Waterfall Planning 101

A step-by-step walkthrough of each tool -- what every input means, what assumptions we make, and how each piece connects to your overall financial picture.

Waterfall Planning is built around a simple idea: understand what you spend, decide what to save, and see what your future could look like. This guide walks you through each section of the tool so you know exactly what you are entering, why we ask for it, and how the numbers work behind the scenes. No financial background required.

How it works

Waterfall is built in a sequence. Each tool feeds into the next. Your budget determines how much you can save. Your savings goals feed into your retirement projection. And your custom scenarios let you test different versions of the future. Here is the order we recommend:

1
About 10 min

Budget Builder

How to enter your income and expenses, what Waterfall does with tax calculations, what is included in the budget vs what is handled separately in savings goals, and why we do not ask you to link a bank account.

2
About 10 min

Savings Goals

How the four-step savings wizard works, what "Emergency Essentials" means and why it comes first, the retirement account types Waterfall covers (Traditional 401(k)/403(b), Traditional IRA, Roth 401(k)/403(b), Roth IRA, brokerage accounts, and cash savings), account types that are intentionally excluded and why (HSAs, 529 plans, annuities, pensions, stock options), how contribution limits are calculated based on your age, what lifestyle goals are for, and how the allocation bar keeps you on track.
3
About 10 min

Retirement Visualizer

How each account type is treated differently for tax purposes (Traditional accounts taxed on withdrawal, Roth accounts tax-free, brokerage accounts subject to capital gains, cash accounts as stable reserves), how return profiles work and what the percentage options represent, what the "Planned" buttons do, how cash account balances are treated as long-term desired levels rather than assets to be drawn down, how withdrawal strategies are modeled, and what the year-by-year chart actually shows you.
4
About 5 min

Custom Scenarios

How to build "what if" scenarios to compare different versions of your future, what types of events you can add (income changes, expense changes, asset purchases and sales, equity events), how to model expenses tied to an asset purchase or sale (for example, maintenance costs on a property or closing costs on a home sale), how scenarios compare side by side, and how to use them as a self-directed tool for exploring how different decisions could change your outcome.

Educational Information Only

This guide is educational. It explains how the tool works and what assumptions go into the numbers. Waterfall Planning does not provide personalized financial advice, specific investment recommendations, or direction on which actions to take. The tools are designed to help you explore universally recognized financial planning concepts and apply them to your own situation at your own pace. If you need help interpreting your results or want guidance tailored to your circumstances, consider speaking with a qualified financial professional.

Want to learn more about the financial concepts behind these tools?

The Learning Center has articles on budgeting, retirement planning, savings strategies, and more.