Planning: post retirement taxability

acferrad

The Planning tab gives me a graph of 3 items vs. time: Taxable, Your Tax-deferred and Spouse Tax-deferred. However I have 2 Roth IRA accounts which are tax-free at retirement. So why is there not a Tax-free item in the graph?

Sherlock

The Taxable, Your Tax-deferred and Spouse Tax-deferred refer to aggregate balances of the accounts.  The Taxable versus Tax-deferred distinction is on the handling of income not on the treatment of withdrawals from the account.  It might be easier to think of Tax-Deferred as meaning no immediate tax on income.  A Roth IRA account should be set up as Tax-deferred: open a Roth IRA account and press Ctrl + Shift + E  

Chris_QPW

I would say it is because they crammed the Roth IRA processing into a system that was designed long before Roth IRAs existed.

So the treatment is a bit strange.  If you make a copy of your data file and remove all savings accounts and regular IRA/401K/... and any income so that only the Roth IRAs are funding the expenses you can get a handle on what they are doing.

The withdraws from the Roth IRA fall under "Tax-deferred".  And the "Tax on Withdraws" will be zero.

Now if you compare that to a regular IRA/401K/...  Again it will withdraw from "Tax-deferred", but there will be an amount in "Tax on Withdraws" since you have to pay tax on these withdraws.

Jim_Harman

The Roth accounts are grouped with the Tax deferred accounts. I believe the spending schedule taps the Roth accounts last, as is normally recommended.

Sherlock

The Taxable, Your Tax-deferred and Spouse Tax-deferred refer to aggregate balances of the accounts.  The Taxable versus Tax-deferred distinction is on the handling of income not on the treatment of withdrawals from the account.  It might be easier to think of Tax-Deferred as meaning no immediate tax on income.  A Roth IRA account should be set up as Tax-deferred: open a Roth IRA account and press Ctrl + Shift + E  

Chris_QPW

I would say it is because they crammed the Roth IRA processing into a system that was designed long before Roth IRAs existed.

So the treatment is a bit strange.  If you make a copy of your data file and remove all savings accounts and regular IRA/401K/... and any income so that only the Roth IRAs are funding the expenses you can get a handle on what they are doing.

The withdraws from the Roth IRA fall under "Tax-deferred".  And the "Tax on Withdraws" will be zero.

Now if you compare that to a regular IRA/401K/...  Again it will withdraw from "Tax-deferred", but there will be an amount in "Tax on Withdraws" since you have to pay tax on these withdraws.