{"id":8119,"date":"2017-11-05T10:15:55","date_gmt":"2017-11-05T18:15:55","guid":{"rendered":"http:\/\/canary.kcprod.info/blog\/?p=8119"},"modified":"2022-01-11T17:12:27","modified_gmt":"2022-01-12T01:12:27","slug":"raw-intellect-path","status":"publish","type":"post","link":"https:\/\/canary.kcprod.info/blog\/raw-intellect-path\/","title":{"rendered":"The Raw Intellect of Path"},"content":{"rendered":"

Note: Wealthfront\u2019s Stock-level Tax-Loss Harvesting is now called US Direct Indexing<\/span><\/i>. <\/span><\/p>\n

Great things happen when you combine academic research with the power of software. It\u2019s how we were able to deliver PassivePlus\u00ae, our signature suite of advanced investment features, which includes Tax-Loss Harvesting, Stock-level Tax-Loss Harvesting, and Smart Beta. Our research team<\/a>, with PhD specialists in finance, economics and operations management, looks for time-tested investment strategies and develops methods to implement them in a diversified portfolio. Our engineers bring them to life in our clients\u2019 accounts. The result is high-end investment strategies executed precisely and automatically at an incredibly low cost.<\/p>\n

Just like PassivePlus, we applied the same power of research and software to Path, our financial planning solution. In our previous post, The Easier Way to Plan<\/a>, we explained how our account linking technology is the foundation to understanding your true financial picture. In this post, we\u2019ll explain how applying academic research to your actual financial data means better, more reliable insights that you can trust.<\/p>\n

Drawing on our research expertise to project your future<\/strong><\/h3>\n

A crucial piece of financial planning is estimating how much you will have in the future. While a simpler model might use a static, generic input (eg. overall investment returns of 4% for next 40 years), Path goes many steps further.<\/p>\n

First, building on the work of several Nobel Prize winning financial economists \u2013 Merton (1973)<\/a>, and Fama and French (1992)<\/a> being among the most cited ones \u2013 we created a factor-based framework for projecting investment returns. Instead of making general assumptions on the returns of your investments, this framework makes projections at the individual securities-level for over 40,000 securities found in our client portfolios. See more about our model in our blog post Understanding Your Path to Retirement<\/a>.<\/p>\n

Second, when it comes to projections, inflation is a factor not to be ignored because it can have a significant impact on your future purchasing power. Instead of making a judgment call on inflation (at which we are no better than anyone else), we look to the public markets and apply financial statistics to estimate the market expectations for inflation. We do so by comparing the yields of long-term nominal Treasury bonds and long-term inflation-protected Treasury securities. Learn more about our inflation model in our blog post How to Forecast Future Inflation<\/a>.<\/p>\n

Lastly, we know that what you earn today isn\u2019t necessarily how much you\u2019ll make in the future. We draw on recent academic research<\/a> based on data from the Social Security Administration to understand how income grows over the careers of actual US workers. Path then applies these insights to project your income, taking into account your current age and income bracket.<\/p>\n

It\u2019s hard to explore your financial future and make decisions if the projections of your future finances are not reliable. That\u2019s why we invested tremendous effort in building a model that we believe most accurately reflects what our clients\u2019 financial futures will look like. And the best part is whenever any inputs change \u2013 whether it\u2019s the investments in your account or a movement in inflation \u2013 Path will automatically reflect the latest data in an updated plan.<\/p>\n

\"\"<\/p>\n

And with a solid foundation, we can then apply our research towards tackling specific question that clients have. Below are a few examples:<\/p>\n

How much will I spend in retirement? <\/strong><\/h3>\n

How much do you currently save and spend every month? Not everyone can answer this question confidently. How much will you spend later, say in retirement? That\u2019s even harder to answer.<\/p>\n

Through our analysis of the Consumer Expenditure Survey<\/a>, a Census-based dataset on US consumer behavior that is widely used by academics, we found trends in how consumer spending changes over their lives. We applied these insights to create a nuanced model that estimates a client\u2019s future spending based on their age and current spending. And since your plan is linked to your financial accounts, Path automatically classifies your transactional data to calculate your rolling 12-month savings and spending rates. From there, we project your future spending by year and use that information to estimate the type of lifestyle you can afford at retirement. Learn more in our post Understanding Your Path to Retirement<\/a>.<\/p>\n

What can I expect from Social Security? <\/strong><\/h3>\n

While most people know that Social Security kicks in at 62, it\u2019s not always simple to understand how much payout to expect. That\u2019s because the amount depends on a number of factors: your retirement age, your income history, and your tax rates. For example, for a couple with annual taxable income above $44,000, in the 25% federal income tax bracket, and living in California, where Social Security benefits are tax exempt, we calculated that their after tax Social Security income would be $2,420 in after-tax benefits if they retired at age 62. But it would be 82% more \u2013 $4,400 in after-tax benefits \u2013 if they retired at 70. See more in our post The Surprising Value of Social Security<\/a>.<\/p>\n

