Bug or misunderstanding: Taxable / TaxFree Portf.

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Lion
Posts: 2
Joined: Mon May 27, 2024 9:52 am

Bug or misunderstanding: Taxable / TaxFree Portf.

Post by Lion »

Hi,
thank you very much for your great tool. It's really a big "playground" for me to understand better my financial possibilities.

While testing, I came across a strange result:

I put in exactly the same values in one case at the taxable portfolio + taxable annual savings in comparison to taxfree portfolio and taxfree savings.

I would have expected the tax-free option to deliver significantly better results (since nothing is deducted). However, it is actually the opposite, as you can see in the attached images.
How is this possible?

Thank you,
Mike
Attachments
Comparison.jpg
jimr
Posts: 839
Joined: Thu Feb 28, 2008 6:48 pm

Re: Bug or misunderstanding: Taxable / TaxFree Portf.

Post by jimr »

My guess is that the difference has to do with penalties on early withdrawals from the tax free portfolio.

From the screenshot, it looks like you're set up to retire at 55. By default, any tax deferred or tax free withdrawals made before age 60 are subject to a penalty.

You can configure the penalty free withdrawal age in the lower section of the settings window.
Lion
Posts: 2
Joined: Mon May 27, 2024 9:52 am

Re: Bug or misunderstanding: Taxable / TaxFree Portf.

Post by Lion »

Perfect, thank you for your fast reply. This was the reason, I have set the penalty to 0 %, and now it is comparable (I live outside the US).
Thanks again!
Mike
jimr
Posts: 839
Joined: Thu Feb 28, 2008 6:48 pm

Re: Bug or misunderstanding: Taxable / TaxFree Portf.

Post by jimr »

Glad to hear it worked. Thanks for posting because this is something that could easily trip up other early retirees.
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