Advanced Option: Enable Indexing of Base Expenses in Real Dollars

By default, the client's Base Expenses are entered in real dollars.  The inflation setting in your scenario is 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 spend $84,000 in 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. 

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 index the real dollar 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 confuse 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 and then Snap automatically takes inflation into account on top of that.