Finance Logix Release 3.10

Tax Periods

With this release we are adding the ability to change the tax assumptions and calculation mode multiple times throughout the plan.

This is achieved by allowing users to add “tax periods”. Each period offers the opportunity to change the Federal, State, and Capital Gains rates. Any tax period that begins at a later date will supersede any previous tax period. 

For Federal Income Tax and Capital Gains Tax, the user can choose to set a flat rate, or let the system compute it automatically, based on the marginal tax calculations by setting it to "Auto".

In case multiple tax periods start in the same year, the tax period that was added last will be selected as “active”.

 
 

Users may change which tier is active by clicking on the icon that appears to the left of the overlapping tax periods, and from the resulting popup, dragging the desired active tier to the top of the list.

 

Plan Assumptions

We have grouped the key planning parameters under the new Plan Assumptions worksheet, so users can make general adjustments to things like plan inflation and the sweep account, without navigating to multiple screens. The Plan Assumptions screen is accessible as a separate worksheet through the main navigation menu and as a tab under the Client Data worksheet.



Plan Start Month

One of the key new functions introduced with this release is proration of the first (current) year of the plan.


Until now, the system assumed that all calculations were based on a full calendar year.  With this new feature, the user can choose to illustrate only the remaining portion of the current year.  This works in conjunction with the ability to set custom tax rates for the current year, so that all contributions, incomes, and expenses that occurred earlier in the year, but that couldn’t possibly be captured through aggregation or any data feed, can now be accounted for by setting the correct tax rate for the first year.


To illustrate how this new feature works, if the user opens the plan in the month of October, with the Plan Start Month set to be Current Month, the system will process only three months of salaries, living expenses, other incomes and expenses, and contributions in the current year. Selecting January as the Plan Start Month will process full annual values for all incomes and expenses in the current year. This has been the default behavior up until this point.


New scenarios created after this release will have “Current Month” as the default setting for the Plan Start Month. Scenarios that were created prior to the release have the Plan Start Month set to “January” to retain existing results. You can adjust this setting at the scenario level anytime.

 

Base Inflation

Enter estimation for average future inflation. This figure will be used in several calculations regarding future living expenses, social security benefits, other incomes and expenses. This data point also remains at its original location, the General Information tab.

 

Sweep Account

The Sweep Account is where the system will deposit unspent income and distributions at the end of every year. This input was only visible in the presentation section (Dynamic Plan), so we decided to repeat it on the summary page.

 

Education Shortfall

If assets allocated towards each Education goal in the Education Module are not sufficient to cover each goal’s overall expenses, you may instruct the system to automatically withdraw money from other non-education specific accounts to cover the shortfall.

 

Spend All Discretionary Income

Any unallocated income from salary, and other incomes marked as discretionary, will be spent at the end of the year.


Other Incomes

In this release we are significantly enhancing the functionality of Other Incomes.  We added new features for usability, and new features for advanced planning scenarios. Below is a list of all the functions and inputs you will find on this redesigned screen.

General Info:

Finance Logix allows specifying a custom name for a new Other Income as well as optionally assigning a Category for that income.


For example: to plan for future trust payments to be received at specific years, you may enter a new category "Trust Income" and add 3 different trust payments happening at specific times. All Other Incomes and categories can be viewed on the Cash Flow Details popup screen.


Income Owner indicates who is responsible for this Income. The owner field is also what drives the smart ages for the start and end age.


Income Category is most significant in Cash Flow mode as it allows the user to visually group multiple Incomes under the same category on both the Detailed Cash Flow screen and the Cash Flow report.


Amount Details

Yearly Amount is the annual value for this income. Income yearly amount can be specified in Today's Dollars or Future Dollars. Select Today's Dollars option if the amount entered should be adjusted from now until this income starts either by the scenario inflation or by specified increase rate. Future Dollars option is for incomes that are already adjusted for inflation.


Finance Logix provides handy tips when entering incomes yearly amount in Today's Dollars by calculating what the amount will be in Future Dollars on the income start year. For example, an income with yearly amount of $10,000 that starts in 10 years and is adjusted for inflation with 4 % rate will yield $14,802 amount in future dollars on the specified income start year.


And the other way around, an income of $10,000 starting in ten years from now is equivalent to $6,755 in today's dollars when the baseline inflation is assumed at 4%.



Inflation rate (or growth rate) that is used to adjust the income amount from current year to its start year is set by “Before it starts” control. You can apply a "Do not increase" setting, the plan inflation rate through "Increase yearly by inflation", or select "Increase yearly at a rate of" and specify a custom growth rate.


You can use a similar control to setup income inflation (or lack thereof) for years after it starts.


Duration

Recurring incomes may have frequency lower than yearly. You can setup incomes with longer recurrence periods by adjusting Repeat this Income every X years control, e.g. an income happening every other year would have this parameter set to 2.



From and To controls indicate the time frame within which the Income will occur. User can choose to tie the start and end of the Income to one of the life events in the plan, such as retirement age or death. The owner on the Income will determine some of the ages. The user can also choose to enter a custom age, but these will not update as changes are made to the various age assumptions in the plan.