The good news is that when you adjust your retirement age in your plan, we automatically estimate your Social Security benefits taking these factors into consideration. And if you\u2019re a Social Security skeptic, we let you adjust how much value to attribute to these benefits.<\/p>\n

How much college financial aid can I expect? <\/strong><\/h3>\n

When it comes to saving for your children\u2019s college tuitions, a huge question is whether you can expect financial aid in the future. In order to help our clients actually answer that question, we created a financial aid model that makes this estimate for 3,671 institutions (all 2-year and 4-year institutions that provide government financial aid). We researched the two financial aid formulas used by colleges, the Federal FAFSA Method and the Institution Method, and analyzed actual data on average grant amounts. When you plan for college with Path, we take into account what we know about your family, your finances, and the school you\u2019ve chosen for your child to provide a pretty accurate and unique financial aid estimate.<\/p>\n

Should I refinance my mortgage? <\/strong><\/h3>\n

When it comes to refinancing your mortgage, there are several factors to consider beyond just the current interest rate. The type of the mortgage (fixed vs. adjustable), the duration of the loan, and the size of the loan relative to the value of your property (sometimes referred to as the Loan-To-Value ratio), and closing costs need to be considered as well. When analyzing 4,784 mortgages that our clients linked to Path, we accounted for all these factors and found that about one in five would benefit from a refinancing. See our analysis in the post The Value of Mortgage Refinancing<\/a>.<\/p>\n

We\u2019re excited to do more<\/strong><\/h3>\n

We know our clients have many more questions about their finances that research can help answer in a more accurate fashion. If you have some, we\u2019d love to know \u2013 please reach out and let us know at support@wealthfront.com<\/a>!<\/p>\n","protected":false},"excerpt":{"rendered":"

