Safe Harbour
Recycles dryer sheets
I know everyone's situation is different, but I'm just trying to wrap my head around the withdrawal advice I get from the Income Strategy app. When I compare outcomes of Conventional Wisdom Withdrawal (Taxable -> Tax Deferred -> Tax Free) and Opposite Conventional Wisdom Withdrawal (Tax Deferred -> Taxable -> Tax Free)
I'm 65 and I get 23% more value from the Opposite Conventional Wisdom Withdrawal. This is hard for me to understand. It is apparently due to effective tax rates on the different accounts. And taking to the top of my tax bracket (24%) to reduce RMDs. The taxable account being made of after tax contributions, capital gains, or annual pay-out on income being lower than the personal income tax on the RMD peaking above 24%.
The principle's behind Income Strategy have published a couple of paper on their finds, this being one. And another one. And here's one from T Rowe Price.
I would say that it's almost impossible to calculate yourself so the Income Strategy App seems make the calculations that I couldn't.
I'm wondering what others thoughts are on this and who's following the Opposite Conventional Wisdom Withdrawal Strategy?
Note that the strategy is also saying it's better to spend the ROTH first, but I don't believe that's the case when you plan to leave it to your heirs rather than spend it. The tax advantage to them is significant. So I have kept my ROTH and highly appreciated stocks and funds in the taxable account to pass on.
I'm 65 and I get 23% more value from the Opposite Conventional Wisdom Withdrawal. This is hard for me to understand. It is apparently due to effective tax rates on the different accounts. And taking to the top of my tax bracket (24%) to reduce RMDs. The taxable account being made of after tax contributions, capital gains, or annual pay-out on income being lower than the personal income tax on the RMD peaking above 24%.
The principle's behind Income Strategy have published a couple of paper on their finds, this being one. And another one. And here's one from T Rowe Price.
I would say that it's almost impossible to calculate yourself so the Income Strategy App seems make the calculations that I couldn't.
I'm wondering what others thoughts are on this and who's following the Opposite Conventional Wisdom Withdrawal Strategy?
Note that the strategy is also saying it's better to spend the ROTH first, but I don't believe that's the case when you plan to leave it to your heirs rather than spend it. The tax advantage to them is significant. So I have kept my ROTH and highly appreciated stocks and funds in the taxable account to pass on.