Firecalc seems to be a popular calculator on this forum. How do you account for income taxes and RMDs? These seem to have a very large impact to the spreadsheets I have built. Especially, since over 80% of my nest egg is in qualified accounts.
Firecalc seems to be a popular calculator on this forum.
Income tax: just gross up your expenses to account for your specific income tax details. This is such a highly variable factor that I couldn't imagine how else to account for it. So, if you need to spend $80k per year, and are in a 20% marginal bracket, enter 80,000/,8 = $100K for your annual expenses, from which you pay income tax...
You do include taxes, as you say, but the way you figure it is wrong.
Spending and taxes are mutually exclusive. It is possible to spend $80,000 and not pay any tax.
You need to determine your tax based on your taxable income, not your spending.
You do include taxes, as you say, but the way you figure it is wrong.
Spending and taxes are mutually exclusive. It is possible to spend $80,000 and not pay any tax.
You need to determine your tax based on your taxable income, not your spending.
I would tend to agree with this. I would think you can kind of pro-forma your investment income that will be taxed, and any other taxable income you may have coming in, in retirement (i'm so far from it and probably won't have it, but is SS income taxed?)
...I would think you can kind of pro-forma your investment income that will be taxed, and any other taxable income you may have coming in, in retirement..
You and R@40 are debating the single biggest question in my plan. I know what to do with taxable withdrawals and tax deferred accounts, but how do I estimate the annual dividends, STCG & LTCG and the associated taxes from my taxable nest egg?That's what is meant by "gross up your expenses to account for your specific income tax details." The 20% was merely an example. No tie-in between expenses and taxes is being assumed - it's different for every user, likely from year to year.
If you owe no taxes, you don't have to gross up anything. If you are drawing on already-taxed money to meet expenses, same. If you do owe taxes, you can treat it (for FIRECalc purposes) as an additional expense (over and above other living expenses) and the calculations work fine.
Bottom line is that it is hard to see any way for FC to automatically account for taxes given the almost unlimited variation from user to user.
Well, after all you have learned on this forum and the Diehards forum, your taxable dividends would be about 2% of your taxable investments, your STCG should be zero, and so should your LTCG.You and R@40 are debating the single biggest question in my plan. I know what to do with taxable withdrawals and tax deferred accounts, but how do I estimate the annual dividends, STCG & LTCG and the associated taxes from my taxable nest egg?
I must be missing something, but I have 2 years to become more tax savvy. And how I can make sure I have no ST or LTCG has eluded me so far...How is the tax problem any more difficult than estimating your future expenses for the next 50 years?
FWIW, I use a spreadsheet. It automagically downloads the yield data from Yahoo and estimates my investment-based taxes for the year.
Generally, your taxes in retirement will be much lower than when you're working due to the absence of earned income. And you can tweak your investments to adjust your tax hit a lot easier than you can tweak other expenses.
I must be missing something, but I have 2 years to become more tax savvy. And how I can make sure I have no ST or LTCG has eluded me so far...
Since I'm still working and 2 years from FIRE, I rarely sell anything so I have (sizeable to me) taxable dividends, ST/LTCG, every year although I have placed my holdings to minimize tax impact. I understand what you're saying for retirement although I'd like to think I'd have some years with no losers to sell. No reply necessary...Never sell anything that has gain (only sell losers) and never invest in actively managed funds.
I must be missing something, but I have 2 years to become more tax savvy. And how I can make sure I have no ST or LTCG has eluded me so far...
I must be missing something, but I have 2 years to become more tax savvy. And how I can make sure I have no ST or LTCG has eluded me so far...