Confused on some column categories

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StayPuft
Posts: 10
Joined: Sun Nov 10, 2019 2:29 am

Confused on some column categories

Post by StayPuft »

Under the "detailed view" tab, can you please explain how the columns for "After tax income" and "Median total withdrawal" are derived?

I'm confused on my numbers and I'm not clear on what those columns represent.

Many thanks!

jimr
Posts: 576
Joined: Thu Feb 28, 2008 6:48 pm

Re: Confused on some column categories

Post by jimr »

After tax income is the sum of all the after tax value of all "income" cash flows. This includes the "Annual Retirement Income" amount on the main input page (100% of which is taxed at the income tax rate) plus any income cash flows that you create in the lower table of the Additional Inputs window.

Median Total Withdrawal is the total amount withdrawn from the three investment portfolios (taxable, tax deferred, tax free) to fund retirement expenses for that year. This is a median value, taken from the 10,000 paths. The total amount for withdrawn in each year of each simulation path (of 10,000) is recorded and the median value is found by sorting the 10,000 values that were saved each year and choosing the one in the middle.

StayPuft
Posts: 10
Joined: Sun Nov 10, 2019 2:29 am

Re: Confused on some column categories

Post by StayPuft »

Great! Thank you!

Where would I input my potential social security benefits?

I'm not sure if I should input it into the "Annual Retirement Income" box on the "Summary View" page or input in the bottom section of "additional inputs". Is there a difference?

Also, if I'm investing into ETFs with a goal of only withdrawing for retirement, do I input that amount in the "Tax deferred..." boxes? I'm not paying any annual taxes and won't be taxed unless I withdraw from the account.

StayPuft
Posts: 10
Joined: Sun Nov 10, 2019 2:29 am

Re: Confused on some column categories

Post by StayPuft »

Also, are the numbers adjusted for inflation?

When I look at the "Detailed view" tab, my "new investments" and "planned expenses" figures remain the same throughout the years. But, I would think they would increase along with inflation.

Thanks again!

jimr
Posts: 576
Joined: Thu Feb 28, 2008 6:48 pm

Re: Confused on some column categories

Post by jimr »

Yes, all dollar amounts are adjusted for inflation. In the additional inputs window, you have the option to enter income and expense cash flows that don't adjust for inflation (No COLA or cost of living adjustment). The numbers you enter on the main input page, income, expense, savings, etc are all adjusted for inflation.

The reason the numbers in the detail view don't look like they inflate is because all dollar amounts shown in the planner are shown in current value dollars.

There isn't one right answer as to whether you should use the inputs on the main page or use the additional inputs cash flow entries. Some people like to just get a quick answer and estimate everything in one place on the main page. Others like to spell everything out in detail using additional inputs.

Generally, using additional inputs gives you much more control over the start and end date of the cash flow, taxes, and how inflation is handled, so if you need that extra detail, it can be a good way to input everything.

StayPuft
Posts: 10
Joined: Sun Nov 10, 2019 2:29 am

Re: Confused on some column categories

Post by StayPuft »

Ah, okay.

So, if I wanted to arrive at my projected income, I would actually have to increase my "new investments" by my rate of inflation...not just keep it the same year after year.

Correct?

jimr
Posts: 576
Joined: Thu Feb 28, 2008 6:48 pm

Re: Confused on some column categories

Post by jimr »

If you mean "in real life" then yes, you would need to increase your savings each year to keep up with inflation.

StayPuft
Posts: 10
Joined: Sun Nov 10, 2019 2:29 am

Re: Confused on some column categories

Post by StayPuft »

Yes, that's what I meant. Thank you for such prompt and thorough responses! Great product!

familyc
Posts: 1
Joined: Wed Jun 10, 2020 5:17 pm

Re: Confused on some column categories

Post by familyc »

What a great planner. So glad I found it.

Really confused on the "after tax income" column. I have seen the explanation provided but am unable to reconcile it in my mind. Here's the example. I'm using $175K planned expenses number. Of that number, the withdrawal amount is offset by other income, e.g., SS and a small annuity in this case. The after income tax column is always about $49K after the first years and below that early on. I would think that $175K would cover all expenses including taxes. I've used 30% for investment and income tax rate for this example. After tax income would be roughly $122K at those rates without considering the impact of other income as described above, I think. I am expecting to see the $120K range as after tax income rather the $49K I'm seeing. Please help me understand what I'm missing?

Thanks,
John

jimr
Posts: 576
Joined: Thu Feb 28, 2008 6:48 pm

Re: Confused on some column categories

Post by jimr »

I think we might be stuck on some confusion over nomenclature.

After tax income isn't related or connected to the amount of expenses you have. It's based on the sum of all the income cash flows you create either on the main input sheet (annual retirement income) and in the additional inputs window (eg ss, pensions, etc).

It is true that after tax income reduces the amount that must be withdrawn from the portfolio each year to fund expenses.

Finally, expected income taxes generally shouldn't be included in your annual expenses. Taxes on income and investments are computed separately by the planner.

Finally, in the detailed view, it can be helpful to click the "show more details" radio button and also to right-click on any column header to select "show all columns" to see all of the available output. (Also, you can right-click on the table body for a menu that lets you export the results to excel.)

Does that help?

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