Why aren't taxes being deducted from tax deferred withdrawals prior to age 67 in the Life Planner

Marley042
Marley042 Quicken Windows Subscription Member
in Budgeting and Planning Tools (Windows)

Taxes are not being incurred on any tax deferred accounts with withdrawals prior to age 67 in the lifetime planner. After age 67, taxes are being incurred. Where is the logic that says only to incur taxes on withdrawals on an arbitrary age 67? (my plan has retirement earlier than that date)

Answers

  • Boatnmaniac
    Boatnmaniac Quicken Windows Subscription SuperUser ✭✭✭✭✭
    edited April 11

    In Tax Planner, click on Explore What If's. Then click on Tax rate and make sure you have the correct before and after retirement tax rates (highlighted in yellow) entered.

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    Also, note that the planner does not take into consideration your actual investments transactions, regardless of whether they are taxable or tax deferred. The planner puts together a distribution plan it calculates as "best" based upon the data entered into the planner and based upon the current accounts balances. The planner is not intended to provide a detailed budget but is intended to show how likely our assets and income are going to support our expenses between now and the end of our life. (You might already know this but you would be surprised by how many people think the planner is a detailed budgetary tool when it is not so I thought it would be good to mention this for the benefit of others if not also for you.)

    Quicken Classic Premier (US) Subscription: R66.23 on Windows 11 Home

  • Scooterlam
    Scooterlam Quicken Windows Subscription SuperUser ✭✭✭✭

    For deferred accounts like an IRA or 401(k), taxes are taken:

    1. at 70.5 years when mandatory RMDs kick-in. NOTE, this RMD age has not been updated in LTP, per the Secure Act 2.0. Sadly, the product team at Quicken has yet to update this to age 73 or 75.

    Or, more to your issue, perhaps….

    2. prior to 70.5 years, when taxable accounts and other income does not cover your total expenses.

    In the plan results graph, click on the year at which you are 67 +/- to see if your taxable accounts are exhausted and withdrawals from your tax-deferred accounts kick-in, causing the tax expense that you see.

    Could #2 be what you see?

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