I have recently purchased the couples edition and have several questions.
1. The entry for retirement income - is that a before tax amount or the gross amount?
2. For lump sum infusions, whether that is an inheritance or business sale or whatever, how is that money handled in terms of investment income in subsequent years? Is there a new entry to make, and where?
3. Is the lump sum amoount received to be entered as an after tax amount?
4. In dealing with taxable account withdrawals, how is the cost basis issue handled?
5. In dealing with taxable accounts or income sources, how is the capital gains issued dealt with?
Thank you,
Gerald B R.,
Portland, Oregon
Gerald,
We've tried to address your questions below:
I have recently purchased the couples edition and have several questions.
1. The entry for retirement income - is that a before tax amount or the gross amount?
-- before tax. Be sure to check torridtech.zendesk.com or the help file when questions like this come up. It is much faster.
2. For lump sum infusions, whether that is an inheritance or business sale or whatever, how is that money handled in terms of investment income in subsequent years? Is there a new entry to make, and where?
-- some of it may be used as needed in the year it is infused. Only if the sum of pension, social security and infusions is greater than that year's income needs will some of it be accumulated. it will then be saved into the bucket you specify on last column of infusions... where you save the overage to "Tax-Deferred, Taxable or Tax Free". If that happens the money then grows at the blended return of that bucket.
3. Is the lump sum amoount received to be entered as an after tax amount?
-- assuming you are referring to a Cash Infusion, then the "Tax Rate to Apply" column controls the taxation. Some items like life insurance proceeds are tax free and you would leave the tax rate at 0%. Some like a part-time job would be taxed at ordinary income rates, so you would enter an estimated rate to apply to ordinary income.
4. In dealing with taxable account withdrawals, how is the cost basis issue handled?
-- the program does not track cost basis. If you have investments with a very low basis, you can enter a special expense to account for the extra taxation. For taxable the program only taxes the growth on the investments.
5. In dealing with taxable accounts or income sources, how is the capital gains issued dealt with?
-- For "income sources" I would assume you mean Cash Infusions, in which case the tax rate to apply column can be set to the capital gains rate.
For Taxable investment accounts, the effective tax rate during retirement is applied to the growth only. If you divide your taxes paid into your gross income, you will get an effective rate... this blended tax rate is a decent enough estimate to use in the program.
Does this help?