Category: Truth Tips

Truth Tip, “Old Money” in Asset Flow

All Present Value dollars in our calculators are assumed to be old money—dollars that the client already has access to when beginning an illustration. If an asset is then added as a Present Value, without that money being pulled from existing dollars, data will appear skewed. When illustrating a client’s money being pulled into a new asset, make sure that money exists elsewhere in the illustration. First, you’ll want to ensure that the money being shifted into a new asset is accounted for in the initial Ordinary Taxable Account. When

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Truth Tip, State Taxes in Asset Flow

When state tax is entered into Asset Flow, the calculator assesses a tax on Social Security. This tax is based on the benefit amount that is subjected to tax on the Federal Side. If you don’t want this to occur, leave out the state tax rate. Currently, the calculator adds the state tax to anything that is also taxed federally (after those federal deductions). Then there is an offset for the tax paid. This offset is taken off of the Federal Income Tax Basis, up to the SALT limits ($10,000).

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Truth Tip, Calculating for COLA in Asset Flow

When using the Asset Flow calculator, it is important to calculate for COLA (cost of living adjustment) when determining Social Security income. The Future Value calculator is a handy tool in this case. To set this up properly, fill in the fields as such: Present Value; the annual payment (multiply the monthly payment by 12). Rate; the annual interest rate. Time Frame; the difference between current age and distribution age.   If you use the resulting number in Asset Flow as the benefit for Normal Retirement Age, the value will

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Truth Tip, Order of Taxation in Asset Flow

In Asset Flow, we chose to treat each individual asset viewed as the last dollar added or withdrawn in the tax bracket (at the margin). This is because any changes made will impact the overall taxation in that regard. However, when you view all the assets in the summary page, the taxes are equally distributed among all of the assets causing the tax. This can cause some discrepancies when viewing an individual asset against the summary of all assets. In Asset Flow, this means it is possible for an individual

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Truth Tip, Social Security Taxes

Do you know how much of your Social Security can be taxed? Up to 85% of Social Security Benefits can be subject to income tax, though it can be confusing to understand exactly how to calculate. First, your Modified Adjusted Gross Income (MAGI) must be calculated, which determines the amount of income affecting tax on Social Security income. The calculations for your MAGI do not get to use personal or Standard Deductions to reduce the amount, nor does the Standard Deduction work against Social Security income. In conclusion, the SS

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Truth Tip, Asset Flow

In the Asset Flow calculator, you can roll a tax-advantaged account into a new account (like a spouse’s account) at death.  It must be done manually, as the calculator is designed to show what happens at liquidating. In Asset Flow, show the principal amount distributed at death going into another IRA (or similar) account the next year with the “Tax Deductible Contributions” box checked. The tax deduction in the new account will offset the taxes paid in the old account for a net “0” tax. You will, however, have to

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