Flexible Retirement Planner Support Forum

I have significant previous year losses of taxable investments. I'd like to reflect this in my retirement model, ie, any short or long term gains up to this loss amount would incur no taxes. Can I do this in your FRP?

This would be very tough to model. In the planner, the portfolio is carried with a 100% cost basis from year to year. All gains and losses are adjusted for taxes in the year they occur.

The real problem with trying to account for a carried portfolio loss is that in the most important simulation paths, where you get a bad initial sequence of negative portfolio returns, the loss doesn't help since the portfolio returns are negative and there are no gains to offset. In these paths, you'd just get the $3k offset against ordinary income during the bad sequence of returns.

In cases where the initial sequence of returns is good, the loss will help of course, but in those simulation paths, the plan is likely to succeed anyway.

So basically, the carried loss is likely to to make your ending portfolio value higher in the cases where the plan succeeds, but it is less likely to improve your plan's probability of success.

At least that's how I think it would play out. Does that make sense?

Jim

Hi Jim. It's been a long time. I think I worked with your software back in 2008 when it was in beta.
Anyway, your reply does make sense, but I still wonder if there is a way to model the fact that I won't be getting taxed on short/long term gains for a long time due to pre-retirement losses in the markets. Your software models appreciation of taxable gains and calculates taxes based on that. If there were a parameter to enter net losses on my tax books as of the start off retirement, then modeled losses on a given year would add to it and modeled gains would be tax free until the starting deficit is back to zero.
Anyway, you have a great product and I'm enjoying refamiliarizing myself with it. Doug