Where Applied or Edited
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.
Customize COLA and Loss to Taxes when Editing Target-Maps
Click the desired Target-Map's edit icon
Click the What you want tab to adjust COLA on the desired spending line items
Click the What you have tab to adjust the desired funding line items to adjust COLA and Loss to Taxes accordingly.
Definition of Loss to Taxes
The Amount Lost to Taxes is the percentage of the gross value of a financial instrument that will effectively be lost to taxes. Since gross values are commonly used in the Asset-Map and financial statements, a reduction of that gross value is necessary to account for the embedded tax obligation that is due upon consumption. This figure is not necessarily equal to the marginal tax rate but rather an intelligent accommodation to the amount of unpaid taxes embedded in the gross value that should be discounted for purposes of consumption.
Behavior of COLA and Loss to Taxes upon Assets and Cash Flows
On Target-Maps
For spending desires (What you want)
Spending desires are considered after tax, therefore COLA is the only adjustment available out of the two.
COLA is assumed to start at current client age, not start age. Of course, the spending line item can be edited.
For funding sources (What you have)
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.
Loss to Taxes is applied on the total value of cash flow funding as well as on the value of assets unless the ROTH check box is ticked on the Asset-Map financial. Loss to Taxes percentages are initially inherited from the Target-Map Preferences. You may adjust Loss to Taxes on the individual line items as you see fit.
By applying a Loss to Tax in the What you have page you are helping to determine funds available for consumption.
Expected Net Return on Capital
The percentage you select for Expected Net Return on Capital is intended to consider a percentage which is net of fees, taxes, and expenses. On the Cash Flow Details page, the percentage is applied after taxes and COLA are applied in the End of Year (EOY) balance.
7/2023