until Retirement: Financially beneficial

Example: MBA at Age 35

Normal Annual Income: $90,000
Duration: 24 months (2 years)
Income During Education: 0% (full-time study)
Annual Education Costs: $35,000
Post-Education Income Increase: 40%

Years 1-2 (Age 35-37):
  Income: $0
  Education Costs: $35,000/year
  Annual Shortfall: $90,000 + $35,000 = $125,000/year
  Total 2-Year Cost: $250,000

From Age 37+ (after MBA):
  New Income: $90,000 × 1.40 = $126,000
  Annual Income Increase: $36,000

ROI Analysis:
  Total Investment: $250,000
  Annual Benefit: $36,000
  Payback Period: $250,000 / $36,000 = 6.9 years
  Break-Even Age: 44
  If retire at 65: 21 years of increased income = $756,000 additional lifetime earnings
  Net Benefit (undiscounted): $756,000 - $250,000 = $506,000

12. Income Protection Calculations

If Include Insurance = ON:

Actual Income Reduction % = Income Reduction % × (100% - Income Protection %) / 100
Effective Income = Normal Income × (1 - Actual Income Reduction % / 100)

If Include Insurance = OFF:

Effective Income = Normal Income × (1 - Income Reduction % / 100)

Duration:

For Duration months: Apply adjusted income
After Duration: Income returns to Normal Income

Example: Income Protection Event at Age 47

Normal Annual Income: $105,000 (= $8,750/month)
Income Reduction: 100% (complete inability to work)
Income Protection: 75%
Duration: 12 months
Include Insurance: ON

Calculation:
  Actual Income Reduction = 100% × (100% - 75%) / 100 = 25%
  Effective Income = $105,000 × (1 - 25/100) = $78,750
  Monthly Income: $6,563

Months 1-12:
  Received: $6,563/month from income protection insurance
  Lost: $2,188/month vs. normal income
  Annual Shortfall: $2,188 × 12 = $26,250 (drawn from savings)

Month 13+:
  Income returns to $8,750/month (normal)

Comparison Without Insurance (Include Insurance = OFF):
  Actual Income Reduction = 100%
  Monthly Income: $0
  Annual Shortfall: $8,750 × 12 = $105,000 (full year of income lost)

Value of Insurance: $105,000 - $26,250 = $78,750 received from insurance

Strategic Scenario Planning

Layering Multiple Events

Multiple events can be active simultaneously to model compound scenarios:

Example: Testing Realistic Life Path

Age 35: Maternity Leave (Event 1)
Age 38: Part-Time Work for 5 years (Event 2)
Age 43: Market Recession (Event 3)
Age 48: Trauma Event (Event 4)
Age 50: Inheritance (Event 5)

This models: Starting family → Reduced work → Market crash → Health scare → Windfall
Tests: Can the plan survive this realistic but challenging sequence?

Common Scenario Combinations

1. Young Family Scenario:

Maternity Leave at 32
Part-Time Work at 34 (5 years)
Salary Change at 39 (career progression after returning full-time)

2. Mid-Career Disruption:

Redundancy at 45
Education/Retraining at 46 (18 months)
Salary Change at 48 (career change to new industry, -15% income)

3. Pre-Retirement Transition:

Part-Time Work at 60 (permanent, 60% income)
Death of Partner at 62 (without insurance, to test vulnerability)
Inheritance at 67 (parental estate)

4. Health and Protection Analysis:

Trauma Event at 42 (with insurance)
Compare vs. same event without insurance
Demonstrates value of trauma cover

5. Market Timing Risk:

Market Recession at 64 (just before retirement)
Tests: Impact of poor sequence of returns
Compare: Conservative vs. Growth portfolio outcomes

Testing Insurance Adequacy

Use event toggles strategically:

Death Cover Assessment:

