(above) to print it, or 
to resize the Help pane.Understand the Yearly Snapshot's terms and calculations
Tip: For easier reading, click (above) to print it, or to resize the Help pane.
Inflows
This section of your Yearly Snapshot displays any income or other money you receive, prior to taxes. ôInflowsö include:
This is money that you and your partner earn, prior to taxes and other payroll deductions. This section also includes annual raises and all career events, like promotions and unpaid time off. To enter current salaries, as well as future career events that will affect your salary, go to the Career place in the Lifetime Planner.
This is the amount that you and your partner expect to receive in Social Security benefits. To enter or change Social Security income, go to Other Income.
According to government regulations, if one spouse or partner dies, the surviving person can receive a Social Security benefit roughly equal to that of the deceased spouse, if the amount would be greater than the survivorÆs independent benefits. This is called a ôSpousal Benefit.ö Spouses or partners who do not qualify to receive Social Security benefits also may receive spousal benefits. The Lifetime Planner follows these guidelines in its calculations.
A pension is a retirement plan in which your employer pays you a fixed amount of money (or ôdefined-benefitö) every month during your retirement. The employer would take responsibility for the investment decisions necessary to the pay the benefits. To enter or change pension benefits, go to Other Income.
Note: A pension differs from a ôdefined-contributionö plan, such as a 401(k). In a defined-contribution plan, the employee contributes a fixed amount of his or her salary to a Retirement account, and also is responsible for the investment decisions. To enter a defined-contribution retirement plan, go to the Accounts section of the Savings & Investments place.
This section shows how much (pre-tax) income you will receive from planned withdrawals from savings or from selling investments.
Withdrawals to Cover Expenses For each year of your plan, the Lifetime Planner calculates your income and expenses. If you do not have enough income to cover expenses in a certain year, the Lifetime Planner assumes you will sell investments or withdraw money from savings to cover the difference. In all cases, the amount of the withdrawal not only covers the unpaid expenses for the year, but also covers the capital gains taxes due from selling investments.
The Lifetime Planner assumes youÆll first take money out of taxable investments. If there isnÆt enough money there, the Lifetime Planner assumes youÆll exercise stock options. And if you still donÆt have enough money to cover expenses, withdrawals from Retirement accounts are projected. There is one special case ù if you have an account in the name of a dependent, withdrawals from that account will be used only to fund college tuition expenses for that dependent.
Required Distributions Government regulations require the owner of certain types of tax-deferred retirement accounts to begin making withdrawalsùcalled ôrequired distributionsö ù at age 70 ╜. The Lifetime Planner uses the formula defined in IRS Publication 590 to determine what amount to withdraw each year. After projecting taxes due on the withdrawal and other expenses due during the year, you may have a surplus left over. The Lifetime Planner assumes you will reinvest this surplus in taxable accounts.
Proceeds from Exercising Stock Option Grants The Lifetime Planner assumes that youÆll exercise stock options if necessary to cover your expenses. If the expiration date youÆve entered for a particular grant arrives and you still own any portion of the grant, the Lifetime Planner projects that you will exercise the option, sell the stock immediately at the current (higher) price, and reinvest post-tax gain in your taxable accounts. The amounts shown for stock option grant proceeds are the pre-tax gain.
When you exercise options, you may see your net worth decline. This is because youÆll have to pay taxes on your gain. To understand the taxes associated with stock option proceeds, see the Outflows section below.
To adjust the normal vesting and expiration schedule for your stock option grants, go to the Account Register.
This section shows extra income youÆve entered including inheritances, social security benefits, pension benefits, rental income, and any other income you expect to receive. To enter or change this type of income, go to the Other Income place.
This section shows proceeds you receive from selling an asset, prior to taxes, sales fees, and money used to pay off any remaining loans. To adjust the sale date for a home or an asset, go to the Homes & Assets place.
This section shows the amount of money you receive from loans. Although you may spend loan money you receive immediately, such as for a mortgage on a house, this money is still shown as an Inflow.
To adjust the details of loans used to purchase homes or assets, go the Homes & Assets place. To adjust the details of other loans, go to the Loans & Debt place.
This section shows the amount of surplus income left over from the prior calendar year after expenses, loan and debt payments, taxes, and savings contributions. If you have surplus income in any particular year, that surplus is carried forward to the next calendar year to pay for upcoming expenses. The Lifetime Planner then assumes that you, like most people, will spend this surplus, rather than invest it; this is what ôSpend Unused Surplus from Prior Yearö represents.
If you think you will save any of this surplus income, you can increase your planned savings contributions in the Savings & Investments place.
