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Version 2.1.0 — Active Methodology

The Nalu Money Methodology

The Nalu Methodology provides a rigorous, privacy-first framework for quantitative retirement modeling and tax-aware withdrawal sequencing. This document outlines the protocols, formulas, and governing principles utilized in our planning engine.

Important Regulatory Notice

NaluMoney is a financial planning workstation, not a brokerage or investment advisory firm. All calculations, projections, and reports generated are for educational and exploratory purposes only. Projections are not guarantees of future performance. Users should review all Advisor Packets with a qualified CPA or fiduciary financial advisor before executing financial transactions.

Methodology Governance
  • Standard: SEC/FINRA Compliance Ready
  • Review Cycle: Quarterly Technical Review
  • Auditor: Internal Quantitative Risk Committee
  • Data Protocol: AES-256 On-Device Only
Recent Changes
  • Updated 2026 IRS Tax Brackets & Limits
  • Optimized Roth Conversion Waterfall Logic
  • Added Medicare IRMAA Surcharge Tiers
  • Refined Social Security PIA Formula Accuracy

Contents

  1. Principle of Privacy-First Computation
  2. Inflation and Economic Assumption Protocols
  3. The Nalu Waterfall: Withdrawal Sequencing
  4. Tax Estimation and Bracket Modeling
  5. Projected Social Security and Medicare Integration
  6. Long-Term Care and Healthcare Stress Testing
  7. Required Minimum Distributions (RMD) Scheduling
  8. Roth Conversion Optimization Algorithms
  9. Asset Allocation and Rebalancing Simulations
  10. The Advisor Packet Export Protocol
  11. References and Technical Standards

1. Principle of Privacy-First Computation

The core of the Nalu Methodology is the Zero-Server Storage Protocol. Unlike traditional cloud-based planning tools, NaluMoney processes all financial data locally on the user's hardware. Calculations are performed using a sandbox architecture that prevents data leakage via telemetry or third-party tracking.

2. Inflation and Economic Assumption Protocols

Assumptions form the baseline for every projection. Nalu utilizes a tiered inflation model that differentiates between general lifestyle expenses and healthcare costs. Rates are reviewed quarterly against real-time CPI data.

General Inflation (CPI-U): 3.0% — Lifestyle Expenses Baseline

Medical Inflation: 5.5% — Healthcare & Medicare B/D Projections

Standard Rate of Return: 7.0% — Market Equity Assumption Baseline

3. The Nalu Waterfall: Withdrawal Sequencing

  1. Interest Income & Cash Flows (ST/LT Capital Gains)
  2. Taxable Brokerage Accounts (LIFO/HIFO logic applied)
  3. Tax-Deferred Required Minimum Distributions (RMDs)
  4. Discretionary Tax-Deferred Withdrawals
  5. Tax-Free (Roth) Assets

4. Tax Estimation and Bracket Modeling

Nalu employs a Static-Tier Tax Ledger for 2026 and beyond. This accounts for the sunsetting of the Tax Cuts and Jobs Act (TCJA). The engine calculates Federal, Social Security taxation (via the combined income formula), and State taxes based on user-defined nexus.

5. Projected Social Security and Medicare Integration

Social Security benefits are modeled using the Primary Insurance Amount (PIA) formula, adjusted for early or delayed filing. Medicare Part B and D premiums are mapped against Projected Adjusted Gross Income (MAGI) to calculate IRMAA surcharges in real-time.

6. Long-Term Care and Healthcare Stress Testing

Risk management is integral to the Nalu plan. Testing includes a 'Long-Term Care Event' scenario which models a lump-sum or ongoing expense starting at age 82, with a 5.5% medical COLA applied. The impact on portfolio longevity is displayed through the Failure Probability Index.

7. Required Minimum Distributions (RMD) Scheduling

Beginning at age 73 or 75 (aligned with SECURE Act 2.0), the engine automates RMD calculations using the Uniform Lifetime Table. RMDs are fed into the Nalu Waterfall as a priority inflow before other tax-deferred withdrawals are considered.

8. Roth Conversion Optimization Algorithms

Roth conversion modeling utilizes the Marginal Effectiveness Ratio. This compares the tax cost of conversion today against the projected future tax savings on at-least 15 years of tax-free growth, accounting for RMD avoidance and secure-legacy considerations.

9. Asset Allocation and Rebalancing Simulations

Portfolios are modeled as weighted averages of risk buckets. Nalu assumes a Glide Path strategy where the equity percentage systematically decreases as the user approaches and enters retirement, unless a Fixed Target Allocation is toggled by the user.

10. The Advisor Packet Export Protocol

The Advisor Packet is the final output of the Nalu workstation. It utilizes the Standardized Planning Schema (SPS-1) to ensure that result are presented in a format that CPAs and Financial Advisors can immediately action. It includes Taxable Income Tables and withdrawal waterfalls.

11. References and Technical Standards

  • IRS Publication 590-B (Distributions from IRAs)
  • SSA POMS RS 00615.001 (Monthly Benefit Amounts)
  • SECURE Act 2.0 (Public Law No: 117-328)
  • W3C Privacy Sandbox Best Practices

Last Updated: May 26, 2026 • Documentation ID: NALU-METH-V210

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