FIRECALC - how to handle RMD taxes

[Owlette]

I know FIRECALC does not "do" taxes. Since RMD taxes can be a significant additional expense in later years, has anyone figured out how to handle the future RMD taxes?

 

[Gumby]

I can think of two ways. One is to input an additional "offchart spending" item in Tab 2, with an inflation adjustment, starting when you are 70. It won't be perfectly accurate, but should give a rough approximation. The other is to figure out the approximate taxes on those withdrawals as if they were taken at 70 and for the next "x" many years, discount that cash flow to today and deduct it from your portfolio in Tab 1.

 

[Sunset]

I'm not getting why ?
Lets say FIRECALC says I can take out $100K per year and be 100% success.
How much in taxes I pay has nothing to do with that, I get to spend what is left after taxes, whether I'm 60 or 80.

When I start RMD's I don't get to increase my withdrawal, it still remains the $100K (plus yearly inflation increase) , not $100K plus RMD amount.

 

[Dtail]

I'm not getting why ?
Lets say FIRECALC says I can take out $100K per year and be 100% success.
How much in taxes I pay has nothing to do with that, I get to spend what is left after taxes, whether I'm 60 or 80.

When I start RMD's I don't get to increase my withdrawal, it still remains the $100K (plus yearly inflation increase) , not $100K plus RMD amount.

Perhaps it is the chicken and the egg scenario.
The OP might want an RMD calculation in order to provide the initial expense input in the first place.

 

[Gumby]

...
The OP might want an RMD calculation in order to provide the initial expense input in the first place.

Owlette can speak for herself, but that's what I assumed. All taxes work that way with FIRECalc, not just RMDs. Either the spending number you input needs to be grossed up for taxes or the portfolio balance needs to be calculated as net of tax.

 

[donheff]

A lot of people assume relatively low ER expenses because of an expected drastic drop in income tax. It is worth reminding ourselves to factor the RMD taxes in as an additional rising expense starting at 70. Pretty easy to do a simple SW calculation based on initial expenses without figuring in the changes at 70.

 

[tb001]

If the issue is the variable spendster in retirement, you can either use the method Gumby suggested or you can manually enter spend by year if you donate to firecalc.

Or are you trying to determine tax liability?

 

[pb4uski]

.... input an additional "offchart spending" item in Tab 2, with an inflation adjustment, starting when you are 70. ...

+1... let's say you have $1 million in tax-deferred at age 70... RMD is $36,496... if 22% margnal rate tax is $8,029.... add $8k a year to spending starting at age 70