With tax season upon us, planners are reminded how big of an impact taxes have on their clients’ financial situation. An important factor in any financial plan is consideration of the effect of income taxes, both now and in the future. Golden Years’ cash flow planning is designed to account for all sources of income and expense, and to illustrate the impact that any surpluses or shortages might have on the ability of assets to last through life expectancy. Since taxes can represent a substantial part of a client’s annual expenses, Golden Years carefully computes the client’s tax burden every year.
Golden Years tracks the client’s income and deduction items to determine the taxable income each year, and includes consideration of ordinary taxable income, capital gains, AMT and other significant items. The analysis uses the actual IRS tax rate tables including annual adjustments for indexing the rate breakpoints and standard deductions.
For high income clients, itemized deductions and exemptions are phased out. Separate tax treatment is provided for dividends, capital gains, alternate minimum tax, the taxable portion of social security income and other areas where special treatment is required such as the 3.8% Net Investment Income Tax.
Instead of showing a rough approximation of annual taxes using an overall tax rate, the tax analysis in Golden Years provides a more accurate yearly estimate of future potential taxes.
See how the yearly tax analysis is fully integrated with the cash flow and retirement planning projections in Golden Years by viewing an example set of planning reports created for a sample client, or review the tax analysis report pages available to be included as part of a financial plan.
