New User Q re. plan start, mid-year update and year rollover

1. Yes, you got it. You enter your new balances and change start date to 2026. There is a post that has a few other items some users thought should be updated, like health care expenses, ACA slcsp, expected returns, carry over losses, insurance rates, social security estimate, property tax, the inflation section,etc.

2. There is not currently a way to update "mid year". This has been discussed in the forum, and the designers are planning on something at some point. The easiest way is to not adjust initial balances but, rather, to create a date range for just this year (e.g. 2026-2026), where you can tailor this year's expected returns. However, there is a good chance your final returns on 12/31 will be different than you project mid-year; so many of us feel it's not worth the trouble given Pralana is a long-range planner. You can also add a one-time windfall income to reflect bonuses or other unexpected income this year.

Jonathan,

Thanks so much for your response.

Re #1. it's good to see they I'm on the right track and the additional pointer is very helpful.

Re #2: I would agree that mid-year updates are nice-to-have, but likely not worth the effort to implement. It was more of a "if it's there, I might as well use it" kind of thinking. But at this point in the year, I should probably just enter 2026 as my planning year and enter the account balances from end of last month, then update them next month with the end-of-year balances.

@tangofan Thinking of folks coming here later, here's the process for updating mid-year:

1. Update your balances on 1/1 of every year, and leave those balances alone for the entire year
2. At the beginning of each year, create a "portfolio time period" starting in the current year and then another starting one year later ( build > financial assets > advanced portfolio modeling > portfolio time periods ). Add other time periods if desired for e.g. falling glide path, changing ERs, etc.
3. Under advanced portfolio modeling > rate of return, start with the ordinary default ER for the current year, but update it at any point during the year with your predicted end-of-year final return if you have confidence that final return will be significantly higher or lower.

This will ensure your end of year totals reflect changes mid-year, and your taxes for this year will reflect those changes. Obviously, the closer you do this to Dec 31st the more accurate those final guesses will be.

The rub of course is that there's lots of cases in history where things look up (or down) in October and then crash (or rise) in the last three months; so do all this at your own risk. 🙂 The main purpose of Pralana is for long term planning, so be careful about focusing too much on the current year.

@jkandell

Very creative. There is still an issue with the way dividends are taxed. Currently in Pralana they are input as percentages of the gains, not a percentages of the balance. Over time, those are roughly equivalent (if the dividend yield stays constant), but dividends generally move slower than stock prices, so those are often very different in the first year. For instance, if I use 8% returns in the model and tell it that 15% of that as qualified dividends and 5% is non-qualified, I'm expecting to see taxes at the ordinary income rate on 0.05 x 0.08 =0.004 of the balance and taxes at the LTCG rate of 0.15 x 0.08 =0.012 of the balance. That's a very different tax picture for the first year than if you have 20% returns or -20% returns and use the same percentages, and I would not expect dividends to adjust that quickly. Right now, Pralana only has one set of percentages for handling dividends generated in taxable and they are not based on % of balance, they are based on % of gains.

If they added multiple time periods for different taxes on dividends or if there were a way to set them up as % of initial balance, that would facilitate it.

No matter what, folks have to realize that during the course of the year, there are often large lumpy cash flows that upset the idealized smooth returns that Pralana is assuming. These can be RMDs, windfalls, major expenses, bonuses, Roth Conversions, etc. and those may require the user to make manual adjustments to the model.

@ricke Good point. For a year with -10% by end of the year, my dividends wouldn't be -1.6%! QED. But we know from other discussions there are independent reasons Pralana might want to change the dividend taxation entry boxes to "% NAV" to match how that information is presented by investment companies on their web sites and how they are actually generated. (Pralana could do the %NAV/ER behind the scenes to generate LTCG.) But you are right: as things stand with how pralana generates taxable taxation, what I suggested will mess up the final taxation for taxable accounts.

Ps. I just did a deep dive into the data for VTSAX (total stock market index) returns 2015 through 2024 (last 9 years). Taken as geometric average of the 13.5% cagr total return broke down into dividends 2.0% and capital gain 11.5%. As expected, while dividends were pretty stable , capital gains jumped all over, from +30% to -21%. But as a whole, for last decade about 15% of growth has been from income. (Note this is Initial Yield, not the more common TTM.) But looking forward, if one assumed 8% (nominal average) stock growth going forward like you, 24% of growth would be from income, 75% from gain. At first I balked at your 8% denominator; but that matches a 3.7% CAGR real return, which is just a hair higher than I assume. If one looks just at the most recent 4 years, dividends average 1.7% of nav. That would be 21% of total 8% growth. Of course that assumes one's taxable account is all vtsax.

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