How ClearPath is calculated

ClearPath runs a deterministic, year-by-year projection of your finances. During your working years it grows each salary, takes contributions into your accounts, and charges federal income tax, state income tax, and payroll (FICA) tax. At retirement it switches to a drawdown: it withdraws a fixed share of your peak savings each year and taxes those withdrawals. The headline numbers you see are read off that single projection.

A separate Buy vs Rent tool reuses the same tax engine to compare owning a home against renting and investing the difference, and a Monte Carlo mode re-runs the projection hundreds of times with randomized market returns to show a range of outcomes.

The engine is entirely nominal: every balance, tax, and withdrawal is in the dollars of its future year, and returns are nominal rates. The "Today’s dollars" toggle is a display-only conversion that deflates a nominal figure back to year-one purchasing power.

Everything is anchored to 2026 and inflated forward uniformly by your inflation rate, so there is no mismatch between the pieces:

Federal income tax

2026 brackets + standard deduction (IRS Rev. Proc. 2025-32), grown as (1 + inflationRate) ^ (year - 2026).

FICA, capital gains, the 49 other states + DC, contribution limits, start year

All on the same 2026 base.

Indexing only ever inflates forward (the factor is floored at 1.0); it never deflates thresholds for years before the base year.

For each working (accumulation) year, in order: grow each person’s salary; compute their contributions (capped); compute income tax and FICA on that salary; total the household’s after-tax income; size brokerage saving from what’s left; then add contributions to each account and grow every account by one year of returns. Contributions are added before the year’s growth, so a full year of return applies to them.

After the last working year, the engine finds your peak (the working year with the highest total net worth) and sets the first-year withdrawal from it. Then each retirement (withdrawal) year draws the year’s spending from your accounts, taxes it, and grows whatever remains.

Horizon

projectionYears working years, then withdrawalYears of retirement (defaults: 30 and 30).

Ages

The age inputs are a convenience in the UI: projectionYears = retirementAge - currentAge. The engine itself only reads the year counts.

Calendar

Year 1 = startYear (default 2026); withdrawals begin the year after the last working year.

Every projection tracks three buckets, because each is taxed differently:

Roth

After-tax money. Grows and is withdrawn tax-free.

Traditional (pre-tax)

Contributions reduce taxable income now; withdrawals are taxed as ordinary income later.

Brokerage (taxable)

A regular investment account. Only the gain above your cost basis is taxed, at capital-gains rates, when sold.

Federal income tax uses the seven 2026 brackets (10/12/22/24/32/35/37%) for a single filer; married-filing-jointly brackets are modeled as double the single thresholds (exact through the 32% bracket, a small simplification at the top two). Tax is computed bracket by bracket on taxable income.

Standard deduction (2026)

$16,100 single / $32,200 married filing jointly.

Deduction used

The greater of the standard deduction or your itemized deductions.

Filing statuses

Only single and married-filing-jointly are modeled (no head-of-household, separate, or widow(er)).

The 2026 federal brackets and standard deduction above are the IRS inflation-adjusted figures (Rev. Proc. 2025-32) for the permanent rate structure set by the 2025 budget law often called the One Big Beautiful Bill (OBBB). That is the only thing the label refers to.

Each state is one of three types: no-tax (returns $0 on wages and gains), flat (a single rate), or progressive (its own brackets). Each state carries its own standard deduction, brackets for single and joint filers, a base year, whether it indexes brackets for inflation, whether it allows itemizing, and how it treats capital gains.

Taxable income is your salary net of pre-tax 401(k), minus the state’s deduction (the greater of its standard deduction or your itemized total, where itemizing is allowed). Some states also add a surtax above a high-income threshold.

California (progressive)

Nine brackets from 1% to 12.3%, indexed, plus a 1% Mental Health Services surtax on income over $1,000,000 (single) / $2,000,000 (joint) - an effective top of 13.3%. Standard deduction $5,202 / $10,404.

Texas (no-tax)

No state income tax; wages and capital gains are both untaxed.

Arizona (flat)

A flat 2.5% on taxable income, with a standard deduction matching the federal $15,750 / $31,500.

A notable special case is Washington: no tax on wages, but a 7% tax on long-term capital gains above roughly $262,000 (indexed).

Every state’s brackets, standard deduction (or a personal-exemption proxy where a state uses one), and bracket-indexing behavior are encoded from state revenue departments and Tax Foundation 2026 summaries, with a source on each entry.

Social Security

6.2% on wages up to the wage base ($184,500 in 2026, grown with inflation as a proxy for wage growth).

Medicare

1.45% on all wages (no cap).

