Understanding Lifetime Planner's yearly cash flow calculations

The Lifetime Planner calculates your annual cash flow by subtracting your total expenses, including savings, from your total income. It applies your planning decisions and assumptions, adjusting income and expenses based on projected changes, such as inflation adjustments for living expenses.

How it works

The Lifetime Planner systematically adds all income sources and subtracts all expenses to provide a detailed view of your projected annual cash flow. This approach helps you plan effectively for future financial needs and goals.

Calculation steps

The following steps describe how the Lifetime Planner calculates your annual cash flow. These are not steps you need to perform but rather how the application processes your financial information.

1. Initialize cash flow: Begin each year with a cash flow of $0.

2. Add income sources:

   • Salaries

   • Other income

   • Income from assets or properties

   • Proceeds from asset or property sales

   • College-related income

   • Income from future loans

   • Social Security benefits (typically post-retirement)

   • Pension benefits (typically post-retirement)

   • Minimum required withdrawals from tax-deferred savings (starting at age 70½): The Lifetime Planner uses the Term Certain method to calculate these withdrawals. This method bases the distribution on the account holder's life expectancy at the time of the first withdrawal. Each subsequent year, as life expectancy decreases by one year, the account is steadily depleted.

3. Subtract expenses:

   • Income taxes on all taxable income

   • Social Security and Medicare taxes

   • Loan payments, including balloon payments

   • Living expenses

   • Planned down payments on assets or properties

   • Special expenses

   • Property taxes and associated expenses for assets or properties

   • Planned college expenses

   • Planned savings contributions