Two examples of VeriPlan's 8-TAXES % graphic

8-TAXES % graphic: Tax Payments (%/yr)

Below are two examples of the blue-tabbed 8-TAXES % graphic, which come from VeriPlan's "Sue and Sam Saver" tutorial.

You can download a free copy of this VeriPlan tutorial file using this link:

Download the Free VeriPlan Tutorial Now

This 8-TAXES % graphic, which VeriPlan automatically generates for every financial plan, presents the same data as VeriPlan's 7-TAXES $ graphics, except in percentage terms. Taxes in each of the eight categories are automatically calculated annually as a percentage of annual earned income, retirement income, and other income taxed at ordinary income tax rates. (Reinvested asset returns are excluded from this income denominator.)

The 8-TAXES % shows Sue and Sam's projected tax payment percentages broken down into eight categories:
1) Federal marginal rate ordinary income taxes on earned, interest, retirement and other income
2) State and Local marginal rate or flat rate ordinary income taxes on earned, interest, retirement and other income
3) Social Security taxes
4) Medicare taxes
5) Property and real estate taxes
6) Ordinary Federal, State, & Local taxes on mandatory and needed tax-deferred account withdrawals
7) Federal long-term capital gains taxes
8) State and Local ordinary income taxes on long-term capital gains

VeriPlan's tax model assesses marginal tax rates and limits against taxable income and also taxes asset distributions, as required by current tax laws. VeriPlan's sophisticated tax modeling capabilities are fully integrated with all other VeriPlan projection modeling functionality.

For example, note that both of these tax payment projection graphics for Sue and Sam indicate significantly reduced tax rates at age 50. In this particular scenario, Sue and Sam are modeling the impact of Sam being unemployed for six months at age 50. Therefore, these tax graphics automatically reduce income-related taxes at age 50.

In addition, in retirement, Sue and Sam's property and real estate taxes become a much higher percentage of their lesser income. They are not paying more in property taxes, but the percentage of income is much higher, because their taxable income in retirement is much lower. Instead, they are paying a very large portion of their retirement expenses in later years through the liquidation of their investment assets -- much of which is in Roth accounts and not subject to taxation.

The first sample tutorial graphic below shows Sue and Sam's tax payment percentage projection using industry average investment costs. VeriPlan automatically extracted the investment cost information that Sue and Sam provided about their portfolio on VeriPlan's yellow-tabbed assets worksheets. Sue and Sam pay investment costs that are about average for full service retail brokerage customers.




This second tutorial graphic shows Sue and Sam's revised tax payment percentage projection with lower investment costs that they consider to be more reasonable. These lower costs are based on the reasonable investment cost assumptions that they entered into Section 4 of VeriPlan's orange-tabbed "6-COST-EFFECTIVENESS TOOL" worksheet. (All other projection assumptions and data in VeriPlan remain the same in these two scenarios. Only the level of investment costs changes.)

By reducing their investment costs Sue and Sam's financial assets would last much longer and even grow in retirement. As a result, they pay ordinary income taxes on tax-advantaged account withdrawals throughout their retirement. When paying higher industry average investment costs in the first graphic, their assets in traditional tax-deferred accounts are exhausted by about age 78 and the cease paying related taxes.

Two examples of VeriPlan's 7-TAXES $ graphic

7-TAXES $ graphic: Tax Payments (real $/yr)

Below are two examples of the blue-tabbed 7-TAXES $ graphic, which come from VeriPlan's "Sue and Sam Saver" tutorial.

You can download a free copy of this VeriPlan tutorial file using this link:

Download the Free VeriPlan Tutorial Now

This 7-TAXES $ graphic, which VeriPlan automatically generates for every financial plan, shows Sue and Sam's projected tax payments broken into eight categories:
1) Federal marginal rate ordinary income taxes on earned, interest, retirement and other income
2) State and Local marginal rate or flat rate ordinary income taxes on earned, interest, retirement and other income
3) Social Security taxes
4) Medicare taxes
5) Property and real estate taxes
6) Ordinary Federal, State, & Local taxes on mandatory and needed tax-deferred account withdrawals
7) Federal long-term capital gains taxes
8) State and Local ordinary income taxes on long-term capital gains

VeriPlan's tax model assesses marginal tax rates and limits against your taxable income, and it also taxes asset distributions, as required by current tax laws. VeriPlan's sophisticated tax modeling capabilities are fully integrated with all other VeriPlan projection modeling functionality.