Additional Medicare

0.9% on wages above $200,000 (single) / $250,000 (married). These thresholds are statutory and not inflation-indexed.

FICA is charged on gross wages and is not reduced by 401(k) contributions (correct US treatment - deferrals are still payroll-taxable). Retirees pay no FICA on withdrawals.

Social Security and Medicare are computed per person on each person’s own salary (so each worker gets their own wage-base cap), then summed. The 0.9% additional Medicare surtax is the one place a couple is combined: married households are assessed once on combined wages over $250,000; otherwise each person is assessed over $200,000.

Long-term capital gains are stacked on top of your ordinary taxable income (the correct IRS method): the portion of the gain that falls below the 0% ceiling is untaxed, the portion up to the 15% ceiling is taxed at 15%, and anything above is 20%.

0% ceiling (2026)

$49,450 single / $98,900 joint

15% ceiling (2026)

$545,500 single / $613,700 joint

Above the 15% ceiling

20%

Most states tax capital gains as ordinary income (the gain is stacked on the state return and the extra tax is the increment). No-tax states (and Missouri, which fully deducts long-term gains from 2025) charge $0. Washington applies its special 7% rate above ~$262,000. Several states’ partial exclusions are simplified to ordinary treatment.

In the retirement projection, capital-gains tax is charged only in retirement, on the realized gain portion of brokerage withdrawals. Each brokerage dollar withdrawn is split into return-of-basis and gain in proportion to the account’s overall embedded-gain ratio (an average-cost method, not lot-level or FIFO).

• Salary grows each year at your salary-growth rate (default 3%).
• Employer match = salary × match% (default 4%), all into Traditional, pre-tax.
• Traditional and Roth 401(k) deferrals share one combined 401(k) limit (Traditional fills first).
• Roth IRA is capped at the IRA limit.
• Brokerage saving is funded from after-tax income left after Roth contributions, and can’t go negative.

401(k) elective deferral

$24,500 (combined Roth + Traditional)

IRA

$7,500

Cap growth

Limits grow 2% per year (distinct from the 3% inflation rate).

Two nominal return rates are used: tax-advantaged accounts (Roth + Traditional) grow at one rate (default 7%) and the taxable brokerage at a slightly lower rate (default 6%). The ~1-point gap stands in for the annual tax drag on a taxable account. Each year, contributions are added and then the whole balance grows once.

By default the withdrawal is inflation-adjusted, so your real spending stays flat across retirement. Turn that off and the dollar amount is fixed (real spending then declines over time).

Each year the spending is drawn brokerage first, then Traditional, then Roth. Brokerage withdrawals are taxed only on their gain portion (capital-gains rates); Traditional withdrawals are taxed as ordinary income (with the full standard or itemized deduction each year); Roth withdrawals are tax-free. There is no FICA in retirement.

If total net worth reaches zero during retirement, that calendar year is recorded as the run-out year and the plan is flagged as not lasting the full horizon. Otherwise the plan is "on track."

Peak net worth

The highest total net worth across your working years, shown in both nominal and today’s dollars.

Monthly income

Your first full retirement year’s after-tax spending, divided by 12. A future-year amount, so it follows the Nominal / Today toggle and tags its basis.

Lifetime taxes

Every tax across the whole projection: federal + state income tax, payroll (FICA) while working, and capital-gains tax in retirement. In today’s-dollars mode each year is deflated before summing.

Marginal rate

The combined federal + state income-tax rate on your next dollar, in your first working year (primary earner).

Effective (blended) rate

Total tax ÷ total income. The retirement figure is blended across all withdrawal years, which is more honest than year one (often near-zero because it draws tax-free basis/Roth first).

Fund status

Whether your money lasts the full withdrawal horizon ("On track" vs "Depletes {year}").

When a plan comfortably lasts the full horizon, ClearPath binary-searches the highest withdrawal rate that still never runs out, and offers it as how much more you could safely spend. This exists because, with a fixed percent-of-peak rule and solid returns, most plans finish with money to spare.

Monte Carlo re-runs the same projection 800 times with randomized annual returns, using a fixed seed so the result is reproducible for a given set of inputs. Each simulated year draws one market shock and applies it to both account types, so within a year they move together.

The success probability is the share of the 800 runs whose money lasted the entire retirement. The fan chart shows the 10th, 50th (median), and 90th percentiles of net worth across runs.

Two parallel net-worth paths are run with identical income, spending, and saving. In the Buy world your upfront cash (down payment + closing costs) leaves the market and becomes home equity, and you pay ownership costs. In the Rent world that cash stays invested and you pay rent. The only tax difference is that the owner itemizes (mortgage interest + property tax) while the renter takes the standard deduction. The home is sold in the final year.

