Author Topic: Investment Tax Scenario Calculator  (Read 615 times)

Glenstache

  • Magnum Stache
  • ******
  • Posts: 3493
  • Age: 94
  • Location: Upper left corner
  • FI(lean) working on the "RE"
Investment Tax Scenario Calculator
« on: January 07, 2022, 09:31:07 AM »
Simple question: does anyone know of a tool for modeling different tax/investment assumptions to compare tax efficiencies? Thinking something like cFIREsim, but where you put in investments and see return projections for different tax approaches (conversion ladders, trad v roth, etc., and so on down the long list).

This, quite frankly, seems like it may be a bit of a gordian knot to actually build and implement, but would love to see it if it is out there. My google-fu only turned up some pretty simplistic excel sheets that were not that useful.

Holocene

  • Bristles
  • ***
  • Posts: 369
Re: Investment Tax Scenario Calculator
« Reply #1 on: January 07, 2022, 08:31:16 PM »
I've spent enough time lurking on Bogleheads to have heard of i-orp (https://www.i-orp.com/Plans/index.html).  Directly on the site it states:
Quote
The Optimal Retirement Planner Computes:
The plan's maximum, annual disposable income, instead of the plan's final surplus or deficit.
The annual tax-efficient amount and order of withdrawals from retirement savings accounts.
Optimal, tax efficient IRA to Roth IRA partial conversions.

I haven't really used it.  I just tried it now and it wouldn't let me retire earlier than 37.  Definitely not designed for the FIRE crowd.  It looks like it could be useful, spitting out the optimal amount to take out of each account.  It looks like you can have it factor in ACA subsidies in the extended version too.  Would love to hear if anyone younger has had luck with getting useful info out of it and if there are any tips.  Maybe I just need to spend some more time with it.

I've spent the last few days working on a spreadsheet to try and figure out ideal withdrawal strategies for my situation.  It gets complex really quick.  I now have a very basic spreadsheet that will compute taxes/tax bracket each year and reduce balances of each account based on each type of withdrawal.  Then it calculates my RMD at 72 based on my 401k balance.  But it's still really crude and requires a bunch of manual manipulation.  And it assumes fixed percentage investment growth which we all know is not accurate.  If I assume too low, I won't convert enough.  If I assume too high, I could run into a bad sequence of returns right at the start and converting too much and paying more taxes than needed early on could increase risk.

Hoping some others chime in with tools they know of that would do this kind of analysis.  In the end, I think there are just too many variables at play to do any kind of accurate long-term tax planning strategies.  There are also an endless amount of things that could change at any time to screw up your analysis.  Tax law changes would be a big one.  But life changes are probably even a bigger factor.  Things like marriage, divorce, having kids, getting an inheritance, earning income again, moving, etc.  When you're retiring in your 30s, it's just not realistic to be able to plan for 60 years.  That doesn't mean you shouldn't try.  But just know it's not gonna work out exactly how you plan and just keep re-evaluating.

 

Wow, a phone plan for fifteen bucks!