FAQ: How to Model a Defined Benefit Commuted Value Scenario

To evaluate taking a commuted value (CV) versus your regular defined benefit pension, you'll need to create two separate scenarios in the Planning > Projections section.

The first scenario will serve as your baseline and include the pension income as normal. The second scenario will model the commuted value.

This involves increasing your LIRA/LIF balance, adding any taxable income from the CV payout, and reducing your pension income to zero.

Create a New Scenario

Navigate to Planning > Projections and make a copy of your base scenario. Rename it something descriptive like "Commuted Value Scenario".

Increase Your LIRA/LIF Balance

In your new scenario, update the starting balance of your LIRA or LIF to reflect the commuted value transfer. This can be done by overriding the starting balance in Advanced Options.

  • Click on Advanced Options at the top right of the projections table.
  • Scroll down to your investment accounts and enter the new, higher LIRA/LIF balance.
  • Save your changes.
  • Note: If you don't have a LIRA/LIF field, you can add it in the Profile Section.

Step 3: Add Taxable Income

Often, a portion of a commuted value exceeds the Maximum Transfer Value (MTV) and is paid out as taxable cash. You'll want to add this to the specific year you receive the payout. Any blue value in the Income columns can be overridden with a specific value in that year.

  • Scroll down to the Table in the Projections section.
  • Open the Income columns using the ">" arrow.
  • Locate the "Other Taxable Income" column.
  • Double-click the blue number in the year of the payout to add an override for the taxable cash amount.
  • Save your override.

Reduce Pension Income to $0

Since you're taking the lump sum, you won't be receiving the ongoing pension payments in this scenario.

  • Stay in the Table and keep the Income columns open.
  • Find the column for your Defined Benefit Pension.
  • Add an override to reduce the pension income to $0 starting in the year of retirement.
  • Cascade this $0 override down to the end of your plan to ensure it persists.

Step 5: Recalculate and Compare

Once your overrides are saved, click "Recalculate" at the top of the page to integrate the changes. You can now use the Compare feature or toggle between your two scenarios to see which option provides a higher estate value or better success rate for your long-term plan.