Spouse and I both 59.5 this year, so have access to all accounts, and wondering where go get money for lumpy expense this year.
I'm aware of the usual recommendation of the account order to withdraw from, but there is an additional wrinkle: we are using the ACA and want to keep income low.
Is there an outline for how to model taking some funds from a Roth account? Thanks.
@feh We are in a similar situation. This is similar to what I posed on another thread:
I still use Gold 2025 so my explanation is based on that. During the years you want to use ACA subsidies set your Withdraw Priority to Roth. Then under Scheduled Withdraw Table for those years input the amount of money to be withdrawn from your regular IRA (or whatever your source of taxable income) to get the amount of tax break you are looking for (based on MAGI compared to % of poverty level). For enhanced subsidies this year you need to be below 150% of the federal poverty level. It is very unlikely the enhanced subsidies will be renewed for 2026.
Hope that helps 😊.
@feh Well, this is what the tool is for, and its super power! Put those lumpy expenses in the Miscellaneous expenses area. That's what that section if for. Make *sure* your ACA numbers are right in the healthcare area, read the doc or read my book (get it from your library if you don't want to buy it). It's easy to do wrong. If your numbers/config are correct, disable roth conversions, run a MC analysis, do a roth optimization, if the results are good do another mc analysis to lock them in (otherwise, disable roth conversions), then do the withdrawal optimizer.
This is your optimal path. If it says to take money out of your pretax that causes you to get less ACA premium tax subsidies, well, it's because that's to your advantage down the road. Don't be short sighted, trying to save $100 or whatever a month on health care now that will cost you greatly down the road in terms of lost tax free growth on your roth accounts. Let the tool do its thing.
Thanks for the replies so far.
For the developers - it would be great to be able to specify on the miscellaneous expenses page where the money for that expense is taken from. It would then be trivial to see how using different sources affect end results.
Money is fungible, so it's not going to be useful to try to track a certain expense back to a certain account.
Bill has given good advice, check the Withdrawal Order Optimizer and the Roth Conversion Optimizer to see what the program sees as the best strategy. You can often improve the Roth Conversion strategy manually since the Optimizer only looks at ordinary tax brackets, but it is a great starting point and won't be far from the very best possible strategy. Also, you can manually use the Scheduled Withdrawal Table to test whether a withdrawal from Roth in a given year helps or not. Note that the best strategy may be a mix - pulling from Roth one year and selling in taxable or doing Roth Conversions the following year to rebuild the war chest.
Money is fungible, so it's not going to be useful to try to track a certain expense back to a certain account.
Bill has given good advice, check the Withdrawal Order Optimizer and the Roth Conversion Optimizer to see what the program sees as the best strategy. You can often improve the Roth Conversion strategy manually since the Optimizer only looks at ordinary tax brackets, but it is a great starting point and won't be far from the very best possible strategy. Also, you can manually use the Scheduled Withdrawal Table to test whether a withdrawal from Roth in a given year helps or not. Note that the best strategy may be a mix - pulling from Roth one year and selling in taxable or doing Roth Conversions the following year to rebuild the war chest.
I agree money is fungible, but I disagree with bolded section above. For example, if I'm going to live another 30 years and I need $100K for a lumpy expense this year, taking that money from different sources will definitely have an effect on ending balance, given the varying tax treatment of taking from different accounts.
