I am getting the reports to run just fine but I can't help but wonder why ESP planner tells me to withdraw from my 401K and then save it rather than just having me withdraw less and letting the rest continue to accrue gains. Can someone point out to me the benefit of withdrawing and then savin the excess please?
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The engineers probably have better answers, but I'd point out that your regular assets also are accruing interest, so there's not a loss there. The pool of funds needs to be something you can deposit into as well as withdraw from. So the 401(k), for example, is not something you can just drop money into without some planning.
There's probably other reasons.
Dan
Doug,
Depends on when ESPlanner tells you to do the withdrawal. If you're getting hit by the mandatory minimums, then you have to do the withdrawal and we'll save anything you don't spend right then. If you give us more details we can tell you more.
Best,
Dick Munroe
I would also point out that the strategy of smoothly withdrawing from your tax deferred accounts, even if it results in adding to your taxable accounts, can minimize taxes on your withdrawals (by keeping the maximum amount of withdrawals in lower tax brackets). If you defer withdrawals, you might be effectively pushing some of your withdrawals from a low tax bracket into a higher one, since you will have to withdraw more per year when you do withdraw the money.
Which is another good point that I hadn't considered when I replied earlier.
Best,
Dick Munroe
jfshelton wrote:I would also point out that the strategy of smoothly withdrawing from your tax deferred accounts, even if it results in adding to your taxable accounts, can minimize taxes on your withdrawals (by keeping the maximum amount of withdrawals in lower tax brackets). If you defer withdrawals, you might be effectively pushing some of your withdrawals from a low tax bracket into a higher one, since you will have to withdraw more per year when you do withdraw the money.
This is day two with the software and I have many questions and this jumped out,
how do I make the software know to take money from my tax deferred accounts up to a tax level then switch to regular accounts?
Welcome!
In the retirement folder there is a tab called Withdrawals. There is an area at the bottom where you can indicate the order of withdrawal from the different kinds of accounts.
Dan
Thank you,
If I change the order, I assume that it will continue to withdraw from that account independent of which tax bracket the withdrawals put me in.
I was wondering is there is a way to ask it to take IRA money until I get to a certain tax bracket then switch to a after tax money. for additional withdrawals.
I have a little excel program that lets me take money out of my IRA account until I get to a certain level (now set to 25%) then take money out of my after tax account. I understand that deductions will affect the actual cut off point but I think I can figure a way around that.
Thanks again for the welcome.
Nope, that you can't do (yet).
Best,
Dick Munroe
Well, that's probably a question for one of the engineers, who will likely weigh in on this for you in this soon. But I think the answer is no. It simply withdraws from that account until it's gone, then it withdraws from the other.
Of course you can set it both ways and compare living standard to see which of those two strategies is best.
But remember, the program will have you withdraw all the money from both pools anyway, so I'm not sure it makes any difference now that I think about it. If you switched to a different pool of money, you'd eventually have to go back and withdraw the rest from the first pool anyway.
So I've talked myself into saying it doesn't make any difference anyway--but the order of withdrawal does make a difference--which is easy to test.
If you don't want to withdraw it all, then you are saying that you want to leave an estate--and there's a place in the program to do that too.
Dan
oops! He jumped in there pretty quickly!
Dan
Forgive me for coming to these old threads and asking new questions. I've had ESP+ for more than a year, and haven't used it for about a year, and, well, some of my understanding has faded away.
I've tweaked the data to reflect current (RETIRED!!) situation and run the reports, and am wanting to know if ESP recommends from what source (savings and my and my wife's retirement accounts) and in what percentages I should "withdraw" my annual spending "allotment."
It's not a question of "which retirement account;" I have a SEP, and my wife has an IRA, not multiple retirement accounts.
My simple-minded idea was to leave the retirement accounts alone and let them accrue tax-deferred, and draw down savings out of the widders-and-orphans muni funds, but this thread makes me wonder if I missed something in the ESP reports, such as the recommendation I'm asking about.
Thanks.
Hi Mark:
ESPlanner does distinguish between you and your wife's accounts. So the amounts in those will be listed separately, so you can see how much it is recommending you withdraw from each for each year.
You can see then how much is allowed to be withdrawn from each account. Of course if you have those accounts listed to earn 10% ESPlanner is going to recommend you withdraw much more than if you have it listed to withdraw 5%.
You can use the Monte Carlo to try to get at relative risk/reward on those accounts. But in short, ESPlanner is calculating a withdrawal rate that will leave the accounts at zero at the end of life.
If you want to leave money on the table when you die, then tell ESPlanner to leave an "estate."
Perhaps that helps a little . . .
Dan
D'OH! Dan, this is a good example of a user not carefully reviewing the mountain of data in the reports and then not asking his ignorant question correctly. All I wanted to know was "where do I find the recommendations for "how to get the annual funds recommended for consumption." The answer: "TOTAL INCOME" report! In my simple mind, "income" is equivalent to "earnings" so I didn't occur to me to actually LOOK AT THE REPORT, and see, laid out nicely in columns, is the answer to "how much, when, from what."
At times like this I think of the condemned Texas murderer who when asked if he had any last words remarked, "my bad."
Ha! Well, that's good . . .
I've discovered that this is a tool that becomes more and more flexible as you use it more. As you get familiar with it, you start to become more creative in the way you use it. There really is a place for *imagination* in how you set up your scenarios etc. In other words, it's not like these other online calculators that have very static input screens. With this one you have so many ways to adjust variable--the younger you are the more you tend to have--that you really have to sort of stare at things awhile to get more ideas.
Sounds like you are doing great with the software.
Best,
Dan