I am in the process of benchmarking my FRP model results against the Optimal Retirement Planner (ORP) which I have previously used for years but wanting to branch out a bit. Obviously there are a few differences between the two models/applications, but I am specifically having comparing them from a tax perspective. Here's where I am .....

I've determined suitable values for Investment Tax Rate and Income Tax Rate. Yes I realize these are effective NOT marginal values.

I've run FRP with comparable inputs to my ORP model and the results (from the perspective of a "available expense monies) seem reasonably close. But I want to drill down on the taxes. I've clicked the FRP Detailed View tab and Show More Detail button and I get a full report with 21 columns as follows (my letters assigned for clarity):

A Year
B Median Portfolio Value
C Taxable Portfolio Value
D Tax Def Portfolio Value
E Tax Free Portfolio Value
F Taxes on Portfolio Growth
G New Investment
H New Taxable Inv
I New Tax Def Inv
J New Tax Free Inv
K Median RMD
L Taxes on RMD
M RMD Avail For Expenses
N Planned Expenses
O % Expenses To Fund
P Expenses To Fund
Q RMD Used For Expenses
R After Tax Income
S Additional Withdrawal
T Taxes On Withdrawal
U Additional Withdrawal With Taxes

Note there is no column for Taxes Paid. So I figure I must create one, perhaps using some data from the 21 columns (A thru U) available to me and the specified Investment Tax Rate and Income Tax Rate, but I am stumped as to how.

Bottom Line: I want to compute a new column that is essentially total Taxes Paid for each Year. Help Please?

I don't think the results view can show taxes paid on income, but there is an estimated taxes paid on portfolio growth column that you can see by right-clicking on any column header and selecting "show all columns".

The only trouble is that this estimate is computed after the fact for display purposes and another user recently found an inaccuracy in the calculation (see here): viewtopic.php?f=7&t=1300

I haven't released the new version that corrects this, but if you'd like a download link for a beta version, email me at info@flexibleretirementplanner.com. Otherwise, I expect to release it within the next couple of weeks.

I will send you a request by email for the beta version fix on taxes computed on portfolio growth. Look for it please.

But that alone doesn't really answer my question. How can I compute a Total Taxes Paid for each year from the other columns? Is it as simple as Taxes on Portfolio Growth + Taxes on RMD + Taxes on Withdrawal?

From the forum questions I see on tax calculations, this could be an area for improvement or at least clarity in understanding the FRP output.

Adding Taxes on Portfolio Growth + Taxes on RMD + Taxes on Withdrawal should cover most of it. There's also taxes on income cash flows (eg on pensions or ss income). These aren't tracked inside the sim code since everything is handled net of taxes. So you'd have to manually add in taxes due on any taxable income each year.

I agree the reporting could be better. One of the issues is that originally I tried to conserve memory and not track too much extra stuff in the simulation code. Each item adds "10,000 x years in plan" worth of extra storage. That's probably not a big deal now a days, but it still adds up, especially with sensitivity analysis, where the storage requirement gets multiplied again by 300-600 (depending on the heatmap size).

Oh I see. Thanks for clarifying what isn't readily available in columned data. I do think improving tax reporting would be useful though. There are certainly other columns that are not nearly as important (IMO).

So if I understand you correctly, there are 4 components that must be summed to determine total annual taxes paid:

Tax Paid (yearly) = Taxes on Portfolio Growth + Taxes on RMD + Taxes on Withdrawal + [ Tax on Taxable Income (see below) ]

where Tax on Taxable Income = Taxable Income - After Tax Income

Unfortunately, this is quite messy because the column titled After Taxable Income already has the income taxes backed out of it. So the user would have to sum up all their Taxable Income sources (pensions, annuities, social security, etc.) for each year (because it's not data explicitly obtained from any column) then subtract the After Tax Income from that! ewww

Fortunately, there is a mathematical shortcut that should eliminate the user from having to sum up Taxable Income Sources:

Tax on Taxable Income = After Tax Income * Income Tax Rate / ( 1 - Income Tax Rate )

So circling back to the original equation:

Tax Paid (yearly) = Taxes on Portfolio Growth + Taxes on RMD + Taxes on Withdrawal + [ After Tax Income * Income Tax Rate / ( 1 - Income Tax Rate ) ]

So if I haven't made a math mistake, Tax Paid (yearly) is inferable from 4 other columns and the user specified Income Tax Rate. Still messy but not a show stopper.

The column entitled After Tax Income indeed does sum the pre-tax inputs entered as Additional Inputs and does implicitly include a reduction for paid taxes in the year the income was received. So to compute how much the reduction is (i.e., taxes paid on that taxable income), we can compute it as [ After Tax Income * Income Tax Rate / ( 1 - Income Tax Rate ) ].

Gatorbyter,
In my additional inputs I have an entry for $55K Misc Income. It is set to 100% taxable. The tax on that amount is not picked up by the formula you mention. The amount does show up in the column "After Tax Income" so I'd expect a tax estimate would be picked up by your formula.

I'll have to put more analysis into that. I could be entering something wrong.