No. of Recommendations: 2
for Kim:

Where you have maximum income for each tax bracket, do you have these in future (inflated) dollars for each year? Yes. I simply apply my predicted/assumed inflation factor, without rounding the way IRS does. Close enough, since the inflation rates are guesses anyway.

I recommend such detailed personal financial planning spreadsheets for everyone, even though many of the numbers in them have to be predicted. You can do sensitivity studies to see how much your results differ if you tweak your estimates of investment returns or inflation or whatever. Without the number-crunching, a lot of important financial questions get answers based only on intuition, and that's scary to me.

My intuition, for example, told me I shouldn't touch my IRA until I'm forced to make some withdrawals at age 70, since I can easily live on other resources. Why pay taxes years before you have to, even if the tax rates are graduated? However, the numbers tell me that I do benefit my situation (just slightly) by taking some withdrawals from the IRA in each of the optional years, ages 59 to 69, of around 1% to 2% of IRA assets. The optimal sizes of these withdrawals, determined for me by Excel Solver, go up and down with the market. If the market keeps dropping, my optimal optional IRA withdrawals will drop to zero. Much too hard for intuitive solution, since it isn't just a matter of taking all I can without breaking into a new tax bracket.

Other problems that are too hard for (my) intuition pertain to

• whether and at what rate anyone should convert a conventional IRA to a Roth,

• whether you should use up taxable accounts ahead of or after tax-sheltered accounts while retired, and

• how to allocate current savings between tax-sheltered and taxable accounts while still working.

Chips, whose spreadsheet has been crucial in steadying his nerves, facing decades with no paycheck

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