Median Total Withdrawal

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Guest

Median Total Withdrawal

Post by Guest »

Hi Jim,

I'm looking at the Detailed View. I believe the column labeled Median Total Withdrawal is actually an after-tax number, correct?

I'm still left wondering about tax treatment of my Tax Deferred Portfolio. I look at the last year and see only a minor variation when I vary the Investment Tax Rate from 0% to 50%. I believe I read that you tax gain every year instead, but is this really more conservative? Even for the case where the starting Tax Deferred Portfolio Value is large?

Regards,
Rick

jimr
Posts: 577
Joined: Thu Feb 28, 2008 6:48 pm

Re: Median Total Withdrawal

Post by jimr »

Hi Again Rick,

The median total withdrawal includes any taxes due on the withdrawal so it's a "gross" amount, rather than the net amount that you get the spend on expenses.

For the tax deferred portfolio, taxes are assessed on the withdrawals, not on annual portfolio gains. The tax rate that's used for this portfolio is the income tax rate. This is done to more closely match the tax handling of IRA and 401k withdrawals. For these tax deferred account, the portfolio grows without any taxes due, but withdrawals in retirement are treated as ordinary income for tax purposes (at least in the USA).

Hope that makes sense and please keep the questions coming...

Jim


Last bumped by Anonymous on Mon Jul 13, 2009 5:28 am.

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