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Firecalc - Entering Portfolio Info
Old 02-25-2016, 01:33 PM   #1
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Firecalc - Entering Portfolio Info

I have a question that I'm sure has an easy answer, but I'm not seeing it.

I understand from other posts that the "spending" estimate assumes pre-tax dollars. But I'm still a little confused on the "portfolio" entry.

If I have say...$1M in a 401K or any taxable account and I have $1M in a brokerage account only being taxed on the growth, it seems that if I enter $2M in that section, I'm not giving the proper weight to one of them. For purposes of this example, the latter has no growth yet and was already taxed when I cashed out company stock options.

Meaning, I know the $1M in after tax money is worth more than the 401K dollars, but no distinction is made between the two if I enter $2M in that section.

What am I missing and/or how much would you enter into that section for your calculation?

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Old 02-25-2016, 01:42 PM   #2
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A few ways to look at it - since you are including taxes in your 'spend' it is accounted for already. Don't double count it.

Or, you could eliminate taxes from 'spend', and reduce your portfolio by the amount you expect to be taxed. But that means you are not allowing them to grow by the full amount. So that's not so great.

You just have to make your best guestimate of taxes going forward with that mix of personal and tax deferred investments. Also take into account SS and pensions and RMDs, and you might find you are in a pretty high tax bracket, despite all the projections that you would be in a low tax bracket once you no longer have an income.

If you have some years between dropping the income and taking a pension/SS you migth find yourself being able to be in a low tax bracket for a while, and it might make sense to do some conversions from Trad IRA to a ROTH.

The answer is pretty easy conceptually, but estimating those numbers isn't (very little is easy when it comes to taxes).

Good Luck! - ERD50

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Old 02-25-2016, 01:47 PM   #3
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I moved this thread to the FIRECalc support forum. Here are a few threads that also discuss taxes and FIRECalc, you may find them helpful.
FireCalc and taxes
Firecalc does not figure taxes?
Firecalc and taxes
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