Source of Funding to Minimize Taxation

[Yossi]

I am brand new to this website which looks promising. My question is regarding while in retirement can the tool provides recommendations as to where to pool the money from in sequence in order to minimize taxes as there are several "buckets" of funding sources during retirement. For example Deferred Compensation Plans have certain withdrawal choices that can affect taxation tremendously.
Thank you

[jimr]

Thanks for posting.

I'm not positive I understand the question entirely. The short answer is that the planner doesn't incorporate any special logic for this sort of thing. Withdrawals are taken from your taxable, tax deferred, and tax free portfolios in the order you specify in the program settings.

Depending on what you're trying to accomplish, you might be able to model some of this using the additional inputs feature of the tool to manually adjust cash flows for things like converting a pension to a lump sum.

Jim

[Yossi]

Jim, thanks for the quick response. I think my concern is how to create the order for the withdrawals in the most tax efficient manner. Let's say I want to withdraw $100k annually (let's say I have enough to cover all expected years) the order of withdrawal is very critical for taxation as regular income, tax deferred and tax free accounts in addition to social security distribution and RMDs . I read that it is better to withdraw from taxable accounts first and let the rest grow until needed . Is this correct??? I wonder if there is a tool that provide this kind of recommendations.
best, Y

[jimr]

I read that it is better to withdraw from taxable accounts first and let the rest grow until needed . Is this correct??? I wonder if there is a tool that provide this kind of recommendations.
best, Y

Starting with an assumption that it's best to withdraw from taxable first doesn't seem unreasonable, and that's what the planner does, but there probably are scenarios where this isn't the best approach. I don't know of a specific tool that optimizes around withdrawals and tax efficiency, but there may be one out there.

This tool doesn't have nearly enough precision with respect to the particulars of the tax code to be of much use for this. The planner just models a rough estimate of the impact from taxes, so they aren't completely ignored. Users can increase tax rates if they want to add extra margin for the estimation errors.