Any i-ORP gurus in the house?

[Poeirenta]

TL;DR: how do we make i-ORP use our penalty-free stash first during FIRE in 2-4 years?

The details: our FIRE date looks to be sometime between 2021 and 2023. We’ll be between 50-52, planning on $40K year spending. We’ve been trying to use the extended i-ORP to visualize our withdrawal plan, but it doesn’t seem to be handling the various types of “buckets” that we have available to us. We disallowed early withdrawals. We saw that it saves our Roth until the very end, but we can’t figure out how to turn that off (we have no heirs).

Here are the buckets and their allocations. Can anyone help us tweak i-ORP (or point us to another calculator) so we can see our options to spend down the stash? And understand the tax implications for withdrawals from our various accounts since some are tax-deferred?

Available at FIRE with no penalties
$254K now; contributing 48-96K by FIRE
Funds are in a 457, an inherited IRA, a joint brokerage acct., a Roth, and a CD ladder ($40K, call it the Year One fund)
AA: 67% equities, 18% bonds, 15% cash.

Available at 60: (assume no backdoors for now)
$209K now; contributing 36-72K by FIRE
Includes a 457 rollover, Rollover IRA, Simple IRA, and Trad IRA
AA: 75% equities, 25% bonds.

Available at 62: SS @ 31K/yr
Available at 65: Pensions at 21K

Between FIRE and 65, we think we’ll be able to generate $20K in after tax income doing project or seasonal work. Planning to take a full sabbatical (12 months with no income generation) the first year to test our retirement plan.

These are all today's dollars. Thanks!

[MDM]

We disallowed early withdrawals.

What happens if you allow them?

[Poeirenta]

We disallowed early withdrawals.

What happens if you allow them?

It pulled from our IRAs and included the early withdrawal penalties. Obviously we don't want to do that.

[MDM]

Available at FIRE with no penalties
AA: 67% equities, 18% bonds, 15% cash.

Available at 60: (assume no backdoors for now)
AA: 75% equities, 25% bonds.

One thing about i-orp: if you declare different AAs in different accounts, i-orp will often move money from the lower-returning AA to the higher-returning AA.  This can lead to confusing results.

To get a "clean" answer to the question "which account should be depleted first?" make the AAs in all accounts equal.

You might also "email your question & concerns to: orplanner@gmail.com" and get a response direct from the i-orp developer, James S. Welch, Jr. (see the bottom of most i-orp pages).

[Poeirenta]

One thing about i-orp: if you declare different AAs in different accounts, i-orp will often move money from the lower-returning AA to the higher-returning AA.  This can lead to confusing results.

To get a "clean" answer to the question "which account should be depleted first?" make the AAs in all accounts equal.

You might also "email your question & concerns to: orplanner@gmail.com" and get a response direct from the i-orp developer, James S. Welch, Jr. (see the bottom of most i-orp pages).

I don't think we had different AAs entered (I just happened to include them from my spreadsheet) but that's interesting nontheless. I will see what Mr. i-ORP himself has to say. Thanks for the tip- I hadn't seen that.

[Poeirenta]

I asked the following of James Welch. "Is there a way for ORP to recognize that my gov't 457b is both tax-deferred and penalty-free? It seems to me this would make a difference in how economically advantageous a withdrawal from this particular bucket would be".

Here is his reply:

For modeling purposes is a 457 a 401K but without the early withdrawal penalty?  Are there other differences?

ORP does not distinguish between a 457 and other tax deferred accounts.  In particular, it applies the 10% penalty to early withdrawals.  In other words, ORP does not do what you want it to do.

I will have to give this some thought.  Right off hand it appears that introducing a 457 saving account sub type would  be very disruptive to ORP's architecture and not worth the effort for small amounts of money, i.e. 10% of the annual distribution.  If you have both a 401K and 457 account, they have to be treated separately just before age 59 1/2 but not thereafter.

Sorry, but I don't have a quick fix for this problem.

James Welch
ORP

@MDM, do you know of any other withdrawal planners that do take into account 457b's?

[MDM]

@MDM, do you know of any other withdrawal planners that do take into account 457b's?

I'm not aware of any canned software that both
1) handles taxes rigorously, and
2) does a multi-year analysis

You can peruse Best and/or Recommended Retirement Calculator - Bogleheads.org and links therein for various lists.