Portfolio Research Lab
RMD-3.1.0-preview · Rules checked September 19, 2026

RMD & household tax study

A required distribution moves money out of an IRA. It is not automatically a spending loss. This study keeps track of where that money goes.

What this edition supports

Single, married filing jointly, head-of-household, and married-filing-separately taxpayers; original-owner traditional IRAs; a combined qualified Roth balance; and an interest-bearing taxable cash reserve. Each spouse’s traditional IRA and unrecovered basis are tracked separately. All three allocation or strategy choices use identical market shocks. Separate returns include one taxpayer only; community-property allocation must be resolved outside the lab.

The example is fictional. Inputs remain in browser memory; exported files contain the financial amounts you entered. Save an input or full-study JSON file to continue later. No account identifiers are needed.

Version 3.2 planning controls and boundaries

Compare three named conversion/cash-withdrawal plans at one retirement-account allocation, or three allocations using a shared plan. Conversion and cash schedules have common date windows across strategies. Baseline means your chosen Strategy A; it is not automatically forced to zero. Cash-withdrawal targets include the cash RMD. Spending phases replace the default spending schedule only for their specified, nonoverlapping years.

Fixed-return mode uses the stock growth input as a simple annual return, runs one path and has no probabilistic interpretation. Monte Carlo mode retains the lognormal convention below. A “better than A” percentage compares tax-adjusted ending balances path by path with a one-cent tolerance. The paired median change is the median of matched-path differences, not the difference between two medians.

Eligibility answers must be confirmed before calculation. QCD confirmation is required for nonzero requests; Roth confirmation is required for existing Roth assets or conversion plans. These are user assertions, not independently verified facts. Fictional examples prefill eligible answers and must be reviewed before personal use. Coverage screening blocks selected inherited/workplace-account, survivor-transition, early-withdrawal and complex-tax cases. It does not diagnose every unsupported tax circumstance. Filing status and household survival remain fixed; tax credits and comprehensive state-law calculations remain outside scope; common-retiree AMT is now included. Some high-income paths trigger a review notice. There has not yet been independent tax-professional certification.

The input and worker modules do not send financial inputs to a server or persist them automatically. Local-browser checks found only static GET requests during calculation, input import and export. The PRL login, hosting and billing services have separate data handling. Exported studies and printed reports contain the entered figures; review them before sharing. Refreshing or closing the lab discards unsaved in-memory work.

Version 1, 2 and 3 input exports can be imported; eligibility answers must be reviewed after every import; the lab recalculates using version 3.1 rules and records the new version. Old outputs are not silently represented as freshly verified results. Reports show complete inputs, methodology flags and a common-path annual record. Changes to inputs disable result exports until a new run completes.

Household inputs that affect the estimate

Enter the starting tax year, birth years, filing status, income amounts and their schedules, deduction choice, IRA balances and basis, QCD requests, conversions and spending. Other income streams must come from outside the accounts being simulated. Pension cash uses the entered taxable percentage; the remaining pension cash is treated as non-taxable income. The lab does not compute annuity cost recovery. Social Security is gross before withholding or Medicare deductions. Qualified dividends and positive long-term capital gains are separate from ordinary income.

For income beginning later, enter the annual amount for that future start year. Growth starts from that year. For existing income, use the study start year and that year’s annual amount. There is no retirement earnings-test calculation for Social Security. Enter benefits actually expected to be paid.

Capital-gain cash includes only the gain, not the sale proceeds’ return of principal; external investment asset values are not part of modeled wealth. Do not double-count dividends or interest earned by the modeled reserve.

Annual calculation order

  1. Compute each owner’s RMD from their previous year-end balance and applicable IRS divisor.
  2. Apply one annual stock return and cash return to the IRA/Roth allocation, less fees. Reserve interest accrues separately.
  3. Pay eligible QCDs first. Pay cash equal to the greater of the remaining RMD and the scheduled cash-withdrawal floor. Only assets left after this cash allocation may convert to Roth. Unfilled withdrawal and conversion requests are reported.
  4. Compute federal and estimated state tax using all modeled income. The senior deduction, Social Security inclusion and capital-gain stacking respond to IRA income.
  5. Use household income and cash distributions for tax, Medicare surcharge and spending. Draw the taxable reserve if needed, then additional IRA withdrawals (split proportionally across available spouse IRA balances), then qualified Roth funds. Additional IRA withdrawals are solved iteratively to cover their own tax.
  6. Deposit remaining cash into the taxable reserve. Show any unfunded obligations rather than allowing negative account balances.

