Account Summary - Regular Investment Balance
First, a rule of thumb I try to live by: When using a calculator, it is a good idea to have an idea of what the answer should be in order to validate the result obtained from the calculator. I have nothing in any normal investments. They are all in a tax-deferred 401k accounts. In the Account Summary page the Regular Investment Balance starts to accumulate balances after going through some Roth conversions. Likewise though, the Roth IRA Savings Balance also grows right along with my Roth conversions. So, where is the money that is being added to the Regular Investment Balance coming from? I see my 401k values dropping as expected and the Roth balances increasing. This is really important to understand because everything in the tool is stating I could retire today. That's a surprise but I never really explored Roth conversions after retirement. My 401k, called a VIP account, actually allows me to have Tax Deferred, After Tax and Roth amounts in it so nothing really ever goes to any regular investment account. So I would like to understand this before chasing through the numbers in order to double check that my other entries in the tool are producing the correct results or I've done something to cause a Regular Investment balance to grow which I would assume is going to be taxed. If it isn't going to be taxed then why wouldn't it be going into the Roth IRA Savings column. I hope I explained good enough. Thanks.
Any positive cash flows will be deposited into your cash account, and you specify the floor and ceiling level of that account on the Financial Assets > Management page. When the balance on the cash account reaches the specified ceiling level, the overflow amount and all subsequent deposits roll over into your Regular investment account. RMD amounts that aren't spent covering any negative cash flows follow the same logic: first to the cash account and overflow amounts go into the Regular account.
@smatthews51 I'm not sure Stuart has answered the question. @motogopher is saying that he doesn't have a regular investment account. The tool is "creating" one for the overflow. I had thought that if you didn't enter a regular investment account in Financial Assets the tool would not include it in the model. In that case, what does the tool do with withdrawals from TD accounts after the cash account hits its ceiling?
Peter, your understanding is incorrect. There's ALWAYS a regular investment account even if it's initial balance is zero. There HAS to be a place for positive cash flows to go and that's the place (after the cash account ceiling is exceeded). And that's where withdrawals from TD accounts go after the cash account hits its ceiling.
@smatthews51 Thank you Stewart, that is a great explanation especially with Peter helping to clarify. Wow, that accomplishes my goal of understanding the tool. I can follow the numbers now with intelligence and can see everything is making sense. And again, this is such a great tool. I love the detail, the layout of the pages and the optimization routines.
I get it. But users tend to associate accounts in PRC with their accounts in the real world, esp as they customize the spreadsheet. At first glance I was wondering what was happening when I didn't have an entry for it in financial assets, and couldn't figure out why a nonexistent account was accumulating funds. In the present case the OP doesn't have a separate regular investment account, but the positive cash flow does go a different kind of account not provided for in PRC. I'm not a designer, CPA, or Excel wiz and don't play one on TV, but this looks to me like a labeling issue -- what's happening is that transactions are generating a surplus above the cash account ceiling and PRC needs a column for those amounts. That column might be labeled a "surplus above ceiling" or "available for investing" in the absence of any entries for "regular investment account" in financial assets, or PRC could issue a red alert like it does for insufficient funds.
Peter, I appreciate your perspective but PRC will never be able to perfectly model every real world case but I think the current design is robust and matches the need for most users, so a redesign will not be in the works. What I do plan to do though, in the next few days, is to add another summary-level section to the user manual to better explain the relationship between the various accounts and how PRC deals with positive and negative cash flows.