I am sure it was easier to model investment taxes this way, but this seems like a major flaw that would dramatically skew outcomes. I suggest you correct this by modeling withdrawals more carefully.The Investment Tax Rate determines how much of each year’s portfolio gains (from taxable investments) will be taxed. The simulation assumes that taxes on all gains in the taxable portfolio are paid in full each year and no taxes are deferred. This assumption will be incorrect in the case of a low turnover portfolio or when a plan starts out with a significant amount of deferred gains in taxable accounts. To compensate for these cases, it may be necessary to reclassify some percent of taxable investments as tax deferred investments or to run some experiments with different investment tax rates to see how sensitive the plan is to this input. Also, taxes are “credited” to the portfolio (instead of debited) in years where the portfolio return is negative. This is to prevent double taxing gains as the portfolio value fluctuates.
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I understand from your documentation that the investment tax rate is applied to investment gains every year:
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