Personal finance forums like Bogleheads and r/FIRE are some of the best places on the internet to ask about money. People post their whole financial picture (accounts, funds, balances, tax brackets, spending), and experienced volunteers reply with advice. The most common kind of thread is "Retirement Advice Requested," and the question behind most of them is the same: do we have enough?
Forum replies tend to answer with rules of thumb: a withdrawal rate, a rough tax estimate, a nudge toward Roth conversions. Those are good rules, but they can't tell a couple how their accounts, their taxes and their spending would have held up through the Great Depression or the 1970s. That is the question Ignigrade is built to answer.
So we wrote a post in the style of those threads and asked Ignigrade.
The couple is made up, but their situation is a common one on the forums. Here is the post we gave Ignigrade:
My spouse and I are both 50 and would like to retire at the end of this year. We file jointly and live in Colorado (4.4% flat state income tax). No debt, the house is paid off, and we keep about a year of expenses in savings outside the accounts below.
Total portfolio: $4.5M, about 73% stocks. We plan to keep roughly this mix in retirement.
Joint taxable brokerage at Vanguard ($2.4M)
$1,600,000 Vanguard 500 Index Admiral (VFIAX), cost basis $900,000
$300,000 Vanguard Small-Cap Index Admiral (VSMAX), cost basis $200,000
$400,000 Vanguard Long-Term Treasury (VUSTX), cost basis $400,000
$100,000 Vanguard Federal Money Market (VMFXX)My 401k ($900k)
$540,000 Vanguard 500 Index Admiral (VFIAX)
$360,000 Vanguard Long-Term Investment-Grade Admiral (VWETX)Spouse's traditional IRA at Vanguard ($700k)
$350,000 Vanguard 500 Index Admiral (VFIAX)
$350,000 Vanguard Long-Term Treasury (VUSTX)My Roth IRA at Vanguard ($250k)
$250,000 Vanguard Small-Cap Index Admiral (VSMAX)Spouse's Roth IRA at Vanguard ($250k)
$250,000 Vanguard 500 Index Admiral (VFIAX)We expect to spend about $90,000 a year on living and travel, plus about $25,000 a year for health insurance until we're on Medicare. We don't know how to estimate our taxes once we're living off these accounts. How much tax should we expect, and do we have enough to retire?
That link pastes the post into Ignigrade's chat. Ignigrade reads the list of funds and sets up a plan: each account with its balance, cost basis and owner, married filing jointly, and Colorado's 4.4% state tax. It maps each fund to the asset class it tracks:
| Fund | Modeled as |
|---|---|
| VFIAX | S&P 500 |
| VSMAX | U.S. small-cap stocks |
| VUSTX | Long-term U.S. Treasury bonds |
| VWETX | Corporate bonds |
| VMFXX | 3-month Treasury bills |
To keep the mix they have, it makes their current allocation the target: 61% S&P 500, 12% small caps, 17% Treasury bonds, 8% corporate bonds and 2% T-bills. Every year it rebalances toward that target inside the 401(k), the IRA and the Roths, where trades aren't taxed. In the taxable account it only sells what it needs for spending, so it doesn't realize gains just to rebalance. For spending, it uses $115,000 a year until they turn 65, then $90,000 once Medicare replaces their private health insurance. Ignigrade adds Medicare premiums from 65 on, and it calculates taxes itself and adds them on top of the spending.
Then it runs that plan starting in every year from 1928 on that has enough history after it. Ignigrade chose a 45-year horizon, to age 95, which gives 54 starting years, 1928 through 1981.
Yes, with plenty of room to spare. At $115,000 a year (before taxes), none of the 54 historical retirements ran out of money. That's a withdrawal rate of 2.6%, well below the 4% rule of thumb, and it drops further when health insurance ends at 65.
| Their plan | |
|---|---|
| Starting years that ran out of money | 0 of 54 |
| Balance after 45 years, worst start (1937) | $11.7 million |
| Lowest balance in any start year (1969) | $2.0 million, in 1981 |
| Balance after 45 years, average | $37.3 million |
Ignigrade's answer. The chart shows the plan's average wealth (solid line) and the range across every starting year (shaded), in today's dollars.
All figures are in today's dollars. The two hardest starting years were hard in different ways:
Either one would be frightening to live through, but even at its lowest point, the portfolio still held more than 17 years of spending.
How much could they spend? We raised their spending, by the same amount before and after 65, until history started to fail. With $40,000 a year more, $155,000 before Medicare and $130,000 after, none of the 54 starting years ran out of money, though the 1969 retiree finished with only about $1.0 million. With $45,000 more, the 1969 retiree ran out of money at 92. Their planned spending is well below that limit, so they have room for more travel, unexpected expenses, or a decade worse than any in history.
This is the part the couple didn't know how to estimate. Ignigrade estimates it year by year: it taxes the dividends and interest their taxable account pays, the capital gains when it sells shares to fund spending, and, later, withdrawals from the pre-tax accounts, using federal brackets for a married couple plus Colorado's 4.4%. To see the tax for every year of the plan, click Show Table below the chart in Ignigrade.
Until 75, taxes are modest. Ignigrade spends from the taxable account first, as most forum regulars would recommend. Selling index funds you've held for years triggers only long-term capital gains, and only on part of each sale, since more than half of their stock funds' value is cost basis. A married couple pays 0% federal on those gains up to a fairly high income. In the first year of retirement, the tax came to between $14,000 and $33,000 depending on the starting year, mostly because dividend yields were much higher in some eras. In the starting years with yields closest to today's, it was $14,000 to $17,000.
At 75, taxes jump. That's when required minimum distributions (RMDs) begin for anyone born in 1960 or later. By then, their $1.6 million in pre-tax accounts has had 25 years to grow untouched, and the IRS requires them to withdraw a fixed share of it every year and pay ordinary income tax on it, whether they need the money or not. Across starting years, the median first RMD is about $462,000, with about $179,000 of tax that year (in that year's dollars). Roth conversions in their low-tax years before 75 could shrink that bill, and Ignigrade can model different conversion schedules to help them decide how much to convert and when.
On a forum, the replies to a post like this would likely reach the same conclusion: at a withdrawal rate under 3%, you're fine. What Ignigrade adds is the specifics:
We see Ignigrade as something to bring to a forum thread, not a replacement for it. Run your plan and post the numbers, and the replies can focus on judgment calls instead of arithmetic.
To turn the post into a plan, a few things had to be simplified or assumed:
If you click the link above, Ignigrade sets the plan up from the post itself. The chat's model can make slightly different choices from one run to the next, so your numbers may differ a little from ours, and you can correct any choice in the chat or in the plan editor.
Have your own "Retirement Advice Requested" post drafted? Paste it into Ignigrade. Then ask the follow-ups a forum would: what if we retire two years later, spend $20,000 more, hold 60% stocks, or convert some of it to Roth? Each one is a new scenario, run against the same history.
If there's a question you'd like us to write about, use the feedback button in the app. We read every one.