Cash flow is income minus expenses. If the cash flow is negative, then the Planner “sells” investments to cover the shortfall.
To calculate the cash flow in any year, your income and expenses are adjusted based on the increase or decrease you forecast. For example, living expenses increase by the inflation rate you forecast.
The Lifetime Planner performs the following calculations to determine your cash flow in a given year:
Start:
- Start the year with $0 cash flow.
Add:
- Any salary
- Any other income.
- Any income from a home or asset.
- Any proceeds from the sale of a home or assets.
- Any college-related income.
- Any income from a future loan.
- Social Security benefits (usually after retirement).
- Pension benefits (usually after retirement).
- The minimum required withdrawal from tax-deferred savings (begins when savings holder has reached or surpassed age 70-1/2). The Life Event Planners use the “Term Certain” method to calculate the minimum required withdrawal.
Subtract:
- Income taxes on all taxable income.
- Social Security and Medicare taxes.
- Loan payments, including balloon payments on loans.
- Debt reduction payments.
- Living expenses.
- Property taxes and expenses associated with a home or asset.
- Any planned downpayment on a home or asset.
- Taxes on gains from sale of home or assets
- Special expenses.
- Any planned college expenses.
- Your planned savings and investments contributions.
Overview
Content Tools