For example, note that both of these tax payment projection graphics for Sue and Sam indicate significantly reduced taxes at age 50. In this particular scenario, Sue and Sam are modeling the impact of Sam being unemployed for six months at age 50. Therefore, these tax graphics automatically reduce income-related taxes at age 50.

The first sample tutorial graphic below shows Sue and Sam's tax payment projection using industry average investment costs. VeriPlan automatically extracted the investment cost information that Sue and Sam provided about their portfolio on VeriPlan's yellow-tabbed assets worksheets. Sue and Sam pay investment costs that are about average for full service retail brokerage customers.




This second tutorial graphic shows Sue and Sam's revised tax payment projection with lower investment costs that they consider to be more reasonable. These lower costs are based on the reasonable investment cost assumptions that they entered into Section 4 of VeriPlan's orange-tabbed "6-COST-EFFECTIVENESS TOOL" worksheet. (All other projection assumptions and data in VeriPlan remain the same in these two scenarios. Only the level of investment costs changes.)

By reducing their investment costs Sue and Sam's financial assets would last much longer and even grow in retirement. As a result, they pay ordinary income taxes on tax-advantaged account withdrawals throughout their retirement. When paying higher industry average investment costs in the first graphic, their assets in traditional tax-deferred accounts are exhausted by age 78. VeriPlan automatically stops assessing taxes, because there are no more taxable distributions available from these accounts.

Two examples of VeriPlan's 10-FINANCIAL ASSETS graphic

10-FINANCIAL ASSETS: Financial Assets with Net Human Capital (real $/yr)

Below are two examples of the blue-tabbed 10-FINANCIAL ASSETS graphic, which come from VeriPlan's "Sue and Sam Saver" tutorial.

You can download a free copy of this VeriPlan tutorial file using this link:

Download the Free VeriPlan Tutorial Now

This 10-FINANCIAL ASSETS graphic, which VeriPlan automatically generates for every financial plan, shows Sue and Sam's projected cash, bond/fixed income, and stock/equity assets. Their net human capital is also shown to illustrate the conversion of their net earned income into financial assets through savings.

This first tutorial graphic shows Sue and Sam's projection, which uses industry average investment costs. VeriPlan automatically extracted the investment cost information that Sue and Sam provided about their portfolio on VeriPlan's yellow-tabbed assets worksheets. Sue and Sam pay investment costs that are about average for full service retail brokerage customers.




This second tutorial graphic shows Sue and Sam's revised projection with lower investment costs that they consider to be more reasonable. These lower costs are based on the reasonable investment cost assumptions that they entered into Section 4 of VeriPlan's orange-tabbed "6-COST-EFFECTIVENESS TOOL" worksheet. (All other projection assumptions and data in VeriPlan remain the same in these two scenarios. Only the level of investment costs changes.)

This second projection indicates that by reducing their investment costs Sue and Sam's financial assets could last much longer and even grow in retirement.

An example of VeriPlan's 9-HUMAN CAPITAL graphic

VeriPlan's 9-HUMAN CAPITAL graphic: Gross and Net Human Capital (real $/yr)

Below is an example of the blue-tabbed 9-HUMAN CAPITAL graphic, which comes from VeriPlan's "Sue and Sam Saver" tutorial. This graphic shows Sue and Sam's projected gross and net human capital prior to their retirement.

You can download a free copy of this VeriPlan tutorial file using this link:

Download the Free VeriPlan Tutorial Now

This 9-HUMAN CAPITAL graphic projects the cumulative remaining gross and net human capital for Earners #1 and #2 up until the retirement age of Earner #1.

Human capital is a depletable personal asset. Without substantial inherited assets, gifts, or lottery winnings, human capital is the only asset one has. It must converted into earned income to pay ongoing expenses. Some of it must be saved and converted into valuable assets, if one is to have assets to live on after human capital is gone.

