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Planner Operations: Withdrawals
Planner Operations: Withdrawals

This article describes the default withdrawal order, changing the order of withdrawals and accounts for RMDs, and manual withdrawals.

Nancy Gates avatar
Written by Nancy Gates
Updated over a week ago

Withdrawal Order:

The Planner will automatically fund the expenses in your plan. It will first use available Income such as work income, Social Security, Pensions, etc.

When income does not meet your expense need, the Planner will fund the remaining expenses with distributions based upon a your Withdrawal Strategy and a default withdrawal order as below.

  1. Taxable Savings

  2. Tax-Deferred Accounts

  3. Roth Accounts

  4. 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. 529 savings are not included in the withdrawal sequence and must be explicitly disbursed as one-time withdrawals.

Due to this feature, in most cases, drawdown amounts are not something you would define manually. You do have the ability to add additional distributions from investment accounts by adding transfers from those accounts to an after tax account.

The Withdrawal Order includes RMDs and the Planner models RMDs in accordance with IRS protocols. That is, the specific RMD amount is determined by dividing the prior year-end account balances by a life expectancy factor as determined by the IRS and withdrawn. If your RMDs are in excess of your expenses, they will be added to your Excess Income.

It's important to note that your accounts likely have a variety of tax treatments. As a result, when the planner withdraws from a particular account, your tax modeling will be impacted. Excluding accounts from the withdrawal strategy, or entering one-time expenses, disbursements, and transfers will also impact your tax modeling.

Because the Planner includes your taxes in your expense modeling, any changes to your tax modeling will impact your expenses. It is an inevitable circular process you'll want to be aware of as you work on your plan and make adjustments.

Note: If you are seeing savings drawdowns on the Lifetime Retirement Projection charts beyond your modeled expenses this is because estimated taxes are based on the income of the year prior and actual tax liability of the current year is reconciled in January of the following year. If you don't have enough income in January to cover one-time expenses and estimated taxes applied at the beginning of the year the tool will borrow from your savings in January (savings drawdown) and replenish your savings with excess income saved throughout the year. You can see this in the Insights > Surplus-Gap Chart below.

Excluding accounts from the withdrawal strategy

You have the ability to override the Planner's default order of withdrawals by excluding accounts from your withdrawal strategy.

If you excluding an account from your withdrawal strategy, the account will NOT be used for the following:

  • In calculations that use liquid retirement savings to generate income estimates

  • In automated withdrawal strategies to cover expenses

  • In Required Minimum Distribution (RMD) estimates

  • In the Roth Conversion Explorer

  • When attempting to pay for a given expense. Even if the account is fully funded and there are no other accounts available to pay an expense, the account will not be tapped and lifetime debt will instead be modeled.

IMPORTANT: Excluding an account from your withdrawal strategy does NOT exclude it from manual withdrawals, only from our automatic withdrawals based on the Expense Hierarchy. Using My Plan > Money Flows to direct money out of an excluded account not only works but allows for much more control over your Plan. See this article for more detail.

How do I exclude an account from my withdrawal strategy?

Use the pencil icon to edit an account and press "Yes" when asked "Exclude this account from your withdrawal strategies?"

How do I model manual withdrawals?

There may be scenarios when you want to manipulate your cash flow to influence the transfer and withdrawal of assets. Manual withdrawals can be used to model scenarios, including:

  • Intentional 401k/IRA withdrawals at any age

  • Deferred salary withdrawals

  • Inherited IRA Required Minimum Distributions (RMDS)

  • 529 withdrawals

  • HSA withdrawals

  • Transferring money from one account to another account

  • Transferring money after the death of the first spouse

  • Transferring money to pay down debt and mortgages

  • Modeling tax-deductible disbursements

Step 1; Head over to the Money Flows section of My Plan

Step 2 Open the Transfers section

Step 3: Press on "Add a Transfer +"

Step 4: Select the account for the withdrawal

Step 5: Select the account/selection for the deposit

Step 6: Enter the amount in future dollars

Step 7: Decide if this is a one-time or annual transfer

Step 8: Enter when the transaction will take place

Step 9: Enter notes (optional)

Step 10: Press Save when complete

See our Video Tutorials for more detail on customizing your own withdrawal strategy.

How do I change the order of accounts for RMDs?

The growth rate on accounts will influence the order of drawdown. 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%, to help influence the order of withdrawals.

The order tax-advantaged accounts are entered in the Savings and Assets section will influence the accounts' order to be drawn down for RMDs.

You may consider re-entering your accounts in the tax-advantaged section in the order you would like for them to be used for RMDs. Entering the accounts in this way will only determine the order RMDs drawdowns.

To view withdrawal details per account, PlannerPlus members can go to Insights > Savings and scroll to the "Withdrawals" chart.

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