First, let me say the makers of Firecalc have done an amazing job. One caveat I would put in is that they are leaving it up to you to estimate your taxes and that obviously varies depending on your life situation, jurisdiction, and taxable income. It's hard to get that right as your asset values and therefore growth vary during the simulation period and income taxes may take a big bite for people in the 100% success department. Firecalc projects that my NW will go way up, but I didn't make an estimate of tax expenses to match that and since it is running a wide spread of scenarios, it's not easy to see how to address that.
My own spreadsheet, tuned to my tax situation (but which I would like to stop using as it seems endlessly buggy and hard to maintain), gives me about half the ending value that I got with Firecalc and quite a few cases where the ending value was half the starting value. The reverse is probably true too, that lower taxes in cases where the assets are depleting means slower depletion.
So to the 100+% crowd, don't fall in love with all those future riches, the tax man always has his hand out.
This is how I handle expected taxes:
1. Start with actual spending on everything but income taxes.
2. Assume that all money needed to support that spending is taxable ordinary income.
3. Gross up for taxes at the marginal rate.
4. Use the grossed up number in FIRECalc
So, for example, suppose I actually spend $81k per year based on having tracked my spending for many years. That puts me at the bottom of the 22% federal bracket and in the 5.5% state bracket. To gross up, so that after I've paid taxes I have $81k left to spend, I use the following formula: Gross draw = actual spending/(1- marginal rate). In this case $81k/(1 -.275) = $111.72k gross draw. That's what I put in for spending on the first tab of FIRECalc.
Will my actual taxes be that high? No, because I didn't take into account the standard deduction, nor the fact that some of my income will be non-taxable social security and some will be withdrawals from Roth and after tax accounts, nor that some may be long term capital gains. It also assumes taxation of income at the marginal rate instead of the effective rate. But doing it this way ensures that I am being conservative in estimating my chances of success. It is also far simpler and easier to do.
Tax rates may go up in the future, but there is really no way to predict when and by how much, so the best I can do now is just use the current ones and err on the conservative side.
Perhaps one big difference in our situations is that I have no heirs, so I care not one whit about my ending balance, as long as it is above zero. FIRECalc says it will average 8 figures. That's good enough for me.