Outflows
This section of your Yearly Snapshot shows where your money will go. ôOutflowsö include:
In the Lifetime Planner, ôliving expensesö include both predictable expenses (such as food, clothing, and gasoline) as well as unpredictable expenses (such as healthcare and car repairs). Living expenses do not include taxes, contributions to savings, loan and debt payments, or special expenses youÆve entered in the College & Other Expenses place. To enter your current living expenses, as well as significant life changes that will cause you to adjust your living expenses, go to the Living Expenses place.
Reduce Discretionary Spending In some years, your projected income may not be sufficient for you to make your planned contributions to savings as well as to cover other outflows. When this occurs, the Lifetime Planner assumes you are committed to sticking to your saving plan and that you will reduce your discretionary expenses instead. The magnitude of this reduction is shown as ôReduce Discretionary Spending." To specify the percentage by which the Lifetime Planner will reduce your living expenses, click Options on the Tools menu, and then click the Planner tab.
If you see ôReduce Discretionary Spendingö in many years of your results, and the magnitude of these reductions is large, this may mean youÆll have difficulty meeting your savings objectives and you should change your saving plan (in the Savings & Investments place). If the projected spending reductions are small and occur in only a few years, most likely you will be able to stick to your saving plan without any difficulty.
This section shows principal and interest payments to loans, as well as payments to your debt reduction plan.
Note: ItÆs possible that the amount shown here going into your debt reduction plan may not match the amount you entered in the Debt Reduction Planner itself. This is because the Lifetime Planner subtracts out any expected spending on credit cards and lines of credit from the number shown here. To enter these types of expenses, go to the Living Expenses place.
This section shows the amount of money you plan to deposit into your savings and investment accounts. To specify regular savings contributions, go to the Savings & Investments place.
Retirement Account Contributions These contributions are to retirement accounts, such as a 401(k) or an IRA. You wonÆt see employer contributions (via matching or profit sharing) listed here, although they are included in the calculations. (To see employer contributions, look in the New Worth section of the Yearly Snapshot report.)
In some years your contributions may be smaller than the amount you specified in the Savings & Investments place. ThatÆs probably because your planned contributions exceed the IRS limits. To view and change the IRS contribution limits, go to the Savings & Investments place. The Lifetime Planner assumes that once limits are reached, you either will stop contributing or will invest the amount above the IRS limit in taxable accounts. To specify which you prefer, click Options on the Tools menu, and then click the Planner tab.
Taxable Account Contributions These contributions include expected deposits into taxable savings and investment accounts. (These accounts are shown under ôTaxable Accountsö in the Accounts section of the Savings & Investments place.)
Save x% of Surplus Income If there is any money left over after expenses, loan and debt payments, taxes, and savings contributions, the Lifetime Planner carries forward this surplus to the next calendar year in case that money will be needed. Then, it assumes that you, like most people, will find some way to spend it. However, if you think youÆll be disciplined enough to save some percentage of this surplus, specify that percentage by clicking Options on the Tools menu, and then clicking the Planner tab.
Above Limit In some years your planned savings contributions to retirement accounts may exceed IRS limits. This may occur, for example if you are currently saving 15% of salary and your salary grows (with raises and promotions) to the point where 15% of your salary is higher than the IRS contribution limit. You can instruct the Lifetime Planner what you plan to do when limits specified on the Planner tab of the Options dialog box are reached. (To see this dialog box, on the Tools menu, click Options.) You can show that you plan to save the amount that exceeded the IRS Limit (shown as ôLimit Exceededö) in your taxable accounts. Or you can specify that you plan to stop increasing your savings once contribution limits are reached.
Reinvest Proceeds from Selling an Asset When a home or asset is sold, you may receive a large sum of money, even after loans and sales fees and taxes have been paid. The Lifetime Planner assumes youÆll reinvest this money in your taxable accounts.
Reinvest Proceeds from Exercising Stock Options When stock options are exercised, the Lifetime Planner uses the proceeds to pay for expenses and taxes during the year. But if there is a surplus, the Lifetime Planner assumes youÆll reinvest the post-tax proceeds in your taxable accounts.
Reinvest Excess Required Distributions Government regulations requires the owner of certain types of Retirement accounts to begin making withdrawals at age 70 ╜. The Lifetime Planner uses the money that is withdrawn to cover taxes and other expenses during the year. But if there is a surplus, the Lifetime Planner assumes that you will reinvest it in your taxable accounts.
This section lists expenses like college tuition, vacations, and any other expenses you specify in the College & Other Expenses place.
This section shows the amount of money you plan to spend purchasing homes and assets. The amount shown is the total cost of the asset, which may be higher than the amount you use as a down payment. You can specify when assets are bought and their purchase price in the Homes & Assets place.
For certain types of retirement accounts, withdrawals prior to age 59╜ incur a 10% penalty. The Lifetime Planner may project early withdrawals from retirement accounts if they are necessary to cover expenses. If your plan shows early withdrawal penalties, you may need to reduce your planned expenses or increase savings contributions to taxable accounts to avoid these penalties.
