General Assumptions

• NaviPlan bases its calculations on certain assumptions, which can be changed. You can specify which inflation and tax rates, as well as tax options, NaviPlan should use. Since NaviPlan allows the clients to retire at a specific date during the year, and retirement begins on the first day of the month that the clients retire, the tax rates for the year of retirement are prorated based on the retirement month.
  • Note: If you selected Client(s) are already retired during plan creation, some of the details listed below may not appear or apply.

• Tax Rates and income types
  • The marginal tax rates are applied to the following income types: dividend, royalty, alimony, and short-term capital gains.
  • The average tax rates are applied to the following income types: salary, self-employed, Social Security, defined benefit, pension, and other taxable income.
  • The long-term capital gains tax rates are applied to long-term capital gains and to dividends.

• FICA taxes refer to the taxes imposed by the Federal Insurance Contributions Act. There are two components to the FICA taxes:

  • OASDI: old age, survivors, and disability insurance component (Social Security)

  • HI: hospital insurance component (Medicare)

  • The OASDI tax is imposed at a rate of 6.2% for both the employer and the employee for a total combined rate of 12.4%. However, the OASDI tax only applies to earnings equal to or less than a base amount. The tax rates are not indexed for inflation. The HI tax is imposed at a rate of 1.45% for both the employer and the employee for a total combined rate of 2.9%. Contrary to the OASDI, there is no limit on the amount of earnings subject to the tax.

  • Self-employed persons are assessed at both the employee and the employer portion of the OASDI (12.4%) and the HI (2.9%), but only 92.35% of self-employed earnings are subject to the total tax (15.3%).

  • NaviPlan applies FICA taxes to all salary and self-employed incomes unless the Exclude from Social Security tax and Exclude from Medicare tax check boxes are selected in the Details Income dialog box (accessible by clicking the Details button on the Cash Flow page).

1. Enter a Base Inflation Ratepercentage. To view the historical inflation rates, click Inflation Rate Graph.
2. In the Return Rate for Cash Surpluses field, enter a percentage
   Note: The Return Rate for Cash Surpluses field only appears if you are using the Detailed Tax method.

1. Enter the Annual Account Fee, specified as a percentage of the account’s market value.
2. From the Frequency list, select how often the account fee will be calculated.
3. To claim annual account fees as a tax-deductible expense, select Tax Deductible.
   Note: The Tax Deductible option only appears if you are using the Detailed Tax method.

Lifestyle Assets

1. From the Lifestyle Assets section, review the data for each Asset Type in the list. Use the Pre-Retirement and Retirement fields to enter your own custom deferred growth rate assumptions.
2. Use Reset to Defaults at any time to remove any custom data you have entered and reset data for each asset type back to NaviPlan's default.

Real Estate Assets

1. From the Real Estate Assets section, enter your custom value for Deferred Growth Rate.
2. Use Reset to Defaults at any time to remove any custom data you have entered and reset data back to NaviPlan's default.

1. From the General section, scroll to Account Reinvestment Strategy.
2. Select your desired option for reinvestment strategy:
   • Reinvest After-Tax: Taxes are paid on investment growth, the remainder are then placed back into their corresponding accounts.
   • Reinvest All: Reinvests all investment proceeds into their corresponding accounts, taxes will be paid by cash flow.
   • Reinvest None: Reinvests no investment proceeds back into their corresponding accounts, goes directly into cash flow.

Note: You can enter different strategies for the Pre-Retirement and Retirement periods.