The Income section is used to model various types of income, such as:
The Start Age and End Age fields define when an item occurs. You can enter only ages between the overall start/end of your Trajectory.
Optionally, you can use a Retirement Age by entering 'R' in the Start Age or End Age field. If you enter 'R', your Retirement Age will automatically be used. In the example below, notice the End Age for Base Income and the Start Age for Social Security are set to 'R'. Since the Retirement Age is set to '67', Base Income's End Age will be calculated to be '66' (the last year the item is received) and Social Security's Start Age will be calculated to be '67' (the year the item begins).
In addition all ages set to 'R' will automatically be updated when/if your Retirement Age is changed, allowing you to perform 'what-if' comparisons more quickly. You can use the 'R' designator for any Income, Expense or Account item.
Growth Override specifies the rate at which an income item is expected to grow. By default, Income (and Expenses) grow at inflation, however, you can override that rate by clicking the checkbox in this column to indicate a specific growth percentage.
If you believe the income item will simply keep up with inflation, there's no need to enter a value here.
This field is useful for forecasting raises that outpace inflation, or conversely, for modeling a 'fixed' pension that does NOT rise with inflation — in which case, set Growth Override to '0'.
If all of this sounds confusing — let us explain...
OnTrajectory lets you work in "Today’s Dollars" — and that’s good. If we didn’t you’d have to account for the effects of Inflation when entering Income (or Expenses) for future periods. For example, you may know that a manager at your company earns 70k per year, and that you plan to have that job in 5-10 years. But a 70k position today will not be the same salary (we hope) 10 years from now — salaries for that position will probably have increased due to the effects of Inflation.
However, since OnTrajectory deals in Today’s Dollars, you can enter 70k in your model, and we'll automatically account for the Inflation (based on the value in the central Inflation Rate field).
NOTE: When setting an Income (or Expense) in the future, the amount will be inflated based on the central Inflation Rate up to the "Start Age" for the item. Thereafter the Growth Override value will be used. If you wish the "override value" to be used before the Start Age, open the item's properties (wrench icon) and select "Apply Growth Override before Start Age".
Finally, if you use OnTrajectory for more than 1-year, you will notice that Incomes & Expenses tied to Inflation appear to "deflate" in the past when viewd in "Tomorrow's Dollars". The rate of deflation is based on actual historical U.S. Inflation.
Set your Effective Tax Rate on the Accounts & Taxes tab, which will be used for both income and gains tax, by default. See Modeling Accounts & Taxes for more information.
Simply put, Items can overlap, but Age Ranges within an Item cannot. Age Ranges allow you to define how an Item changes during discrete periods of your life. Of course, you can have multiple Income streams (Items) that overlap time periods, such as Income from your spouse — or continuing to work after you've begun receiving Social Security. An example might look something like this:
Notice that in this example, the Item 'Spouse Income' is not contiguous — there is a gap from the End Age 36 to the next Start Age at 39. This reflects a married couple planning to have children with the wife being un-salaried during that period.
Also, notice in this example, the Start Age for each individual's Income is different. OnTrajectory allows you to choose a different Birth Year for different individuals (such as a spouse) in your plan. Add a new item Owner or choose from those you've already added by selecting the Wrench icon .
As a reminder, to add a new Item, click the 'Add' button beneath the Item table. A menu will appear on the left side of the screen. Select the Item you wish to add. To delete an Item, select the "Trash" icon .
To add a new Age Range beneath a row, select the 'Add Range' icon . To delete the Age Range, select the red icon.