The verdict is whoever has more net worth at the end; the crossover year is when buying first pulls ahead.

The loan is simply the price minus the down payment; closing costs are a percentage of price, paid upfront. A standard fixed-rate amortization splits each year into interest and principal, and the final partial year only counts the interest and principal actually paid (no overstated last payment).

Deductible interest is capped to the interest on the first portion of your loan up to the acquisition-debt ceiling. The owner’s tax benefit is the difference between itemizing (mortgage interest plus property tax, with property tax capped by the SALT limit) and taking the standard deduction, scored through the real federal and state brackets.

Single / married

$750,000 acquisition-debt ceiling, shared.

Two unmarried co-owners

$1,500,000 - each owner has their own $750,000 limit (the Voss rule), and they split the deduction.

ClearPath surfaces this on the Buy vs Rent page: the year-one deductible interest, the year-one tax saved, and the total saved over your horizon, with the ceiling labeled for your ownership structure.

The state-and-local-tax deduction (state income tax + property tax) the owner can take on the federal return is capped on the OBBB schedule:

2025

$40,000 cap

2026 - 2029

Grows 1% per year

High income

Phased down 30 cents per dollar of income over ~$500,000 (also growing 1%/yr), floored at $10,000

2030 onward

Reverts to $10,000

Property tax is an effective rate (base + special assessments, default ~1.35%) on the assessed value. Most states reassess at market value each year; a few cap how fast the assessed value can grow:

California

Prop 13 - 2% cap

Florida

Save Our Homes - 3% cap

Arizona

Prop 117 - 5% cap

Texas

Homestead - 10% cap

In the final year the home is sold: proceeds are net of agent commission and transfer costs (default 6% combined), the mortgage is paid off, and capital-gains tax is charged on the gain above the §121 exclusion. The taxable gain is taxed at federal 0/15/20% (stacked on that year’s income) plus the state’s own treatment.

Single owner

$250,000 of gain excluded

Married / two co-owners

$500,000 of gain excluded

Affordability is a year-one front-end ratio: (principal + interest + property tax + insurance + HOA) ÷ gross household salary, rated green below 28%, yellow to 36%, red above. The "squeeze" tracks whether a tight budget forces cutting savings - brokerage first, then IRA, then 401(k), or a deficit that draws down existing savings.

• Only single and married-filing-jointly statuses; no head-of-household or separate.
• Married couples are taxed on separate returns (each spouse on their own salary using full joint brackets), except the additional-Medicare surtax, which is combined.
• Itemized deductions in the retirement projection are taken at face value (no SALT cap there); the SALT cap applies only in Buy vs Rent.
• No AMT, no itemized-deduction phase-outs, no NIIT (3.8%).
• No local or city income taxes; no state credits, exemptions, or high-income recapture.
• Brackets are indexed to your single inflation input, not to actual future IRS/state figures.

• No age-50+ catch-up contributions and no overall 415(c) defined-contribution limit; employer match is an uncapped flat percentage.
• No capital-gains drag during working years - brokerage growth is unrealized until withdrawal; starting brokerage is 100% basis; gains realize on an average-cost basis.
• No Required Minimum Distributions (RMDs), no Social Security benefits, no pensions or annuities.
• A single deterministic return path in the base projection (sequence-of-returns risk is only explored in Monte Carlo).
• The withdrawal order is fixed (brokerage → Traditional → Roth); no tax-bracket-aware withdrawal or Roth-conversion optimization.

• No PMI; fixed-rate mortgage only (no refinance or extra principal); the deductible-interest fraction is fixed at the original loan size.
• Home appreciation, rent growth, and returns are deterministic in the Buy vs Rent view; the home is always sold at the end.
• Cost basis at sale is the purchase price only; the §121 exclusion is never prorated.
• Monte Carlo uses additive-normal (not lognormal) returns with one shared annual shock across accounts; ending balances are in today’s dollars while the fan bands are nominal.

Federal income tax

2026 brackets, standard deduction, FICA, and capital-gains thresholds (IRS Rev. Proc. 2025-32 / SSA 2026).

State income tax

2026 tax year, from state revenue departments and Tax Foundation 2026 summaries, with a source cited on each state. California is held on its prior CA FTB schedule, inflated to 2026 (a preserved baseline, flagged for refresh).

Housing

IRC §163(h) acquisition-debt limit and §121 exclusion; the OBBB SALT-cap schedule; state property-tax assessment caps.

Figures change with law and markets. Treat every output as an educated estimate for comparison and learning, not a filing or a guarantee.