Taxes on Withdrawals (from Detailed View - Show More Detail)

[tyee1850]

Hi Jim,

Hope all is well. Still loving the tool - it is the best!

Quick question: What is the column labeled "Taxes on Withdrawals" in the Detailed View output with the radio button "Show More Detail" selected for, please? No values appear there for me in any of my runs. Just want to be conservative and sure I have all my tax bases covered.

Thanks.
Dave

[jimr]

Hi Dave,

Glad you're still finding the planner helpful.

That column reflects taxes paid on withdrawals from tax deferred investment accounts.

The simulation generally exhausts taxable investments first, then on to tax free, then tax deferred. This is configurable in settings, along with required minimum distributions (RMDs) from tax deferred accounts.

If your plan is robust, it may be that most iterations of the simulation don't dip into tax deferred savings.

The value shown for that column (and most columns) is the median value from the 10k simulation iterations. So if less than 5k of the sim iterations required you to dip into tax deferred funds, you'll see a zero there.

Also, as you're delving into these extended columns, be aware that the values across a row (for a given year) may not be consistent. For example, 'additional withdrawal' + 'taxes on withdrawal' might not exactly equal 'additional with taxes.' This is because these values are medians and each one might actually come from different iteration of the simulation. Usually the values are pretty close, so it looks ok. But every once and a while I'll see what looks like an error and convince myself there's a software bug. Then I re-educate myself about how those medians work.

(For folks following along at home, I'm sure this all sounds madly confusing. The extended output option we're discussing may be a case of me error'ing on the side of providing too much information. I used this view to dump any data I had leftover after the sim run that I thought might possibly be useful or interesting.)

Jim

[tyee1850]

Jim,

Thanks for the lightening fast reply. You certainly know your tool!

I should have mentioned, I have selected the "Take withdrawals from Taxable, then Tax-deferred, then Tax Free" option under Settings. Also, I have specified to take the RMD starting at age 70. I see in the detailed output where taxes are taken on the RMD. Are the taxes that will appear in the 2nd to last column (Taxes on Withdrawals) different from the Taxes on RMD?

Sorry if I am slow on the uptake.

Thanks also for the note on the median values - that is good to know.

Thanks,
Dave

[tyee1850]

Hi Jim - just ran a test and got the tool to work as you defined. I understand now. Thank you again.