The Assumptions input panel provides a number of important fields.
Rates of Return
This panel asks you to enter the nominal average rate of return for regular assets and retirement assets. Since you are building a financial model that is perhaps 20 years, 30 years, or more, you should enter rates of return that reflect your assumption about the returns on these pools of money over the life of your model.
You can also set Future Nominal Rates of Return, which allows you to set a year of change and a new rate of return at some year in the future.
Standard of Living
The default living standard index is 100%. This means that the program will attempt to keep your per-adult living standard smooth or even throughout your life unless there is cash constraint. You can gradually raise or lower the living standard pattern by growing the 100% in positive or negative percentage growth.
Cost of Children
Children typically consume less than adults. By default we calculate that children consume at 70% of the level of an adult.This extra household cost will be reflected in the discretionary spending levels for those years when the child is still in the home.
MaxiFi Planner has been updated to incorporate the provisions of the Tax Cuts and Jobs Act of 2017. Learn more about these changes and how you can use ESPlanner to see their impact on your lifetime finances. You can learn more about the Tax Cuts and Jobs Act here.
You can run your plan to see how it is impacted by different assumptions for current and future Federal tax policy related to the Tax Cuts and Jobs Act of 2017 (TCJA). The options are:
- Current Tax Law: This is our default setting. It applies the TCJA changes as written in law, which means many of the changes, such as reduced income tax rates, expire on December 31, 2025.
- TCJA Changes Made Permanent: This option assumes the TCJA changes that are set to expire in 2025 are instead made permanent by Congress.
- Tax Law Prior to TCJA: This option applies the tax rates and provisions that were in place prior to the TCJA.
This panel asks you to enter the share of taxable regular asset income received as capital gains or dividends. Enter the percentage of income from your taxable Regular Assets that our calculations should assume are qualified dividends or long-term capital gains and thus will be taxed at the lower capital gains rate rather than the regular income tax rate. For example, if you have $100,000 in Regular Assets and $90,000 of that is in a brokerage account fully invested in stocks and bonds, then enter 90%; the remaining 10% might be in your local bank, for example, earning ordinary interest.
If some accumulated amount of your regular assets represent unrealized long-term capital gains/losses, you can enter that dollar amount on this panel. If you have your money in a brokerage account or invested in some way, the balance of that account may be due in part to growth or loss in the stock market resulting in capital gains or losses. For example, you might have a $100,000 balance at the end of last year and enter that in regular assets, but how did you get that $100K? Perhaps you got lucky or invested wisely and $15K of that was from capital gains. In other words, you invested $85K at the beginning of the year and then earned $15,000 in your funds or stocks or ETFs. That $15K is "unrealized capital gains," which simply means that if you were to withdraw it, you'd pay taxes on it at the capital gains rate. If you were to withdraw the other $85K, you'd not owe any tax on that since that was your cost basis or original investment. In this case, you would enter a value of 15000.