My wife is three years younger than me, we each have around the same amount in our tax deferred accounts (IRAs). Both IRAs have the same expected rates of return.
Every time I run the withdrawal order report, the report says to take withdrawals from her IRA before mine. That runs counter to conventional wisdom, which is take money from the older person's IRA first since their RMDs start first.
Am I missing somethng, or any insight on why this report acts the way it does?
Thanks!
@temartin2 If you'd be willing to share an export file (send to mail@pralanaconsulting.com) I'd be happy to investigate, but the tool doesn't apply any conventional wisdom in its algorithm. It simply tests all the permutations and reports the one that results in the highest savings value at the end of the modeling period.
Stuart
@smatthews51 I shared the plan to admins. I was not sure how to export from Online. If you have time please take a look. However, it may be that it is a negligable difference.
@temartin2 Ah, you fooled me. Your post is under the Pralana Gold and Bronze category but actually pertains to Pralana Online. So, I'm moving it to the Pralana Online > Analysis category. Anyway, as you surmised, there isn't much of a long-term difference whether you withdraw from your account first or your wife's account first. But, I think the tool is always picking her account first because there is a difference in the rates of return for your TD account vs hers, with yours being a little higher.
Stuart
A bug is possible of course, but short of that, the only thing I can think of is if you are short of cash in the three years prior to your wife's RMDs and the program finds that the capital gains taxes you have to pay during that time are a more significant factor than the extra tax drag associated with starting RMDs earlier. You could test by looking at the cash shortage and using the Scheduled Withdrawal Table to pull out that amount from your IRA.
If that's what it is, you may also want to tune up the Unrealized Capital Gains entry. For instance, we have some investments that go back a long time, so have very large unrealized gains, but our plan shows we never need to sell them, they can be passed on to receive the step up basis on death. So there's no reason for those gains to show up in the Pralana plan and we exclude those gains from the entry in Pralana.