Note: Wealthfront\u2019s Stock-level Tax-Loss Harvesting is now called US Direct Indexing. Great things happen when you combine academic research with the power of software. It\u2019s how we were able to deliver PassivePlus\u00ae, our signature suite of advanced investment features, which includes Tax-Loss Harvesting, Stock-level Tax-Loss Harvesting, and Smart Beta. Our research team, with PhD specialists […]<\/p>\n","protected":false},"author":125,"featured_media":7672,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"inline_featured_image":false,"footnotes":""},"categories":[1278,1360],"tags":[1487,2200,1697,2192,2265],"coauthors":[1033],"class_list":["post-8119","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-planning","category-product-news","tag-expertise","tag-financial-advisor","tag-financial-planning","tag-path","tag-research"],"acf":[],"yoast_head":"\nThe Raw Intellect of Path<\/title>\n<meta name=\"description\" content=\"Path, the financial planning solution by Wealthfront, is powered by the academic research of our team of PhDs and produces personal, reliable insights.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/canary.kcprod.info/blog\/raw-intellect-path\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"The Raw Intellect of Path\" \/>\n<meta property=\"og:description\" content=\"Path, the financial planning solution by Wealthfront, is powered by the academic research of our team of PhDs and produces personal, reliable insights.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/canary.kcprod.info/blog\/raw-intellect-path\/\" \/>\n<meta property=\"og:site_name\" content=\"Wealthfront Blog\" \/>\n<meta property=\"article:published_time\" content=\"2017-11-05T18:15:55+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2022-01-12T01:12:27+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/canary.kcprod.info/blog\/wp-content\/uploads\/2017\/07\/investing-research.png\" \/>\n\t<meta property=\"og:image:width\" content=\"1472\" \/>\n\t<meta property=\"og:image:height\" content=\"530\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/png\" \/>\n<meta name=\"author\" content=\"Pedro Olea de Souza e Silva, PhD\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:creator\" content=\"@Wealthfront\" \/>\n<meta name=\"twitter:site\" content=\"@Wealthfront\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"Pedro Olea de Souza e Silva, PhD\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"6 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"WebPage\",\"@id\":\"https:\/\/canary.kcprod.info/blog\/raw-intellect-path\/\",\"url\":\"https:\/\/canary.kcprod.info/blog\/raw-intellect-path\/\",\"name\":\"The Raw Intellect of Path\",\"isPartOf\":{\"@id\":\"https:\/\/canary.kcprod.info/blog\/#website\"},\"primaryImageOfPage\":{\"@id\":\"https:\/\/canary.kcprod.info/blog\/raw-intellect-path\/#primaryimage\"},\"image\":{\"@id\":\"https:\/\/canary.kcprod.info/blog\/raw-intellect-path\/#primaryimage\"},\"thumbnailUrl\":\"https:\/\/canary.kcprod.info/blog\/wp-content\/uploads\/2017\/07\/investing-research.png\",\"datePublished\":\"2017-11-05T18:15:55+00:00\",\"dateModified\":\"2022-01-12T01:12:27+00:00\",\"author\":{\"@id\":\"https:\/\/canary.kcprod.info/blog\/#\/schema\/person\/eaa8e1b7236339c9a31ad98d66ee4ffb\"},\"description\":\"Path, the financial planning solution by Wealthfront, is powered by the academic research of our team of PhDs and produces personal, reliable insights.\",\"breadcrumb\":{\"@id\":\"https:\/\/canary.kcprod.info/blog\/raw-intellect-path\/#breadcrumb\"},\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"ReadAction\",\"target\":[\"https:\/\/canary.kcprod.info/blog\/raw-intellect-path\/\"]}]},{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\/\/canary.kcprod.info/blog\/raw-intellect-path\/#primaryimage\",\"url\":\"https:\/\/canary.kcprod.info/blog\/wp-content\/uploads\/2017\/07\/investing-research.png\",\"contentUrl\":\"https:\/\/canary.kcprod.info/blog\/wp-content\/uploads\/2017\/07\/investing-research.png\",\"width\":1472,\"height\":530},{\"@type\":\"BreadcrumbList\",\"@id\":\"https:\/\/canary.kcprod.info/blog\/raw-intellect-path\/#breadcrumb\",\"itemListElement\":[{\"@type\":\"ListItem\",\"position\":1,\"name\":\"Home\",\"item\":\"https:\/\/canary.kcprod.info/blog\/\"},{\"@type\":\"ListItem\",\"position\":2,\"name\":\"The Raw Intellect of Path\"}]},{\"@type\":\"WebSite\",\"@id\":\"https:\/\/canary.kcprod.info/blog\/#website\",\"url\":\"https:\/\/canary.kcprod.info/blog\/\",\"name\":\"Wealthfront Blog\",\"description\":\"Personal Finance & Investing Insights\",\"potentialAction\":[{\"@type\":\"SearchAction\",\"target\":{\"@type\":\"EntryPoint\",\"urlTemplate\":\"https:\/\/canary.kcprod.info/blog\/?s={search_term_string}\"},\"query-input\":{\"@type\":\"PropertyValueSpecification\",\"valueRequired\":true,\"valueName\":\"search_term_string\"}}],\"inLanguage\":\"en-US\"},{\"@type\":\"Person\",\"@id\":\"https:\/\/canary.kcprod.info/blog\/#\/schema\/person\/eaa8e1b7236339c9a31ad98d66ee4ffb\",\"name\":\"Pedro Olea de Souza e Silva, PhD\",\"description\":\"Pedro Olea de Souza e Silva is a Senior Quantitative Researcher at Wealthfront. His work mainly focuses on applying economic modeling and quantitative data analysis to Wealthfront\u2019s financial planning experience. He earned a PhD in Economics from Princeton University where he studied behavioral economics. Prior to Princeton, he received an MS in Economics from the Getulio Vargas Foundation, and a BS in Economics from the University of Sao Paulo, both in Brazil.\",\"url\":\"https:\/\/canary.kcprod.info/blog\/author\/pedroonly\/\"}]}<\/script>\n<!