I am not sure how to determine the effective tax rate to use for this setting (Financial Assets > Management). Depending on the scenario, column 'Effective Tax Rates' on the Tabular Projections > Taxes page lists rates from 5.9 to 7.0%. Is this a valid source, or is the effective tax rate based on other factor(s)?
Running Pralana Gold 2023 v2.0.
Thanks,
Don
It's specific to each person/situation. I'd get everything set as best you can, run an analysis, then to to the Taxes tab in the Tabular Projections. Scan down the effective tax rate column throughout the years and come up with a realistic average, either by eyeballing it or doing the math.
Then use that in Financial Assets->Management. Keep in mind that in the taxes tab, the marginal column is your top federal income rate while the effective column is for your overall total income taxes, including state/local.
Thanks Bill, that makes sense.
Don
If you are passing your estate to your heirs, it would be your estimate of the marginal tax rate that they will pay as they withdraw IRAs inherited from you on top of their own income. If you have multiple heirs with different earning potential or different state tax rates, average them as best you can.
On the other hand, if you are passing your IRAs to charity, the tax rate would be zero and therefore Roth conversions would be less attractive.
