Author Topic: Stupid (?) question about how to calculate using the 4% rule  (Read 869 times)

rudged

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Stupid (?) question about how to calculate using the 4% rule
« on: December 09, 2017, 09:42:57 AM »
Dear all,

My stache is caught up in a 403(b) account. So should I be calculating the amount I need to save into my 403(b) account according to the 4% rule with respect to the amount I would like withdraw after taxes or before? E.g. if I wanted an income of $10,000 per year from my investments after taxes, do I use $250,000 as my savings goal, or should I be planning on significantly more to include the fact that the money is being saved in a tax advantaged account? I presume the latter, but when I've read previous discussions no one seems to refer to what investment vehicle(s) are being used for saving.

rudged

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Re: Stupid (?) question about how to calculate using the 4% rule
« Reply #1 on: December 09, 2017, 09:55:31 AM »
Thanks!

Acastus

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Re: Stupid (?) question about how to calculate using the 4% rule
« Reply #2 on: December 11, 2017, 11:17:36 AM »
The best way to figure this is to calculate what your taxes would be at your desired withdrawal rate, then include that in your projected budget. Don't forget state taxes. The reason most will say depends is that you still get deductions and exemptions, so you will not pay tax on 100% of  your withdrawal. This is one of the really useful benefits of having traditional, Roth, and taxable accounts. You can mix and match the different tax treatments to get both the spending and taxable income that is best for you. For example, I plan to spend 60k, taxable withdrawals of 40k, and nontaxables of 20k. After deductions, my final taxable will be 15k, with Fed tax of 1500. That is practically a nuisance expense, not something that dominates my finances.