Is there any way to model a large age difference? My spouse and I are about 20 years apart, so this makes a big difference in terms of when we can access my retirement accounts vs. his. Also this affects how much we have to take in RMDs. So far we have just been modeling my spouse's accounts, but I would love to be able to really have a full picture - I just can't quite figure out how to do it!
Thank you.
Modeling Spouses with 10+ year age difference
Re: Modeling Spouses with 10+ year age difference
Unfortunately the planner doesn't model this as well as it could. However, there are some tricks that might help.
The first is to combine both of your retirement account balances and enter them into the planner. Run the planner to see the result, then swap which spouse you base ages on (eg current age, retirement age, end of plan) and run the planner again. Although this doesn't work as well if the account balances of the spouses are very lopsided, in general the results should give a lower and upper bound. Using the older spouse for the age base will overstate the RMDs, while using the younger spouse will understate them. You could even average your ages and use that as the age base.
If the retirement account sizes are very different between the spouses, it might make sense to base the ages on the spouse with the larger balance, and handle the taxes due on the other spouse's balance separately. Enter the smaller balance in the 'tax free' portfolio so it won't be impacted by RMDs due from the other spouse. Next, either pre-deduct the taxes that will eventually be due from RMDs from that balance, or add an annual 'other' expense starting when RMDs start for the lower balance spouse to cover the taxes due on the RMDs.
Both of these approaches are just approximations, but with some tuning, one of them should help you to capture the big picture well enough.
Jim
The first is to combine both of your retirement account balances and enter them into the planner. Run the planner to see the result, then swap which spouse you base ages on (eg current age, retirement age, end of plan) and run the planner again. Although this doesn't work as well if the account balances of the spouses are very lopsided, in general the results should give a lower and upper bound. Using the older spouse for the age base will overstate the RMDs, while using the younger spouse will understate them. You could even average your ages and use that as the age base.
If the retirement account sizes are very different between the spouses, it might make sense to base the ages on the spouse with the larger balance, and handle the taxes due on the other spouse's balance separately. Enter the smaller balance in the 'tax free' portfolio so it won't be impacted by RMDs due from the other spouse. Next, either pre-deduct the taxes that will eventually be due from RMDs from that balance, or add an annual 'other' expense starting when RMDs start for the lower balance spouse to cover the taxes due on the RMDs.
Both of these approaches are just approximations, but with some tuning, one of them should help you to capture the big picture well enough.
Jim
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