ôSet Aside This YearÆs Surplus for Next YearÆs Expensesö is the amount of money left over from the current calendar year after expenses, loan and debt payments, taxes, and savings contributions. The Lifetime Planner assumes that if you have surplus income, that you set it aside for expenses due the following calendar year.
The Lifetime Planner carries forward any surplus income you have from one year to the next, in case it is needed for expenses. The Lifetime Planner then assumes that you, like most people, will find some way to spend it, either on required or discretionary expenses. This is what ôSpend Unused Surplus from Prior Yearö represents.
If there are many years where this amount is high, it probably means you can save more than youÆve planned. You may want to increase your savings contributions in the Savings & Investments place. To instruct the Lifetime Planner to invest a portion of this surplus, change the Sweep percentage on the Planner tab in the Options dialog box. (Click Options on the Tools menu.)
This section shows taxes that will be paid. This includes payroll taxes such as Social Security and Medicare, as well as taxes on income.
These taxes are calculated automatically based on information that you specify in the Income place. Note that self-employed individuals pay higher Social Security and Medicare taxes than employees.
The Lifetime Planner uses ôaverage tax ratesö to calculate your future tax liability. This is a simplification recommended by financial planners. HereÆs how taxes are calculated.
Since the Lifetime Planner recalculates your taxable income and average tax rate each year, this means that in years when you have higher income you may have a higher average tax rate. Likewise if you planned to take time off from work (reducing your taxable income), the Lifetime Planner might calculate a lower average tax rate.
Notes:
The Lifetime Planner does not explicitly calculate deductions. But the net result of deductions is factored into the calculations the Lifetime Planner uses. The Lifetime Planner assumes you receive the same deductions as most people in your income range and state of residence. You can change this assumption by changing your average tax rate in the Taxes & Inflation place.
For special income you receive, such as an inheritance or proceeds from selling a house, you can specify the rate at which it is taxed. For example, you may specify that no taxes are due on an inheritance you receive, or that proceeds on selling an asset are taxed at 20%. Any time you specify a tax rate on income, it is not included in the calculations for your taxable income described above.
Property taxes and sales taxes should be specified in the Expenses place (either a living expenses or a "College & Other" expense). These types of taxes are not calculated automatically like income taxes; you must include them in your financial plan manually.
Net Worth
This section of your Yearly Snapshot shows both what you owe and what you own. All amounts shown are pre-tax.
This section shows your projected net worth. If youÆve included money owned by dependents in your plan, these accounts are not shown here because they do not belong to you. The Loans section does not include the amount you owe on your debt reduction plan; to see how your Debt Reduction Plan will be paid off, go to the Debt Reduction Planner.
This section shows the projected value of the retirement accounts owned by each spouse/partner in the plan. If multiple accounts are owned by a spouse, they are combined here. These are accounts like 401(k) and IRA that you can set up in the Accounts section of the Savings & Investments place. The value of these accounts is affected by contributions to savings, expected investment return, withdrawals from savings, and the effects of inflation.
This section shows the projected value of the taxable accounts. These are typically all accounts other than retirement accounts and accounts owned by your dependents. You can specify the taxable accounts you own in the Savings & Investments/Accounts place. The value of these accounts is affected by contributions to savings, expected investment return, withdrawals from savings, tax on expected investment return, and the effects of inflation.
This section shows the pre-tax value of all vested stock options. You can set up stock options, including vesting and expiration schedules, from the Savings & Investments/Accounts place. The value of options is affected by expected investment return (appreciation of value), the effects of inflation, and projected exercising of options.
Each home or asset that you will own during the current year is listed here. You can change the details for each asset, including purchase and sale dates and expected appreciation, in the Homes & Assets place. The value of assets is affected by expected appreciation of value, and the effects of inflation.
You can define the pre-tax annual return for each group of investments you hold in the Savings & Investments/Expected Return place. You can set a different return for before retirement and after retirement. The Lifetime Planner begins using the after-retirement rate of return once both spouses/partners are retired.
Tax on expected investment returns By default, the Lifetime Planner assumes that 100% of your investment gains are realized and taxed each year. This is a conservative assumption used by many financial planners. You can change this assumption on the Advanced tab of the Savings & Investments/Expected Return place. HereÆs how this works: Suppose someone had an average tax rate of 20% and specified that they planned to get an 8% pre-tax return on their taxable investments. If 100% of the gain is taxed each year, the post-tax rate of return would end up being 6.4% (8.0% minus 20% of 8%).
This item shows how inflation depletes the purchasing power of your assets. For example, if your investments are growing at 8% a year, but inflation is also 3%, the purchasing power of your assets is really only growing at 5% (8% minus 3%) a year. You can adjust the inflation assumption in the Taxes & Inflation place.