New User Video 4 of 5: How to Target a Specific Spending Level

welcome to getting started with income

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lab a video series that jump starts

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great retirement income planning and

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management when income lab plans answer

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the question how much can I spend they

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do so in Gross of tax terms that's

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because when we ask how much someone can

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withdraw from a portfolio the answer is

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gross of tax after all your IRA doesn't

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really care what your tax rate is it

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would support the same withdrawals

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whether your tax rate is 35% or

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0% but in many planning situations there

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are times when instead of asking how

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much can I spend and getting a gross of

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tax answer you need to ask how can I

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spend X net of tax that could be because

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you already know how much a household

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wants to spend net of tax and you know

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that that amount is reasonable it could

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also be that you want to build a plan in

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life Hub where net of tax income and

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planned spending exactly match with no

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buffers surpluses or shortfalls it could

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also be that your plan has lumpy

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expected taxes due to Roth conversions

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or other irregular income or expenses

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especially early in the plan unless

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spending capacity is very high compared

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to what the household will actually

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spend lumpy taxes typically mean the

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clients will have to gross up their

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income in high tax

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years this video shows you how to do

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this with income

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lab note that even with a how much can I

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spend plan you can view estimated net of

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tax income in a few places in the app

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first you can switch the main plan

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dashboard to net using the tools menu

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this will show you projected net income

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in the month or year of

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retirement you can also click on the

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spending capacity card to see a full

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accounting of gross and net

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income however though that's accurate

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for a point in time it may not be

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representative of this plan's long-term

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experience especially if retirement is

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midyear or if there are other

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exceptional tax circumstances in that

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year second you can view tax estimates

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and their effect on net of tax income in

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life Hub either in the mindmap view or

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the finf flow

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view this plan for example has a surplus

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in all years of the plan what does that

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mean just that what the household can

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spend gross of tax exceeds estimated

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taxes plus specified expenses the

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Surplus is just income we could spend

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but haven't allocated to a particular

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use to switch a plan from how much can I

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spend to how can I spend X net of tax

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first specify the target Baseline

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spending level on the Baseline expenses

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tab either by entering a bottom line

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total goal or by itemizing Baseline

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expenses here we're targeting $10,000

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per month next change the plan's primary

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question from how much can I spend to

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how can I spend $10,000 net of

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tax you can also change the primary

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question in the plan advanced settings

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in the income settings

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section now this plan will Target

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$10,000 a month in net of tax Baseline

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income following the plan's income path

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over time that could mean flat real

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spending or following the retirement

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smile or a custom path on top of this

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the plan will Target extra net of tax

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income to cover any other variable

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expenses the app then grosses up

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withdrawals in order to cover estimated

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taxes you'll notice a few differences

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between this plan and the how much can I

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spend plan first well the plan still has

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guard rails we no longer have a slider

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in the guardrails Explorer that's

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because we've settled on a spending

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level already we're not exploring

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anymore second the income sourcing graph

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is lumpier reflecting the grossing up of

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portfolio withdrawals in certain years

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to handle estimated

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taxes third life Hub now has no Sur

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pluses or shortfalls income now matches

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expenses plus savings and

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transfers and finally in the tax Center

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withdrawal strategies all have the same

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total net

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income that's by design of course a how

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can I spend X net of tax plan holds net

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income constant so these strategies

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don't differ on net of tax grounds only

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on total taxes paid and on projected net

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Legacy as you can see this plan is

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totally different from the how much can

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I spend plan we had before but this type

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of plan can be very useful for many

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Advanced planning

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tasks