All distributions, conversions and cash settlements occur at year-end. The first required distribution may optionally be delayed to the following tax year, which is how this annual model represents the April 1 election; the whole amount moves, partial splits and the actual withdrawal date are not modeled. Returns therefore accrue before the annual withdrawal. There are no new IRA contributions, outstanding rollovers, inherited accounts, death events or filing-status changes.

QCD requests start at modeled age 71. This deliberately omits the legally eligible half-year at age 70½ because no exact birth date is collected. QCDs assume direct custodian payment to an eligible charity and no deductible IRA contributions after age 70½. QCDs with positive IRA basis are rejected. The per-person limit stays at $111,000 in future study years as a stated assumption.

With after-tax basis and no QCD, recovered basis is proportional to total annual distributions and conversions divided by year-end IRA value plus those distributions. This matches the no-new-contribution, no-rollover annual model. Basis is not a deduction, and the user’s total IRA balance must include the relevant aggregated accounts.

What changed in the federal tax review

Version 3 adds common-retiree alternative minimum tax (AMT), including the new 50% exemption phaseout, separate-return adjustment, private-activity bond interest and capital-gain worksheet. AMT disallows the standard and enhanced senior deductions and restores the high-income itemized reduction. It also corrects the capital-gain worksheet to use ordinary rates when they produce a smaller regular tax.

The 2026 SALT cap is $40,400 before income limits; the statutory cap and income threshold rise 1% through 2029, then the cap returns to $10,000 in 2030. Separate-return rules halve the final cap. These statutory dates override the user’s general tax-index assumption.

Common components cover eligible unreimbursed medical expenses, SALT payments, already eligible home mortgage interest, and eligible current-year cash gifts to public charities. Do not include donor-advised funds, supporting organizations, noncash gifts, QCDs or carryovers in cash gifts. Mortgage debt/use limits must be applied before entry; mortgage insurance is not modeled. Entered totals must already include all regular-tax limitations and need their included SALT amount for AMT. “Lower modeled federal tax” compares legally available standard and itemized choices each year, including AMT in detailed mode. Separate filers whose spouse itemizes cannot choose the standard deduction. It minimizes only modeled annual federal tax, not lifetime or state tax. The legacy “Larger regular-tax deduction” option remains available and does not optimize for AMT.

Deduction amounts do not automatically create expenses. Include medical expenses, mortgage interest, property/sales taxes and cash gifts in spending. The model pays its state income-tax estimate separately. SALT paid is a separate fixed payment assumption for the federal deduction, not an automatic link to the modeled state liability. Both amounts must be reviewed for consistency. Private-activity bond interest must already be part of the entered tax-exempt income.

AMT coverage excludes stock options, business/property adjustments, foreign credits and prior-year minimum-tax credits. All tax credits, including Schedule R, dependent credits, earned-income credits and ACA premium credits, are outside scope. Taxpayers claimed as dependents, nonresident returns, foreign-income exclusions and specialized tax situations need a separate model. This is a retirement planning estimate, not a complete tax-return engine.

Rules reviewed September 19, 2026. Enacted law and IRS revenue procedures take priority; the referenced 2026 forms remain drafts. Later indexed values are assumptions, not published future law. Continuous tax-rate schedules are used rather than $50 tax-table bands or tax-return whole-dollar rounding. No independent tax-professional certification has been performed.

Additional primary sources

Federal tax estimate

Detailed mode uses 2026 progressive ordinary rates and qualified-dividend/long-term-gain rate stacking, taxable Social Security, age-related standard deductions, the temporary enhanced senior deduction through 2028 and net investment income tax. Future bracket and standard-deduction amounts increase at the user’s assumed rate from the 2026 base. Social Security inclusion thresholds, NIIT thresholds and the temporary senior deduction’s phaseout thresholds are not indexed.

