Question: Tabular Projections: Withdrawal Report [Net Withdrawals from Cash Account]
I can't seem to understand PRC's logic on withdrawals recommended from a cash account when one does not exist, as it has not been funded (left 0 at initialization). In my example the withdrawal sequence is set as Regular (Investments), Your TD, Spouse TD, Roth. Years 2023 thru 2035 PRC effectively outlines withdrawals from Regular (Taxable Investment) Accounts. From year 2036 and on, PRC then outline withdrawals from Your (My) TD, Spouse TD, and Net Withdrawals from Cash. The issue is that Net Withdrawals from Cash is never funded by an investment source, that I can tell, and I cannot understand why a recommendation is from a cash account that I defined unfunded. I looked at the manual and reviewed page 34 that spoke to Cash Accounts, though it is not clear to me how the logic is working in PRC and why the withdrawal recommendation from cash, while other accounts have balances to draw from that fit into the withdrawal strategy that is defined.
Anyone else run into this, or can offer some guidance?
Please read Modeling of Cash Accounts and Cash Flow starting on page 9 of the manual. If you have a positive cash flow, the excess cash first goes into the cash account. When the cash account balance exceeds the specified ceiling, the overflow amount is withdrawn from the cash account and deposited into the regular investment account. That overflow amount is shown as a "Withdrawal from Cash".
I read the manual section you outlined above, though it's not clear what reports or data elements I would look at that derive the overflow situation that ultimately withdraws from this overflow account and ultimately creates a Withdrawal from Cash situation in the withdrawal report. I reviewed and purposely left out my cash accounts / values and floor and ceiling levels out of the "User Defined" financial assets section - to better understand what was happening here, though I believe this is going on either behind the scenes, or is broadcasting in another report. All the other defined accounts seem to be traceable on withdrawal activity and associated balances, though this Cash Account referred to by PRC - I am not able to locate or trace its activity. Is there anywhere that outlines the contributions to this cash account or what you label in your response the "Regular Investment Account"? I assume the Regular Investment account are the user defined taxable accounts in the Financial Assets Section of PRC. For me at least this section / logic is very confusing, as I cannot track what PRC is doing with this so-called Cash Account and how items enter or leave it. Lastly, there is also a reference in this section of when the ceiling is exceeded and then money is deposited to the Regular Investment Account. If there was a way I can physically see this in PRC or an example of these transactions, then I think the light will click "ON" for me. But for now, I don't have a solid grip on what is happening here, though I get that it's a critical logical piece of PRC.
From page 10 of the referenced section of the manual:
- Contributions to the cash account are never specified directly by the user and are only done via PRC’s algorithms. Here’s a list of events that result in contributions to the cash account:
- positive cash flows (your overall income exceeding your overall expenses, where income includes earned income, pensions, annuities and Social Security)
- growth of the regular investment account that is attributed to simple interest, short-term capital gains or qualified dividends and that is not reinvested
- scheduled withdrawals from cash value life insurance policies
- scheduled withdrawals from tax-deferred, Roth or HSA accounts (as specified on the Financial Assets > Management page)
- proceeds from a new investment loan
If these contributions drive the balance of the cash account over the specified ceiling (which is zero if you chose to omit it), then the overflow amount will become a withdrawal (shown on the View Mgmt page and can be included on any other View of your choice) and a deposit to the regular investment account. To assist you in tracing this, I'd refer you to the Summary Report on the Reports page that shows all of the puts and takes on an account basis (for the first five years of the modeling period).