veremchuka
Thinks s/he gets paid by the post
I experimented with the Optimal Retirement Decision Support website Optimal Retirement Calculator and Retirement Decision Support System that I saw in a thread about RMD's on Friday and I am somewhat confused by the results. I think all the various reports are excellent and cover a lot of ground but what is the purpose of this exercise?
Just to see how this works I made up pseudo parameters as follows. I would retire at 62 and collect my pension and Social Security at 62. I gave it a portfolio of $570,000 plus my house valued at $250,000, 15% federal bracket and 3% state. Inflation I set to 5%, returns on tax deferred and Roth at 5%. I told it I wanted to leave an estate of $350,000.
The OPR Withdrawal Report has me shaking my head. In the 1st year, age 62, it has me taking a tax deferred distribution of $201,000, doing a Roth conversion of $148,000 and paying taxes of $56,000! This is where I'm confused. Why would anyone in the 1st year of retirement at 62 pull $201,000 from tax deferred just to pay taxes on it and put it into the Roth? Sure it's tax free then but the taxes, I jump from the 15% to 28% bracket! And where does the money come from to pay the taxes? Maybe from the distribution but they always say not to use the distribution money to pay the taxes on a Roth conversion use taxable (after tax money). I told it I have only $8,000 in cash. My Social Security was $18,000 and pension was $21,000 so where exactly does the tax money come from! And why would I want to cough up $56,000 for taxes in the 1st year of retirement?
In the 1st 3 years of retirement it has me taking distributions of $364,000 from tax deferred, doing $255,000 in Roth conversions and paying $101,000 in taxes! By year 4 my taxes would be $7k, $8k or $9k per year for 7 years and then in the 11th year my taxes are $4k for ever. My spending would be $50,000 to $90,000 from year 3 thru 17 and then $100,000 to $180,000 to age 92! Where's all this money coming from? I don't get it.
Has anyone followed the withdrawal suggestion/results of the ORDS report? Maybe the report is just to show "what if" scenarios and not "do this" scenarios? I sure wouldn't do what it is showing! I thought would be a good tool but now I doubt the results.
Just to see how this works I made up pseudo parameters as follows. I would retire at 62 and collect my pension and Social Security at 62. I gave it a portfolio of $570,000 plus my house valued at $250,000, 15% federal bracket and 3% state. Inflation I set to 5%, returns on tax deferred and Roth at 5%. I told it I wanted to leave an estate of $350,000.
The OPR Withdrawal Report has me shaking my head. In the 1st year, age 62, it has me taking a tax deferred distribution of $201,000, doing a Roth conversion of $148,000 and paying taxes of $56,000! This is where I'm confused. Why would anyone in the 1st year of retirement at 62 pull $201,000 from tax deferred just to pay taxes on it and put it into the Roth? Sure it's tax free then but the taxes, I jump from the 15% to 28% bracket! And where does the money come from to pay the taxes? Maybe from the distribution but they always say not to use the distribution money to pay the taxes on a Roth conversion use taxable (after tax money). I told it I have only $8,000 in cash. My Social Security was $18,000 and pension was $21,000 so where exactly does the tax money come from! And why would I want to cough up $56,000 for taxes in the 1st year of retirement?
In the 1st 3 years of retirement it has me taking distributions of $364,000 from tax deferred, doing $255,000 in Roth conversions and paying $101,000 in taxes! By year 4 my taxes would be $7k, $8k or $9k per year for 7 years and then in the 11th year my taxes are $4k for ever. My spending would be $50,000 to $90,000 from year 3 thru 17 and then $100,000 to $180,000 to age 92! Where's all this money coming from? I don't get it.
Has anyone followed the withdrawal suggestion/results of the ORDS report? Maybe the report is just to show "what if" scenarios and not "do this" scenarios? I sure wouldn't do what it is showing! I thought would be a good tool but now I doubt the results.
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