All calculations in Income Lab are based on monthly values, whenever possible. That includes inflation.

This use of monthly values means that, unless it is currently January, the software will not assume 12 months of returns and inflation are yet to apply in the current year. Therefore, from February through December, for the first year of a plan (the current year) you will see lower-than-expected inflation and returns in annual plan views like Life Hub, Tax Lab, and in the Income Sourcing and Expense Details tables.

For example, assume you view a plan that has a 3% inflation assumption in May 2024. Any annual views will show 2024 values in May 2024 dollars. But 2025 values will be stated in January 2025 terms. (2026 values will be in January 2026 terms, and so on.) That means that 2025 values will show only 8 months of inflation (from 1 May 2024 to 1 Jan 2025).
 

The same is true for asset balances. While the expected average rate of return for an asset might be 5%, in this example the January 2025 values would only show 8 months of growth from the May 2024 values.
 

Custom Inflation / Cost-of-Living Adjustments (COLAs)

If you have a cash flow that uses a custom inflation rate, you may also see unexpected values between the first and second year of the plan. Again, this is because less than 12 months of inflation would be applied between the first year's values (which are in current-month dollars) and the second (which are in January dollars). For example, imagine an income stream has a 3% custom inflation rate (COLA) applied and that the plan's assumed average inflation rate is also 3%. All COLAs are applied in the plan in January. If the plan is viewed in May, there are only eight months of inflation remaining in the year, but the full 3% COLA will apply in January. That means the real (today's dollars) amount will go up in January because a 3% COLA is offsetting just 1.99% of inflation (eight months' worth).
 

 
If this cash flow had a 5% custom inflation rate applied, the real value would go up every year because of the difference between the COLA (5%) and the inflation rate (3%), but again the increase would be larger between May 2024 and Jan 2025 ($295) than between Jan 2025 and Jan 2026 ($200).
 

In January 2025, a 5% COLA is applied ($10,000 * 1.05 = $10,500). The real value reflects the 8 months of inflation (1.99%) between May and January: $10,500 / 1.0199 = $10,295.

In January 2026 another 5% COLA is applied ($10,500 * 1.05 = $11,025). The real value now reflects those first 8 months of inflation (roughly 2%), plus another 12 months in 2025 (3%): $11,025 / 1.05 = $10,495.