pb4uski
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
I've thought about this before, but this morning it's not making sense to me.
Let's say you have annual expenses of 40K per year (just an example). So you withdraw 40K from your portfolio. Then you have to pay taxes, I'll say 10% just for ease of calculation. So you withdraw another 4K to pay taxes. That brings your total withdrawal to 44K. So now your taxable income is 44K, so you have to withdraw another .4K to cover the extra taxes. But now your total withdrawal is 44.4K, and so on.
I'm sure I'm being especially dense this morning, but how do you avoid this spiraling situation?
If you withdraw and pay 10% in taxes you get 90% of each $ withdrawn.... 1-10%.... so if you want $40k, withdraw $40k/(1-10%) or $44,444... pay 10% or $4,444 in tax and you have $40k left to spend.