Understanding A Structured Income Plan

Client Information: 

• John Doe, age 60; birth date: 01/01/1966; retirement age: 70 

Incomes: 

• Wages: $125,000 growing at 2.8%; Social Security (SS) at 70: $48,000 COLA at 2.8% 

Assets: 

• Taxable Brokerage Account (BA): $800,000, Moderate 3% net growth per year 

• Traditional IRA: $350,000, Conservative 2% net growth per year 

• ROTH 401 (k): $500,000, Aggressive 5% net growth per year 

• High-Yields Savings Account: $30,000, 3.5% net growth per year 

• Residential Home: $480,000 in value, fully owned 

Goals and Objectives: 

• Target Income: The first year will start at $75,000 with an inflation factor of 2.8%. At age 70 the Target Income will reset to $90,000 with an inflation factor of 2.8% for the remainder of the plan. 

• Brokerage Account: Contribute any excess amounts for the remainder of the plan.  

• Traditional IRA: Contribute $6,000 per year until the age of 70 and starting in retirement years withdrawal 4% for the remainder of the plan. 

• ROTH 401 (k): Contribute 6% of employee income per year to receive the full match from the employer until age 70. Before the RMD withdrawals, withdrawal 4% from the account per year.  When RMD starts withdrawal the full amount for the remainder of the plan. 

• High-Yields Savings Account: Contribute $1,200 per year until age 70. Withdrawal 4% for the remainder of the plan. 

Expenses:  

• Gifting to Family: Gift $6,000 for the remainder of the plan. 

• Travel: While working at $5,000 with an inflation factor of 2.8%, while in retirement start at $8,000 with an inflation factor of 2.8% until age 80. 

To learn more, see articles and sections:

• Understanding a Structured Income Plan
• Understanding a Structured Income Plan that has a Target Income and an After-Tax Target Columns
• Case Studies 

Step 1: Prepared By: This represents the person who created the structured income plan. 

Step 2: Initial Plan Date: This date represents the first day of the structured income plan. To learn more about inital plan date see article: Editing the Initial Plan Date

Step 3: Revised Plan Date: This date represents the most recent date that the structured income plan was edited. 

Step 4: Scenario: This text box shows the scenario you are currently viewing. To switch scenarios, click the dropdown arrow to toggle between scenarios. To learn more about the Scenario function, see the section Edit or Add Scenario Function

Step 5: Planning Horizon: This text box displays the timeline for the planning scenario. To adjust the timeline, click the dropdown arrow and select a time frame. To learn more see article: Planning Horizon Timeline.

Step 6: RMD Column: This column represents the amount that needs to be withdrawn from qualified accounts, which for this plan includes the Traditional IRA and the Roth 401(k). The background color is white, which indicates the exact RMD amount has been withdrawn. If the background color is red, not enough is being withdrawn to satisfy the RMD that year. If the background color is green, more than the RMD is being withdrawn from qualified accounts in that year. To learn more see article: Required Minimum Distribution (RMD).

Step 7: Year: Each row represents one year in the plan. 

Step 8: Name & Age: This column displays the client’s name and age. 

Step 9: Brokerage Account & Income: The grayed‑out section displays the growth rate (shaded in orange) and the initial account balance. The left column with the header "Account" displays the estimated account balance at the end of that year. The right column with the header "Income" represents any cash flow in or out of the account in that year. Since the header is "Income," a contribution would be negative, and a withdrawal would be a positive number. To learn more see article: Tax Calculation Option for Accounts.

Step 10: Traditional IRA Account & Income: This follows the same pattern as the Brokerage Account with "Account" and "Income" columns. 

Step 11: 401(k) Account & Income: This follows the same pattern as the Brokerage Account with "Account" and "Income" columns. 

Step 12: High-Yields Savings Account: This follows the same pattern as the Brokerage Account with "Account" and "Income" columns. 

Step 13: Accounts Total: The sum of all the assets displayed by year. 

Step 14: Planned Distribution: This is the netted total of all funds added or withdrawn from the accounts in that year of the plan. Numbers in (parentheses) indicate overall net savings to accounts in that year; numbers not in parentheses indicate a net withdrawal from accounts in that year. 

Step 15: Percent Distribution: This value represents the percentage amount of the total funds added or withdrawn from the account in that year of the plan. If the percentage is a negative amount, it represents the amount being deposited. If the percentage amount is positive, it represents the withdrawal rate. To learn more see Article: View % Distribution Function 

Step 16: Wages: This column is part of the income section and represents the client’s yearly wage. The orange section displays the annual growth rate for the yearly wage increase. The starting wage amount corresponds to the value entered on the Income page. Similarly, the annual growth rate is initially populated based upon the percentage specified on the Income page in the Client Dashboard. To learn more see article: Tax Calculation Option for Incomes 

Step 17: Employer Match: This column represents the employer’s contribution amount to the Roth 401(k). The orange section displays the annual growth rate for this income. To learn more see article: Adding an Employer Match 401(k) Income 

Step 18: SS: This column represents the Social Security income. The income begins based upon the age specified for this income in the structured income plan. You can change the start date for Social Security using the "Manage" button for the Social Security Income. The orange section displays the annual growth rate for this income. 

Step 19: Gifting to Family: Expenses are modeled as negative income. The orange section displays the annual growth rate for this expense. Since this amount is an expense, it is displayed as a negative number. To learn more see article: Adding Expenses to the Structured Income Plan 

Step 20: Travel: Expenses are modeled as negative income. The orange section displays the annual growth rate for this expense. Since this amount is an expense, it is displayed as a negative number. 

Step 21: Approx Income Tax: This is the estimated income taxes and effective tax rate percentage for each year in the plan. To learn more see article: Understanding the Advanced Tax Planning Page 

Step 22: After Tax Income: Since this is an income plan, the after‑tax income is the same as the annual after‑tax cash flow the plan generates each year. 

Step 23: After Tax Target: The after‑tax target is the annual after‑tax cash flow that the client would like to have. Any income generated over this amount will be reinvested into accounts. The inflation factor represents how much their target income—or annual target after‑tax cash flow—needs to rise to maintain the spending power illustrated in Year 1. 

Step 24: Income Gap: This column indicates whether there is a monetary difference between the After‑Tax Income and After‑Tax Target that is not being made up using deposits or withdrawals from accounts. If the numbers are red, this means there is an income shortfall for that year by the amount in red and the actual income generated from the netted account withdrawals plus incomes minus expenses and taxes is less than the After‑Tax Target income. If the numbers are green, there is an excess, which means the actual income generated exceeds the target income and is not being reinvested into the accounts. If the number is 0 and has a white background, it means that the After‑Tax Income and After‑Tax Target are perfectly aligned and equal. 

Step 25: Final Row: The final row indicates the last year of the planning horizon. 

Step 26: Numbers at the End of the Plan: Note the numbers at the end of the plan; they represent the total amounts of the columns. If you feel you need more support or would like to set up demo time with one of our representatives, please contact us at: support@planscout.com