This article describes the withdrawal modeling, chart interpretation, and language used in the Planner to manage and portray the cash outflows, withdrawals, and transfers in your plan.
The Withdrawals chart on the Insights > Savings page illustrates the projection of cash outflows, or withdrawals, as well as transfers within your plan.
Items on this chart include:
RMDs: Automated withdrawals for Required Minimum Distributions (RMDs) based on the withdrawal strategy modeled in My Plan > Money Flows
Roth Conversions: Roth conversions (these are shown as withdrawals and contributions) in My Plan > Money Flows
One Time Expenses and Disbursements: One time expenses and disbursements entered in My Plan > Expenses
Annuity Purchases: Future annuities modeled in My Plan > Income
Real Estate Purchases: Future real estate purchases modeled in My Plan > Home and Real Estate
Transfers: Transfers entered in My Plan > Money Flows. Keep in mind that a transfer may net out with a drawdown from savings. As a result, the total shown in the withdrawal chart does not represent the total cash outflow, but an aggregate.
What is a Shortfall? A shortfall is an automated withdrawal to cover the expenses modeled in your plan
If the income coming into your plan is not enough to cover the expenses going out, the Planner will draw down from savings. We refer to this as a shortfall, drawdown, or funded gap. The Planner will withdraw from your accounts to fund your expenses, following the default order below:
Taxable Savings
Tax-Deferred Accounts
Roth Accounts
HSAs
Within each category, the growth rate on accounts will influence the order of withdrawals. Accounts with the lowest growth rate will be used first, allowing accounts with higher growth rates to continue to grow for the longest period of time. You may consider making slight changes to the growth inputs, such as 7.9% instead of 8%, if you'd like to influence the order of withdrawals in your plan. Or, you can enter Transfers to override the order of withdrawals in your plan in the Money Flows section of My Plan.
NOTE: If you are using transfers to employ a specific order of withdrawals in your own plan, you may feel that your plan is "funded" and a savings drawdowns is not necessary. What you will see in the Withdrawals chart is often two transactions:
The transfer(s) FROM your desired account TO an after tax being used to cover expenses.
The shortfall withdrawal(s) from the after tax account.
While you may not interpret your plan as having a shortfall in this situation, in the "language" of the Planner, it is termed a shortfall.
PRO-TIP: Use meaningful labels when you create accounts in your plan so that it is easier to map accounts on the Insights charts.
What should I look for?
Notice the years where the columns are taller than average. These are years where you have more outflows. Is there a special event in that year?
Notice the years where there are shortfalls. Did you anticipate drawing on savings in these years?
Notice the amount of RMDs per year. Are they higher or lower than you expected?
What next?
See how the chart changes if you change your plan assumptions from optimistic to pessimistic
See how RMDs change if you select a different withdrawal strategy
See how the chart changes if you update something in your plan, such as working longer, spending less, or saving more
See how RMDs change if you model Roth Conversions before age 72