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Pre / Post Tax Firecalc Question
Old 06-07-2009, 07:20 AM   #1
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Pre / Post Tax Firecalc Question

Say I have $ 500K in my (pre-taxed) 401K and $ 500K in my (post-taxed) mutual fund. Would I put $ 1 million into the portfolio field in FIRECalc or do I need to first reduce the 401K amount by the taxes that will be eventually be due?

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Old 06-07-2009, 08:21 AM   #2
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FIREcalc doesn't factor in taxes and generally everything is entered pre-tax. So in your case, you'd use $1M. You need to factor in taxes when you input the amount of income you need since it's "pre-tax" income.

"Hey, for every ten dollars, that's another hour that I have to be in the work place. That's an hour of my life. And my life is a very finite thing. I have only 'x' number of hours left before I'm dead. So how do I want to use these hours of my life? Do I want to use them just spending it on more crap and more stuff, or do I want to start getting a handle on it and using my life more intelligently?" -- Joe Dominguez (1938 - 1997)

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Old 06-07-2009, 09:39 AM   #3
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What Ziggy said.

From the FIRECalc "How It Works" page:
Why don't you have a space for taxable portfolio and another space for nontaxable portfolio?

FIRECalc ignores taxable versus nontaxable portfolios right now. Since it only uses historical data to determine how a portfolio would behave, with no guesses by anyone about what will happen to inflation, market performance, and so forth, and we don't have historical tax rates for the period for which I have market data, I can't add tax planning without changing the philosophy of the program. Just planning on x% tax rates would make all the historical examples meaningless, when changing tax rates would have at least some effect on the market returns.

If I can figure out how to do this in a way that would not corrupt the results, I'll do it. For now, I prefer to leave the tax planning portion to programs like -- an outstanding tool!
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Old 06-07-2009, 10:34 AM   #4
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What Ziggy and REWahoo said.....

I find it beneficial to look at taxes as a budget item (an expense) and plan to have income to pay them rather than look at taxes as a reduction to income.
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