The ‘Discount rate used for optimization’ setting can be used to apply a discount rate to the Social Security Optimization tool. This setting can be found in the Gear Icon > Settings > Other Assumptions tab of each client plan:
Advisors can either choose between general inflation, or enter a customized discount percentage.
General inflation: When ‘General Inflation’ is chosen, the discount rate will mirror your General Inflation Rate. This will functionally bring all future Social Security benefits back into today’s dollars, much like the ‘Today’s Dollars’ toggle in the Retirement Analysis.
Customized discount rate: When ‘Customized discount rate’ is chosen, a custom discount percentage can be entered. The discount rate will reduce all future Social Security benefits by the percentage indicated. Unlike the ‘Adjust benefits starting in the future’ setting, which has a direct impact on social security benefit amounts within the plan, the Discount rate will result in the following changes:
- Within the Retirement > Social Security tab, all filing strategies for Social Security will be recalculated using the new, discounted values. This can potentially result in changes to the filing ages used by the Optimal Strategy in both the Social Security module, and the Retirement Analysis module.
- A ‘Discounted Values’ toggle will be added to the Retirement > Social Security tab, allowing advisors to toggle back and forth between discounted and non-discounted values for both the ‘Annual Cash Flow Comparison’ and ‘Cumulative Cash Flow Comparison’ charts.
The ‘Discounted Values’ switch does not impact the optimal Social Security strategy that is calculated and displayed in the Retirement > Social Security > Action Items. The Optimal Strategy recommendation will always be shown based on your chosen discount rate.
