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Understanding the Software Better / How inStream Works

The software is based on Inflows and Outflows. With 'Income' used to model any inflows into the accounts and 'Goals (and Fees)' used to model any outflows from the accounts. So for example, Payroll, Social Security, Pensions, and the sale of assets would be inflows into the account. And any outflows such as expenses, expenditures, or retirement spending needs would be set as a 'Goal' (or outflow from the account).

Everything else in the profile such as Insurance, Properties, and Liabilities are additional information used for the Net Worth statement and have no impact on the plan's probability of success.

The Monte Carlo analysis determines the plan's probability of success. The ingredients needed for the Monte Carlo analysis are: Income, Account, Goals, Fees, Allocations, and Taxes. The Monte Carlo runs 1,000 simulations based on these variables.

To generate the plan’s probability of success, we simply look at how many of the 1,000 simulations ran out of money. The simulations are determined by the 'Allocation' model (or Investment Model) used in the plan, ie the Gross Average Return and Standard Deviation. If a simulated path meets all of the 'Goals' it is a success. If it does not meet all of the 'Goals' in the plan it is not successful. The plans probability of success is the percentage of the simulated paths that were successful.

To understand the probability of success better and why a plan was successful or not it is best to look at the Cash Flow report. Below is an article that breaks down the Cash Flow report:
https://support.instreamwealth.com/hc/en-us/articles/360000025860-How-to-Read-the-Cash-Flow-Report

Click the link below to access our InStream Academy which is a step-by-step video and article guide:
https://instream.zendesk.com/hc/en-us/categories/200150915

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