Step 1: Configure Death Event at key age (e.g., 45)
Step 2: Set current insurance payout amount
Step 3: Run scenario WITH insurance (Include Insurance = ON)
Step 4: Note: Success rate, age when funds depleted (if applicable)
Step 5: Run scenario WITHOUT insurance (Include Insurance = OFF)
Step 6: Compare: Difference in outcomes
Step 7: Adjust: Increase/decrease payout amount to find optimal coverage

Example Results:

Death at 45, Current Cover $500,000:
  With Insurance: 68% success rate, household viable to age 82
  Without Insurance: 22% success rate, household runs out of funds at age 71

Testing $750,000 Coverage:
  With Insurance: 85% success rate, household viable to age 95
  Conclusion: Recommend increasing cover to $750,000 (50% increase)

Sensitivity Analysis

Test plan sensitivity to event timing and magnitude:

Timing Sensitivity:

Death at 40 vs. 50 vs. 60: Which timing is most vulnerable?
Recession at 35 (accumulation) vs. 64 (pre-retirement): Which is worse?

Magnitude Sensitivity:

Market Loss: 20% vs. 30% vs. 40%: At what point does plan fail?
Expense Reduction after Death: 30% vs. 40% vs. 50%: Test realism of assumptions

Visualization and Reporting

When What-If events are enabled, financial projections show:

Event Markers: Visual indicators on timeline charts showing when events occur
Cashflow Impact: Step changes in income/expense lines at event ages
Balance Trajectories: Jumps or drops in investment/savings balances
Success Rate Changes: How events affect Monte Carlo success rates
Comparison Mode: Side-by-side base case vs. what-if scenario results

Best Practices for Financial Advisers

1. Start with Base Case: Always establish a viable base plan before adding What-If events

2. Test One Variable at a Time: When diagnosing issues, change one event parameter at a time to isolate impact

3. Use Realistic Assumptions:

Market Loss: Historical recessions range 20-50%
Expense Reduction after Death: Typically 30-50% for couples
Income Protection: Standard policies cover 75-80% of income
Unemployment Period: Average job search 3-9 months

4. Layer Events Gradually: Start with single events, then add complexity to test compound scenarios

5. Compare Insurance Scenarios: Always test both "Include Insurance = ON" and "OFF" to demonstrate value of coverage

6. Document Event Reasoning: Use event descriptions and reasons to document why each scenario is relevant to client

7. Test Sequence of Returns Risk: Place market recession events at critical ages (near retirement) to test vulnerability

8. Validate Payout Allocations: Ensure allocations sum to 100% of payout amount before saving event

9. Consider Tax Implications: Remember that insurance payouts are generally tax-free in NZ, but debt paydowns reduce tax-deductible interest

10. Review Event Interactions: Some events may interact (e.g., death event transfers KiwiSaver to partner, affecting their retirement income)

Wealthie Documentation

Documentation

Documentation

WhatIfTab Documentation

Event Types and Inputs

1. Market Recession

2. Death

3. Total Permanent Disability (TPD)

4. Trauma/Critical Illness

5. Redundancy

6. Maternity/Paternity Leave

7. Inheritance

8. Temporary Leave

9. Part Time Work

10. Salary Change

11. Education/Training

12. Income Protection

Payout Allocation System

Monetary Allocation (Current System)

Loan-Level Debt Paydown Example

Debt Balance Calculation at Event Age

Event Toggles and Insurance Controls

Event Enable/Disable

Insurance Payout Toggle

Death Event Exclusivity

Calculations and Financial Impacts

1. Market Recession Calculations

2. Death Calculations

3. TPD Calculations

4. Trauma/Critical Illness Calculations

5. Redundancy Calculations

6. Maternity Leave Calculations

7. Inheritance Calculations

8. Temporary Leave Calculations

9. Part-Time Work Calculations

10. Salary Change Calculations

11. Education/Training Calculations

12. Income Protection Calculations

Strategic Scenario Planning

Layering Multiple Events

Common Scenario Combinations

Testing Insurance Adequacy

Sensitivity Analysis

Visualization and Reporting

Best Practices for Financial Advisers