Can 401(k) Withdrawals be reflected in the Lifetime Planner before age 70?

Steven Miller

The lifetime planner assumes that 401(k) withdrawals will start at 70. How do you get the planner to start when I retire before then?

Boatnmaniac

I think we all need to approach LP and TP like @Chris_QPW states...as tools to get us ballpark pictures, especially since there are so many variables we will all encounter over the years that could cause significant changes to the outlook.  In order to be a reasonably effective planning tool it needs to be revisited periodically and edited as appropriate for changes in our circumstances and in economic outlooks.  I do this 3-4 times each year.

Boatnmaniac

I don't think there is a way to do what you want it to do.  But don't assume that LP will not plan for withdrawals from your 401K before age 70-1/2.  It will do that automatically if your plan shows you would run out of cash before then.

I believe that LP calculates the plan based upon the lowest cost option that ensures liquidity for each year.  For sure, it must start assuming RMDs starting at age 70-1/2 but if there is no projected need to start withdrawing it sooner than that then it won't do that.  But if LP projects you will not have enough cash to cover expenses it will definitely show earlier IRA/401k withdrawals than starting at 70-1/2 to make sure your plan does not run out of cash.

I think we need to keep in mind that LP is most effective (in most situations) when we follow the plan it calculates.  We can deviate from it but doing so will probably end up costing us more (i.e., paying taxes on tax deferred distributions before we need to and/or in lost tax deferred investment growth opportunity) and could result in causing the long-term plan to fail to meet your lifetime objective. Each person's situation is different but if we want to deviate from the LP plan we should be asking ourselves if that is really the smartest thing to do from a fiscal and desired output perspective.  It might be for some but for most it mostly likely is not.

Regardless, LP constantly recalculates to account for actual changes to account balances, for time passed and for any changes made to the assumptions entered into the plan.  So, if you take earlier withdrawals from your 401k it will adjust for that once the transactions are completed.

In my case, I retired at 60 and LP has always planned for IRA withdrawals for me before age 70-1/2 because my taxable investments would deplete before then.  I've also made sure to keep a safety fund of immediate access cash (in a savings account) for emergencies that I never touch unless I have no choice and I keep another taxable brokerage account that I keep as a buffer to ensure that I can keep my taxable income (IRA withdrawals) below a certain level each year.  These are things that LP is not smart enough to account for except as an after the fact event.  But that's OK because LP recalculates each day that I don't tap into those taxable savings and brokerage accounts and for each IRA distribution I actually take.

Chris_QPW

The Lifetime Planner definitely has "what account type should I draw from first formula".  And there isn't any way to change it.  And frankly I don't agree with the order for my situation.  That that is the problem with a fixed formula like that.  Everyone's situation is a bit different.  So I use the Lifetime Planner like I use the Tax Planner.  And that is as a "ball park estimate", not as plan of how I would do it.

If you want a planner that is much more flexible, but whole lot more work, you should look at this one:
http://forecaster4website.azurewebsites.net/default.html

Boatnmaniac

I think we all need to approach LP and TP like @Chris_QPW states...as tools to get us ballpark pictures, especially since there are so many variables we will all encounter over the years that could cause significant changes to the outlook.  In order to be a reasonably effective planning tool it needs to be revisited periodically and edited as appropriate for changes in our circumstances and in economic outlooks.  I do this 3-4 times each year.