Choose an already limited itemized total or common-expense components. Component mode applies the 7.5% medical floor, statutory SALT caps and phasedown, the 0.5% cash-charity floor and 60% ceiling, and the high-income 2/37 limitation. Studies that would require charitable carryovers pause. Standard-deduction filers can enter eligible cash gifts for the $1,000/$2,000 deduction. All expense inputs grow with spending inflation. The calculation excludes tax credits, payroll taxes, business income, foreign-income modifications, capital losses, specialized capital-gain rates, charitable carryovers and specialized itemized deductions. High-income households and unusual tax situations need a separate tax calculation. Standard age allowances use year minus birth year, with an optional January 1 tax-age adjustment. RMD age is not changed by that tax adjustment. Blindness allowances and the separate-return spouse-itemizes restriction are included.

Quick mode applies the entered flat federal rate to the same estimated taxable income, without progressive rates, separate capital-gain rates, AMT or NIIT. Both modes are estimates, not tax-return preparation.

The displayed tax attributed to IRA activity is total household tax minus the same-year tax with taxable IRA cash distributions and conversions removed. Other income and reserve interest stay fixed. This captures interactions but is not a counterfactual lifetime strategy.

State taxes & Medicare

State residence is a descriptive label only. State/local custom mode applies the entered rate to modeled federal AGI after the entered exempt percentage of federally taxable Social Security, capped pension and IRA exclusions, and general allowance. Dollar exclusions index at the tax-index assumption from the first study year. None is inferred from the selected state. Off mode excludes state/local tax; neither off nor a zero rate establishes no actual liability.

The optional Medicare sensitivity adds full-year Part B and Part D IRMAA surcharges for each household member from their assumed full-year enrollment age. Part B and Part D surcharges may be included separately. Enter household MAGI for the two preceding years, assuming the same filing status. Subsequent years use simulated AGI plus tax-exempt interest from two years earlier. A zero Medicare indexing assumption holds all future surcharge amounts and thresholds at 2026 levels. A nonzero rate scales the entire schedule as an explicit sensitivity assumption, not a forecast or statutory indexing formula. Separate filers who lived together use the separate-return surcharge thresholds; those apart all year use the individual schedule. Base premiums belong in spending; enrollment gaps, appeals and life-changing events are excluded.

Markets, wealth and interpreting results

Stock returns follow an annual lognormal model: exp(growth tendency − volatility²/2 + volatility × a standard-normal shock), with rates expressed as decimals. Cash earns its entered annual rate. IRA and Roth allocations are restored once per year, and a continuous annual fee factor is applied. The cash reserve has no modeled fee.

The three stock/cash allocations or strategy schedules share shocks path by path. This controls random market differences but does not reproduce historical sequences, volatility clustering or changing tax law. Stock/cash is not stock/bond.

Median wealth and percentile ranges summarize simulation outcomes, not predictions. Total wealth is IRA plus Roth plus reserve before future tax on the remaining IRA. It excludes housing, pension asset values and external investment principal. The optional tax-adjusted figure deducts the user’s flat assumed future rate from remaining pretax IRA assets, excluding unrecovered basis. It is not a progressive liquidation-tax calculation. Inflation-adjusted charts deflate each end-of-year amount to the beginning of the study.

The annual detail uses the reference choice’s actual path nearest its median terminal wealth, then replays that same path for all choices. It is not a sequence of annual medians or each choice’s median outcome. The endpoint CSV contains matched path numbers for paired comparisons. Funding shortfalls include spending and unpaid tax/Medicare obligations; missed-RMD penalties are not calculated. If money runs out, the accounting prioritizes Medicare, then tax, then spending. Unpaid obligations are reported annually, not carried as debt.

RMD baseline means zero lifestyle spending. All other income, taxes, QCDs and conversion requests still operate. Set conversions and QCDs to zero for a simple baseline.

Official references