VeriPlan measures your gross human capital as your cumulative yet-to-be-earned real dollar income prior to retirement. Your gross human capital depends upon your entries and growth rates on the yellow-tabbed '2-Your Earned Income' and '4-Your Other Income' worksheets. These entries are related: a) to your wage and salary income, b) to your actively-managed business income, and c) to your other income sources, which may or may not be associated with active income generating efforts on your part.

You can spend and/or save your gross human capital. To the extent that you save it rather than spend it, you will have projected net human capital. Your projected net human capital is your cumulative yet-to-be-saved real dollar net earned income or savings after expenses prior to retirement. Your net human capital can be converted into other assets, which can increase in value and be withdrawn in the future to fund expense shortfalls.

An example of VeriPlan's 6-SAVINGS % graphic

VeriPlan's 6-SAVINGS % graphic: Pre-retirement Savings Rates -- with and without investment-oriented debt payments (%/yr)

Below is an example of the blue-tabbed 6-SAVINGS % graphic, which comes from VeriPlan's "Sue and Sam Saver" tutorial. This graphic shows Sue and Sam's projected savings rates from earned income prior to their retirement.

You can download a free copy of this VeriPlan tutorial file using this link:

Download the Free VeriPlan Tutorial Now

This 6-SAVINGS % graphic projects your annual savings rates up to the planned retirement age of Earner #1. Unless Earner #2 retires later or your retirement income is projected to exceed expenses, VeriPlan's income-related graphics beyond retirement age would show asset withdrawals or negative savings rates. Instead of showing that information here, projected withdrawals are shown on VeriPlan's withdrawal graphics, which are discussed below.

This graphic projects your savings rates with and without your investment-oriented debt payments. Particularly early in many people's lifecycles, it can seem difficult to save. Savings is always important, and it is useful to recognize that investment-oriented debt payments are a form of savings. When such debt has been retired, then your "normal" savings rates usually need to increase substantially to ensure that adequate assets will be accumulated prior to retirement.

Two examples of VeriPlan's 5-AFTER-DEBT PROFIT graphic

The 5-AFTER-DEBT PROFIT graphic: Profit, after Expense, Tax, & Debt Payments (real $/yr)

Below are two examples of the blue-tabbed 5-AFTER-DEBT PROFIT graphic, which come from VeriPlan's "Sue and Sam Saver" tutorial.

You can download a free copy of this VeriPlan tutorial file using this link:

DOWNLOAD THE FREE VERIPLAN TUTORIAL HERE

This 5-AFTER-DEBT PROFIT graphic projects your net income, including expenses, taxes, and debt payments. It is the same as the 3-PRE-DEBT PROFIT graphic, except that it further reduces your net earned income by your projected debt payments related to your currently outstanding debt obligations and any future unfunded consumption debt.

This 5-AFTER-DEBT PROFIT graphic excludes both your asset earnings and your asset expenses. Furthermore, it does not include any long-term capital gains taxes related to asset withdrawals. (It includes taxes related to asset distributions taxed at ordinary income tax rates.)

The first tutorial graphic below shows a projection for Sue and Sam's lifetime debts when they pay industry average investment costs. VeriPlan automatically extracted the investment cost information that Sue and Sam provided for their investment asset portfolio on VeriPlan's yellow-tabbed assets worksheets. Sue and Sam pay investment costs that are about average for full service retail brokerage customers. The year-after-year cumulative and compounded lost investment earnings and asset growth due to these cost inefficiencies would dramatically undermine Sue and Sam's personal assets.

SEE THESE INVESTMENT COST EFFICIENCY ARTICLES elsewhere on The Skilled Investor website.

If at any point in the future, your expenses would exceed your net income and would fully deplete your accumulated cash, bond, and equity financial assets, then VeriPlan automatically would begin to accumulate an "unfunded consumption debt" loan for you. In this first graphic, that is what happens to Sue and Sam in their mid- 90s. They run out of financial assets, and thereafter, VeriPlan automatically accues additional interest charges for their unfunded consumption debt.




This second tutorial graphic shows Sue and Sam's revised projection with lower investment costs that they consider to be more reasonable. (All other projection assumptions and data in VeriPlan remain the same in these two scenarios. Only the level of investment costs changes.)

