by John Darer® CLU ChFC MSSC CeFT RSP CLTC
What is Settlement Planning?
Settlement planning is a comprehensive and collaborative holistic approach to guiding individuals in making informed fiancnial decisions related to incoming settlements and other significant life events, each with their own life tranistion experience. The financial decisions that must be made are unique to each person’s transition and requires, experience, patience, empathy and the ability to educate. Settlement planning is more involved than simply selling a product, although you will find me highly capable should the need arise.
What does “Stochastic Analysis” or ” Monte Carlo Simulation” Mean?
Stochastic analysis or Monte Carlo simulation is a scientific tool used to attempt to predict the probability of outcomes using multiple variables. Instead of “If P then Q” it’s “If P and A and K and then C, what are the chances of Q?”.
Individuals may fail to accomplish a goal due to linear thinking, neglecting to take significant variables into account
For example you recover a $500,000 settlement or have $500,000 sitting in your retirement account and want to know how much you can safely spend each year so that the money will not run out before you die. Can you think of any variables that could impact the answer today, or down the road?
- How about unexpected repairs?
- Unexpected health issues? Future need for long term care? Insurance in place?
- Inflation?
- Interest rates?
- Death in the family?
- Kids dependent and living at home past age 21
- Parents become dependent and/or have long term care needs
- Expecting a new baby
- Expecting an unexpected new baby and
The list goes on…
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