-- \/ Yoast SEO plugin. -->","yoast_head_json":{"title":"The Raw Intellect of Path","description":"Path, the financial planning solution by Wealthfront, is powered by the academic research of our team of PhDs and produces personal, reliable insights.","robots":{"index":"index","follow":"follow","max-snippet":"max-snippet:-1","max-image-preview":"max-image-preview:large","max-video-preview":"max-video-preview:-1"},"canonical":"https:\/\/canary.kcprod.info/blog\/raw-intellect-path\/","og_locale":"en_US","og_type":"article","og_title":"The Raw Intellect of Path","og_description":"Path, the financial planning solution by Wealthfront, is powered by the academic research of our team of PhDs and produces personal, reliable insights.","og_url":"https:\/\/canary.kcprod.info/blog\/raw-intellect-path\/","og_site_name":"Wealthfront Blog","article_published_time":"2017-11-05T18:15:55+00:00","article_modified_time":"2022-01-12T01:12:27+00:00","og_image":[{"width":1472,"height":530,"url":"https:\/\/canary.kcprod.info/blog\/wp-content\/uploads\/2017\/07\/investing-research.png","type":"image\/png"}],"author":"Pedro Olea de Souza e Silva, PhD","twitter_card":"summary_large_image","twitter_creator":"@Wealthfront","twitter_site":"@Wealthfront","twitter_misc":{"Written by":"Pedro Olea de Souza e Silva, PhD","Est. reading time":"6 minutes"},"schema":{"@context":"https:\/\/schema.org","@graph":[{"@type":"WebPage","@id":"https:\/\/canary.kcprod.info/blog\/raw-intellect-path\/","url":"https:\/\/canary.kcprod.info/blog\/raw-intellect-path\/","name":"The Raw Intellect of Path","isPartOf":{"@id":"https:\/\/canary.kcprod.info/blog\/#website"},"primaryImageOfPage":{"@id":"https:\/\/canary.kcprod.info/blog\/raw-intellect-path\/#primaryimage"},"image":{"@id":"https:\/\/canary.kcprod.info/blog\/raw-intellect-path\/#primaryimage"},"thumbnailUrl":"https:\/\/canary.kcprod.info/blog\/wp-content\/uploads\/2017\/07\/investing-research.png","datePublished":"2017-11-05T18:15:55+00:00","dateModified":"2022-01-12T01:12:27+00:00","author":{"@id":"https:\/\/canary.kcprod.info/blog\/#\/schema\/person\/eaa8e1b7236339c9a31ad98d66ee4ffb"},"description":"Path, the financial planning solution by Wealthfront, is powered by the academic research of our team of PhDs and produces personal, reliable insights.","breadcrumb":{"@id":"https:\/\/canary.kcprod.info/blog\/raw-intellect-path\/#breadcrumb"},"inLanguage":"en-US","potentialAction":[{"@type":"ReadAction","target":["https:\/\/canary.kcprod.info/blog\/raw-intellect-path\/"]}]},{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/canary.kcprod.info/blog\/raw-intellect-path\/#primaryimage","url":"https:\/\/canary.kcprod.info/blog\/wp-content\/uploads\/2017\/07\/investing-research.png","contentUrl":"https:\/\/canary.kcprod.info/blog\/wp-content\/uploads\/2017\/07\/investing-research.png","width":1472,"height":530},{"@type":"BreadcrumbList","@id":"https:\/\/canary.kcprod.info/blog\/raw-intellect-path\/#breadcrumb","itemListElement":[{"@type":"ListItem","position":1,"name":"Home","item":"https:\/\/canary.kcprod.info/blog\/"},{"@type":"ListItem","position":2,"name":"The Raw Intellect of Path"}]},{"@type":"WebSite","@id":"https:\/\/canary.kcprod.info/blog\/#website","url":"https:\/\/canary.kcprod.info/blog\/","name":"Wealthfront Blog","description":"Personal Finance & Investing Insights","potentialAction":[{"@type":"SearchAction","target":{"@type":"EntryPoint","urlTemplate":"https:\/\/canary.kcprod.info/blog\/?s={search_term_string}"},"query-input":{"@type":"PropertyValueSpecification","valueRequired":true,"valueName":"search_term_string"}}],"inLanguage":"en-US"},{"@type":"Person","@id":"https:\/\/canary.kcprod.info/blog\/#\/schema\/person\/eaa8e1b7236339c9a31ad98d66ee4ffb","name":"Pedro Olea de Souza e Silva, PhD","description":"Pedro Olea de Souza e Silva is a Senior Quantitative Researcher at Wealthfront. His work mainly focuses on applying economic modeling and quantitative data analysis to Wealthfront\u2019s financial planning experience. He earned a PhD in Economics from Princeton University where he studied behavioral economics. Prior to Princeton, he received an MS in Economics from the Getulio Vargas Foundation, and a BS in Economics from the University of Sao Paulo, both in Brazil.","url":"https:\/\/canary.kcprod.info/blog\/author\/pedroonly\/"}]}},"_links":{"self":[{"href":"https:\/\/canary.kcprod.info/blog\/wp-json\/wp\/v2\/posts\/8119","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/canary.kcprod.info/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/canary.kcprod.info/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/canary.kcprod.info/blog\/wp-json\/wp\/v2\/users\/125"}],"replies":[{"embeddable":true,"href":"https:\/\/canary.kcprod.info/blog\/wp-json\/wp\/v2\/comments?post=8119"}],"version-history":[{"count":1,"href":"https:\/\/canary.kcprod.info/blog\/wp-json\/wp\/v2\/posts\/8119\/revisions"}],"predecessor-version":[{"id":15105,"href":"https:\/\/canary.kcprod.info/blog\/wp-json\/wp\/v2\/posts\/8119\/revisions\/15105"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/canary.kcprod.info/blog\/wp-json\/wp\/v2\/media\/7672"}],"wp:attachment":[{"href":"https:\/\/canary.kcprod.info/blog\/wp-json\/wp\/v2\/media?parent=8119"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/canary.kcprod.info/blog\/wp-json\/wp\/v2\/categories?post=8119"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/canary.kcprod.info/blog\/wp-json\/wp\/v2\/tags?post=8119"},{"taxonomy":"author","embeddable":true,"href":"https:\/\/canary.kcprod.info/blog\/wp-json\/wp\/v2\/coauthors?post=8119"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}