Originally from ticket #18798.
Hello,
I was unable to find the answers to these questions in your FAQ or tutorial. Can you give me direction as to where I might find the explanation.
1. In the spreadsheet, why is the “Taxable Cash Infusion – After Tax” a higher number than the “Taxable Cash Infusion”? I did include an effective tax rate in Assumptions.
2. On the Retirement Graph which numbers make up the “The Other Income” stream. Is it from “Taxable Cash Infusion After Tax” or before?
3. In Special Expenses tab, How does the “Estimated Inflation Rate before retirement” and “Estimated Inflation Rate After Retirement” calculate? Example: I added Medicare Expenses of $2,924 with an estimated annual inflation rate of 16% for 30 years starting at age 65. That one line item increased Goal and Expenses from $236,041 to $518,636 in 20 years. The single premium expense of $2924 grew to $282,595
Thank you for your time and response to my earlier question
Sincerely
Tricia
Hi Tricia,
1. In the spreadsheet, why is the “Taxable Cash Infusion – After Tax” a higher number than the “Taxable Cash Infusion”? I did include an effective tax rate in Assumptions.
-- Are you sure it doesn't include "other job income"?
2. On the Retirement Graph which numbers make up the “The Other Income” stream. Is it from “Taxable Cash Infusion After Tax” or before?
-- Other Income is from all Cash Infusions that are not tax deferred + Other Job Income if one spouse is still working
3. In Special Expenses tab, How does the “Estimated Inflation Rate before retirement” and “Estimated Inflation Rate After Retirement” calculate? Example: I added Medicare Expenses of $2,924 with an estimated annual inflation rate of 16% for 30 years starting at age 65. That one line item increased Goal and Expenses from $236,041 to $518,636 in 20 years. The single premium expense of $2924 grew to $282,595
The BEFORE inflation occurs between now and the Start age.
The AFTER inflation occurs at Start Age for the Duration you specify.
It does COMPOUND the expense so that it is larger and larger each year that you apply inflation just like real life.
As you can see an inflaction rate of 16% is huge compounding. Don't know if that is a reasonable assumption for medicare. Have not researched it. I do know basic medical costs are going up 6 - 10% a year in recent years.