Overview
COLA (inflation) and Loss to Taxes percentages are incorporated into Target-Map™ goals planning and not considered on the Asset-Map.
Asset-Map Platform's Target-Map™ Templates use default percentages to generate Target-Maps quickly and easily. The default percentage values are found on the Target-Map Preferences page. You may adjust them as you desire.
From the result of running a Target-Map template based on the default values, adjust the client's Target-Maps, including COLA and Loss to Taxes, directly on the specific Target-Map.
How Default COLA is Applied and Edited
To apply a default COLA that Target-Map templates will use, enter the desire percent in the Annual Increase of Contributions field on the Target-Map Preferences, General Settings page.
This value is used to generate funding conversations quickly.
Customize COLA and Loss to Taxes when Editing Target-Maps
Click the desired Target-Map's Edit option on its Actions menu (three dots)
Click the What you want tab to adjust COLA on the desired spending line items
Click the What you have tab and the edit the desired line item (pencil icon) to adjust COLA and Loss to Taxes accordingly.
Impact of COLA and Loss to Taxes upon Assets and Cash Flows
On Target-Maps
For capital required (What you want)
Spending desires are already considered after tax therefore adjust the COLA as desired.
COLA is assumed to start at current client age, not start age/date.
For funding sources (What you have)
By applying a Loss to Tax in the What you have page you are helping to determine funds available for consumption. If the Future Value checkbox is ticked on the Asset-Map financial, COLA will be applied from the entered future age/date. Otherwise, COLA is applied from the client's current age.
Roth Assets
Loss to Taxes is applied to the value of an asset unless the ROTH check box is ticked on the Asset-Map financial.
Impact on Target-Map Cash Flow Details
The cash flow details page displays the net annual impact of COLA and Loss to Tax entered on the funding line item on the After-tax Cash Flow Sources column.
Conclusion
Although future taxes and COLA values are unknowable, the client conversation can center around accomodating for the fact that inflation and taxes will have some impact. By ntering logical values and revisiting Target-Maps annually, the client can have confidence that their funding goals are effectively managed by their financial professional.