TIP$TER makes a simplifying default assumption about taxes: that an investor can rebalance his or her retirement savings and reinvest the earnings – including interest income, dividends, and capital gains – from his retirement savings without immediately realizing any taxable income.  Also, when specifying a targeted retirement budget, TIP$TER assumes that the investor is specifying the pre-tax retirement budget.  So it is important to specify a generous enough targeted retirement budget to pay all necessary taxes.

   TIP$TER's default assumption is suitable for most young middle-class investors.  Today, most middle-class workers squirrel away the majority of their retirement savings in 401(k)s, IRAs, Roth IRAs, pension plans, and other tax-advantaged vehicles.  Moreover, many buy-and-hold investors invest most or all of their taxable retirement savings in low-cost index funds, deferring taxes on any capital gains for years, perhaps all the way until they redeem some of their assets to fund their retirement budget.  Also, many investors can maintain their targeted asset allocation, and effectively rebalance their entire portfolio, without ever owning bonds in a taxable account.

   There are, however, some investors who would suffer a huge tax drag by investing in bonds.  (Here's a spreadsheet that illustrates the effects of tax drag on a taxable TIPS portfolio as user-specified tax and withdrawal rates).  For them, TIP$TER's default assumption is not as suitable.  For such investors, TIP$TER includes an experimental tax option mode that assumes the opposite extreme: that all of the investors' assets are in taxable accounts and that the investor is specifying an after-tax budget.

    Or course, most people fall somewhere in between the two extremes: most have some of their savings in tax-advantaged accounts and some of it outside those accounts.  TIP$TER version 3.0 will more precisely model the impact of taxes on a growing portfolio.  This forthcoming version of TIP$TER will distinguish between taxable, tax-deferred, and tax-free accounts, and further distinguish between the bond and equity holdings of each account.  It will assume that the investor would utilize an optimal allocation policy that favored bond holdings in tax-advantaged accounts and equity holdings in taxable accounts.  It will also enable the investor to model maximum utilization of available low-tax "bracket space" (e.g., in the 15% tax bracket) to roll over savings from tax-deferred to tax-free accounts.

    The development of a version 3.0 will involve considerable efforts to develop, maintain, and validate the code for the many different tax circumstances different investors face.  Considerable revisions to TIP$TER's user manual and online documentation will be needed.  To support such a dramatic evolutionary improvement, Prospercuity must gain enough of an advisor base willing to pay a reasonable annual subscription fee that TIP$TER can mature into a revenue-generating program. 

    Consequently, Prospercuity is testing the advisor market by giving away temporary licenses of TIP$TER PRO, which includes report-generating features, for free.  If TIP$TER generates enough interest, then arrangements will be made to develop TIP$TER into an even more powerful financial planner.  More on that vision here.