Flexible Retirement Planner Support Forum

For tax reasons, I want to be be able to override my settings which are set to have money coming out of tax deferred savings (i.e. my traditional IRA) last and instead in some years force some income out of my traditional tax deferred IRA instead.

The way I have been doing that is by adding additional input in the form of a combination of 1) negative tax deferred savings and 2) another input that reduces my expenses by the same amount. The reduction in expenses thus cancels out the reduction in savings so everything is left as it was except I have effectively forced the income out of tax deferred savings.

My theory is that negative tax deferred savings is the equivalent of income coming out of tax deferred savings, and I assume that FRP sees a reduction in tax deferred savings and automatically taxes it at the income tax rate so that I am not giving myself tax-free income.

Does this make sense?

You're on the right track. The only issue is that the negative tax-deferred savings is sort of a hack that bypasses the FRP taxation logic. So your negative savings amount actually is a tax free withdrawal.

The way to handle this is to be sure to account for the taxes that will be due on the withdrawal when you create the offsetting income (or expense reduction) cash flow. I think if you do a 100% taxable income cash flow instead of the expense reduction, it might be a little cleaner, but that's just a guess.

In any case, I strongly suggest that you take a careful look at the detailed view year-by-year output, with the "show more detail" radio button checked. This is the best way to understand exactly how the planner has interpreted your inputs because you can see the year-to-year handling of the cash flows, including taxes.

It may make sense to run a test scenario where you set the spending policy to stable and the portfolio return/std dev to zero so you can see exactly how the planner is handling the various cash flows in your plan. If this makes the plan fail too early to see what's going on, you can increase the starting portfolio values so the plan doesn't run out of cash too early (again, just as a test).

Thank you very much for the quick weekend reply! I love FRP and having this kind of support makes it even better. I've got my friends using it too!