This week I’ve been implementing an idea I’ve had to further enhance the Tax and Penalty Minimization (TPM) withdrawal method, which I’ve been mentioning in previous posts for a while now.
But so far I’m not seeing very good results…
This week I’ve got some (mostly) good news regarding the “20% withholding from retirement accounts” challenge I mentioned in the previous post.
I also have a bit more stress testing analysis results of the Tax and Penalty Minimization (TPM) withdrawal method and the Traditional withdrawal method, this time looking at how each method does if expenses increase each year.
This week has been a lot of traveling, visiting family, and childcare, with both kids out of school/daycare. So I haven’t gotten much (*cough* any *cough*) analysis done this week.
2022 has been a wild year, and not too great for the markets. Hopefully 2023 will be better!
Well after over four weeks of work, I finally have the withdrawal method stress testing results of the Tax and Penalty Minimization (TPM) withdrawal method and the Traditional withdrawal method! Woohoo! Not just another “update” post!
I hope you’re psychologically prepared for plots. LOTS of plots. But really, who doesn’t love plots? They’re the best.
Well after a great deal of work, I have finally extended the Tax and Penalty Minimization (TPM) method to be able to go down to $0! Which I’ve been working on for several weeks.
Unfortunately I ran out of time to do much of any stress testing analysis, but I did run it for a couple scenarios and compared the results to the Traditional method for those scenarios – and the results are very promising!
It’s been another week of lots of work and coding and testing. But, still no results for the stress testing analysis unfortunately. I did come up with a pretty large breakthrough though (I think, TBC once I have results), for handling the main problem I was facing last week.
Well I’ve gotten a bunch done this week, but unfortunately I don’t have much in the way of results to show for it.
This week I’ve focused a few different things:
In the previous post, I described how the Tax and Penalty Minimization (TPM) method can greatly reduce your Required Minimum Distributions (RMDs) and thus your total lifetime tax bill – resulting in significantly higher final total assets.
But as I wrote that post, one question kept popping into my head: instead of striving for a $0 tax bill until age 72 (as is the default in the TPM method), could it be worth it to pull more from your pre-tax accounts (beyond the standard deduction) and thus pay a small amount of taxes earlier in your retirement to further reduce your pre-tax account balance and thus reduce RMDs and taxes after age 72 (soon 75)?
Let’s find out.
In previous posts, I outlined an early retirement withdrawal method called the Tax and Penalty Minimization method, and I discussed Required Minimum Distributions (RMDs) that can begin at age 72 (and soon 75 it looks like) and can result in significant taxable income and thus taxes.
In this post, we’re going to show just how much better the TPM method is than the traditional withdrawal method for reducing RMDs and thus your tax bill. Especially if you’re an early retiree and can take advantage of decades of good tax planning.