When Sue and Sam decide to pay reasonable costs, they switch on their reasonable cost assumptions in Section 4 of VeriPlan's orange-tabbed "6-Cost-Effectiveness Tool" worksheet. When Sue and Sam use their reasonable cost assumptions, their financial assets last beyond age 100, and therefore, this graphic does not project any unfunded consumption debt in their late-90s.

An example of VeriPlan's 3-PRE-DEBT PROFIT graphic

VeriPlan's 3-PRE-DEBT PROFIT graphic: Pre-Debt Profit, after Expenses & Taxes (real $/yr)

Below is an example of the blue-tabbed 3-PRE-DEBT PROFIT graphic, which comes from VeriPlan's "Sue and Sam Saver" tutorial. This graphic shows Sue and Sam's projected pre-debt profit, after expenses and taxes.

You can download a free copy of this VeriPlan tutorial file using this link:

Download the Free VeriPlan Tutorial Now

This 3-PRE-DEBT PROFIT graphic, which is automatically generated for every VeriPlan financial plan, presents the difference between the 1-INCOME and 2-EXPENSES projection graphics. It is a preliminary indication of projected annual family operating profitability, after expense and taxes, but before debt payments.

An example of VeriPlan's 2-EXPENSES graphic

VeriPlan's 2-EXPENSES graphic: Ordinary, Planned, and Adjusted Expenses plus Income, Employment, & Property Taxes (real $/yr)

Below is an example of the blue-tabbed 2-EXPENSES graphic, which comes from VeriPlan's "Sue and Sam Saver" tutorial. This graphic shows Sue and Sam's projected living expenses, ordinary income taxes, and their FICA (Social Security), Medicare, Property, and Real Estate tax payments.

You can download a free copy of this VeriPlan tutorial file using this link:

Download the Free VeriPlan Tutorial Now

This 2-EXPENSES graphic, which VeriPlan automatically develops for every financial plan, projects your expenses related to living expenses and the taxes that are related primarily to non-asset earned and retirement income. This graphic includes:

* Your ordinary living expenses and major planned expenses with adjustments and with your real dollar growth rates from the orange-tabbed '1-Expense & Savings Tool' worksheet

* Your Federal, State, and Local ordinary income taxes from the yellow-tabbed '11-Your Taxes' worksheet

* Your Federal, State, and Local ordinary income taxes on asset income and reinvested interest and short-term capital gains from the yellow-tabbed '6-Your Cash,' '7-Your Bonds,' and '8-Your Stocks' worksheets. Because ordinary earned income and ordinary asset income tax treatments are similar, VeriPlan combines both earned income and asset income sources here for taxation purposes. Generally, most asset income taxes will be from current interest and dividend payments on cash and bond/fixed income assets.

* Your tax payments related to FICA (Social Security), Medicare, self-employment, property, real estate, and other non-capital gains taxes

An example of VeriPlan's 1-INCOME graphic

OVERVIEW of the 1-INCOME graphic: Gross Earned, Retirement, and Other Income (real $/yr)

Below is an example of the blue-tabbed 1-INCOME graphic, which comes from VeriPlan's "Sue and Sam Saver" tutorial. This graphic shows Sue and Sam's projected income, which is directly or indirectly associated with earned income sources and excludes income from their asset portfolio.

Earned income for Earners #1 and #2 will also reflect any income adjustments made in the table in Section 4 of the '2-Your Earned Income' worksheet, which is entitled: "Making adjustments to your projected employment and actively-managed business income." In this case, Sue and Sam are testing two adjustments to Sam's employment income. First, they project that he will be promoted in four years and receive a substantial real dollar raise. Second, they project that Sam will be unemployed for six months when he is 50 years old. The adjustments are just illustrations of your ability to adjust your income projection assumptions in VeriPlan for any or every year.

You can download a free copy of this VeriPlan tutorial file using this link:

Download the Free VeriPlan Tutorial Now

Each 1-INCOME graphic, which is automatically generated for every VeriPlan lifetime financial planning scenario, shows your:

* earned employment and actively-managed business income with your real dollar growth rates for Earners #1 and #2 that you entered on the yellow-tabbed '2-Your Earned Income' worksheet.