Month selectors allow setup for proration of the annual income amount on the start and end years. For the start year the income amount will be prorated by the number of months remaining in the year. For example,  an income with $12,000 annual amount starting in September will pay out $4,000 (a four month value) on the start year. On the end year income will stop in the selected month.


Planning Options

“This will be a discretionary income” option instructs the system to treat this income as discretionary. This option, in conjunction with the "Spend All Discretionary Income" option on the Cash Flow / Goals page, will allow you to include any unused portion of this income in the living expenses.


For incomes that are not subject to Federal Income Tax or State Income Tax, the  respective checkbox can be deselected to exclude the income amount from tax calculations.


Insurance Planning

By default, duration of incomes is not affected by insurance planning events. For example, when running a disability insurance what-if scenario on the income’s owner, the income will last until the specified end year. Using the Insurance Planning controls allows you to terminate an income when life insurance, disability insurance or long-term care insurance event are triggered.


Direct Deposits

With the Direct Deposit function you can designate the whole amount of an income or a portion of the income  to be deposited directly into specified accounts. When enabled, Direct Deposit has one account on the list. By default it is the client's default Savings account. You can change the deposit account in the dropdown menu or add more accounts to the list, so the income has a more complex distribution. Please note, that due to contribution limits constraints, only liquid accounts are available as a target for direct deposit. For example,  you can setup direct deposit into Checking or Brokerage accounts, but not into 401(k) or Traditional IRA.



Other Expenses

When adding an Other Expense you can choose a name, an owner, and assign it to an existing category or create a new one. You can also set a start and end age for the expense, specify a recurrence frequency, adjust the rate at which the expense will inflate, and assign a priority to it.


Expense Owner indicates who is responsible for this expense. The owner field is also what drives the smart ages for the start and end age.


Expense Category is most significant in Cash Flow mode as it allows the user to visually group multiple expenses under the same category on both the Detailed Cash Flow screen and the Cash Flow report.


Amount Details

Yearly Amount is the annual value for this expense. Expense yearly amount can be specified in Today's Dollars or Future Dollars. Select Today's Dollars option if the amount entered should be adjusted from now until this expense starts either by the scenario inflation or by specified increase rate. Future Dollars option is for expenses that are already adjusted for inflation.


Finance Logix provides handy tips when entering expense yearly amount in Today's Dollars by calculating what the amount will be in Future Dollars on the expense start year. For example,  an expense with yearly amount of $10,000 that starts in 10 years and is adjusted for inflation with 4 % rate will yield $14,802 amount in future dollars on the specified expense start year.


And the other way around, an expense of $10,000 starting in ten years from now is equivalent to $6,755 in today's dollars when the baseline inflation is assumed at 4%.



Inflation rate (or growth rate) that is used to adjust the expense amount from the current year to its start year is set by Before it starts control. You can apply a "Do not increase" setting, the plan inflation rate through "Increase yearly by inflation", or select "Increase yearly at a rate of" and specify a custom growth rate.


You can use similar control to setup expense inflation (or lack thereof) for years after it starts.


Duration

Recurring expenses may have frequency lower than yearly. You can setup expenses with longer recurrence periods by adjusting Repeat this Expense every X years control. For example, expense happening every other year would have this parameter set to 2.



From and To controls indicate the time frame within which the expense will occur. User can choose to tie the start and end of the expense to one of the life events in the plan, such as retirement age or death. The owner on the expense will determine some of the ages. The user can also choose to enter a custom age, but these will not update as changes are made to the various age assumptions in the plan.

Month selectors allow setup proration of the annual expense amount on the start and end years. For the start year the expense amount will be prorated by the number of months remaining in the year, e.g. an expense with $12,000 annual amount starting in September will yield $4,000 (a four month value) on the start year. On the end year expense will stop in the selected month.


Planning Options

Expense Priority allows the user to rank expenses by importance in the plan. Multiple expenses can have the same priority, with 1 being the highest priority (Note: Living Expenses are always assumed to be of priority 1 in the plan). Grouping or ranking expenses by priority allows the user to quickly change the output in the results screen by filtering lower priority expenses. By default all expenses are included in the plan, but in the case of a projected shortfall, the user may choose to only include goals and expenses with higher priority to see if those essential expenses can be met without failing the overall plan.


By enabling “This Expense is Tax Deductible” option you can specify what portion of the expense should be counted towards itemized deductions. Selecting “This is an Above The Line deduction” will use the specified portion of expense to reduce the Adjusted Gross Income, instead of factoring it into the itemized deduction calculations.


Insurance Planning

By default, duration of expenses is not affected by insurance planning events. For example, when running Disability Insurance what-if scenario on expense owner, expense will last until the specified end year. Insurance Planning controls allow you to terminate an expense when life insurance, disability insurance or long-term care insurance event is triggered.


Add Sample Client Button

We implemented the ability to add a sample client to your client list. This sample client will have a pre-populated basic scenario that can help you get familiarized with the software. To add the sample client, go the client list under Client Management and then click “Add Sample Client”: