How Money calculates items in the lifetime planner (Part 3 of 3)

This is a document that used to be provided on the Microsoft Money 98 site, but can no longer be found. Much of it is still relevant in more recent versions of Money.

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How are my LONG-TERM SAVINGS calculated?

The calculation for long-term savings contribution is:

(Monthly contributions * 12) + occasional contributions

Both monthly and occasional contributions amounts are defined in the top-level budget. In the first month of the first year of the Forecast, the entire monthly contribution is made.

Events
Many events can change long-term investments contributions in the future:

  • Change future income
  • Change future living expenses
  • Receive raise, pay cut, or career change
  • Receive Social Security or pension
  • Retire
  • Start working
  • Stop working

You specify the new savings amount in the event. The change takes place in the month you specify in the event. You can specify the amount either as percent of income or as a flat amount per year. In the percent of income case, the calculation is taken from the personal income of the person to whom the event applies after the event. The new amount replaces the entire contributions for that person. If the field is blank, the contributions are unchanged.

Investment Gain
Investment Gain is calculated as:

(beginning balance + ending balance) / 2 * rate of return

In the first year the Investment Gain is prorated by multiplying the above gain by ((date of 12/31 - start date of Forecast) /365.25). The rate of return is defined in the Savings & Investments place of the Planner. You can specify a rate of return before retirement (first spouse) and another rate of return for after retirement.

Taxes
Investment Gains are taxed each year at the rate indicated in the Options dialog. The tax is paid out of the Spending account group.

Inflation
When you have chosen Real Dollars, the monthly and occasional contributions grow with inflation in the same way expenses do.

If you have chosen Today's Dollars, no contributions grow with inflation.

How are my SHORT-TERM SAVINGS Calculated?

The amount of the contribution is:

(Monthly contributions * 12) + occasional contributions

Both monthly and occasional contributions amounts are defined in the top-level budget.

In the first year of the Forecast the entire current month contributions are made.

Investment Gain
Investment Gain is calculated as:

(beginning balance + ending balance) / 2 * rate of return

In the first year the Investment Gain is prorated by multiplying the above gain by ((date of 12/31 - start date of Forecast) /365.25) . The rate of return is defined in the Savings & Investments place of the Planner.

Taxes
Investment Gains are taxed each year at the rate indicated in the Options dialog. The tax is paid out of the Spending account group.

Inflation
If you have chosen Real Dollars, the monthly and occasional contributions grow with inflation in the same way expenses do.

If you have chosen Today's Dollars, then no contributions grow with inflation.

How are my PROJECTED TRANSFERS Calculated?

Transfer Amount
At the end of each year, the forecast calculates the ending balance of each account group. If the ending balance is less than the combined minimum balance for the group, the forecast tries to take money away from the other account groups with higher protection.

The protection order of account groups, from low to high, is as follows:

Spending Short-Term Savings Long-Term Savings Retirement

The amount of the transfer is enough to bring the ending balance back up to the combined minimum. Note that this can happen with a completely balanced budget by using events with expenses.

Taxes
Capital gains taxes are paid on these withdrawals. The forecast keeps track of the cost basis in order to calculate capital gain. Investment gains are calculated and displayed before these projected transfers.

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Page Last Updated: Sat, 29 Oct 2016 13:33:30 GMT

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