* the pension and annuity income for Earners #1 and #2 that you entered on the yellow-tabbed '3-Your Pensions & Annuities' worksheet

* the Social Security income with adjustments that you entered on the orange-tabbed '2-Retirement Tool' worksheet

* the "Other Income" that you entered on the yellow-tabbed '4-Your Other Income' worksheet

These income sources summarize your earned income sources and your non-asset related retirement income that is generally related to your earned income. Annuities are the exception in the sense that they sometimes represent assets that you have transformed into contractual income sources. Other annuities may be acquired without asset financial transformation through a regular, contractual purchase plan. Some 'Other Income' sources may also be passive sources that do not require your active work to be received. These passive 'Other Income' sources are included primarily because they are listed as 'other income' on your tax returns, are taxed at ordinary income tax rates, and are grouped with your other more actively-earned 'other income' sources.

No income from assets nor any capital appreciation is represented on this graphic. Asset income is assumed to be taxed and reinvested. Assets are withdrawn only in years when you are projected to have a cash expense-to-earned income shortfall. VeriPlan automatically provides many other graphics and data tables that provide lifetime projection information related to your various assets.

Two examples of the 4-DEBT PAYMENTS graphic

OVERVIEW of the 4-DEBT PAYMENTS graphic: Debt Payments (real $/yr)

Below are two examples of the blue-tabbed 4-DEBT PAYMENTS graphic, which come from VeriPlan's "Sue and Sam Saver" tutorial.

You can download a free copy of this VeriPlan tutorial file using this link:

DOWNLOAD THE FREE VERIPLAN TUTORIAL HERE

Also, SEE THESE INVESTMENT COST EFFICIENCY ARTICLES elsewhere on The Skilled Investor website.

This 4-DEBT PAYMENTS graphic, which VeriPlan develops automatically for every projection, projects your annual debt repayment obligations according to your settings on the yellow-tabbed '5-Your Debts' worksheet.

On the '5-Your Debts' worksheet, you classify your debts as consumption-oriented or investment-oriented. Consumption-oriented debts represent past consumption that you have financed. Investment-oriented debts are those you take on with a rational expectation that they will enhance your human capital and/or portfolio assets.

Because VeriPlan uses real or constant purchasing power dollars with inflation extracted throughout your projections, your future debt payments related to your CURRENT debts will be discounted. Because your current debt re-payment obligations are stated in nominal dollars, VeriPlan uses a 3% inflation assumption to convert your future payments into real dollars.

If at any point in the future, your expenses would exceed your net income and would fully deplete your accumulated cash, bond, and equity financial assets, then VeriPlan automatically would begin to accumulate an "unfunded consumption debt" loan for you. On the orange-tabbed '10-Future Debt Tool' worksheet, you can set a projected loan interest rate for any such unfunded consumption debt. Were this situation to occur, then the required interest-only annual payment on this accumulated unfunded debt would display automatically on this '4-DEBT PAYMENTS' graphic. See the '10-Future Debt Tool' worksheet for more information.


The first tutorial graphic below shows a projection for Sue and Sam's lifetime debts when they pay industry average investment costs. VeriPlan automatically extracted the investment cost information that Sue and Sam provided for their investment asset portfolio on VeriPlan's yellow-tabbed assets worksheets. Sue and Sam pay investment costs that are about average for full service retail brokerage customers. The year-after-year cumulative and compounded lost investment earnings and asset growth due to these cost inefficiencies would dramatically undermine Sue and Sam's personal assets.




This second tutorial graphic shows Sue and Sam's revised projection with lower investment costs that they consider to be more reasonable. (All other projection assumptions and data in VeriPlan remain the same in these two scenarios. Only the level of investment costs changes.)

When Sue and Sam decide to pay reasonable costs, they switch on their reasonable cost assumptions in Section 4 of VeriPlan's orange-tabbed "6-Cost-Effectiveness Tool" worksheet. When Sue and Sam use their reasonable cost assumptions, this graphic projects that their debts would be paid off in their mid-60s.

When they pay higher industry average investment costs, VeriPlan projects that Sue and Sam would still pay off their debts by their mid-60s. However, since their investment costs were substantially higher and their lifetime investment returns were much lower, Sue and Sam's cash, bond, and stock assets would be gone in their mid-90s. Thereafter, VeriPlan would automatically accrue unfunded consumption principal and interest debt through age 100 to project that their financial assets are gone, but their living expenses would continue.