Taxes & RMDs

What the tax model does

By default the forecast ignores income tax, which keeps things simple but paints a slightly rosy picture — it pretends money pulled from a 401(k) or IRA arrives tax-free. Turning on the tax model fixes that. When it's on, each year the projection estimates the federal income tax you'd owe and treats it as an expense.

Specifically, it:

• Uses 2025 federal tax brackets and the standard deduction, including the extra deduction for being age 65 or older.
• Taxes your Social Security benefits realistically — anywhere from 0% to 85% of the benefit is taxable, depending on your other income, using the IRS provisional-income rules.
• Forces Required Minimum Distributions (RMDs) from your 401(k) and IRA accounts starting at age 73.
• Lets you choose a filing status and add an optional flat state tax rate.

See the glossary for RMD, provisional income, and filing status.

How to turn it on

Go to My Numbers → Profile & assumptions in the app and tick Model income taxes. Two more fields appear:

• Filing status — Single or Married filing jointly. (If you leave it, the app assumes married when you have a spouse, single otherwise.)
• State tax rate (optional) — a flat percentage applied to your taxable income. Leave it at 0 if you're in a no-income-tax state or want to keep it federal-only. This is a rough stand-in, not your state's real brackets.

Where you'll see it

Once on, open any month in the month detail and you'll find a new expense line, Income taxes (est.), alongside your other spending. That's the model's estimate of the tax you're paying that month.

Behind the scenes the app tallies up each calendar year's taxable income and spreads the resulting bill across the following year — a realistic roughly one-year lag, similar to how withholding and April settle-up work in real life.

It usually moves your run-out date earlier

Adding tax means more money leaving each year, so turning the model on typically pushes your run-out date earlier — sometimes by a few years. That's not the app being pessimistic; it's a more honest picture. Better to see the tax drag now, while you can still adjust the plan, than to be surprised later.

RMDs add to the effect: once you hit 73, the model forces a minimum withdrawal from each 401(k)/IRA every year (the money stays in your savings — it just moves to a taxable account and gets taxed), which can bump you into paying more tax even in years you didn't plan to draw.

Off by default — nothing changes silently

The tax model is off for existing plans, so switching it on is always your choice and never happens behind your back. If your plan already looked good tax-free, turn taxes on to pressure-test it; if the run-out date moves up, that's useful to know.

Simplifications (and why they're fine)

This is a good estimate, not a tax return. On purpose, it:

• Doesn't model capital-gains tax on brokerage accounts — those are treated as already taxed, which is slightly optimistic for large taxable accounts.
• Holds brackets and deductions flat rather than indexing them to inflation. Real brackets rise over time, so this is mildly conservative over long horizons — the two simplifications partly cancel out.
• Uses a single flat rate for state tax rather than real state brackets.

Not tax advice

The tax model is an educational estimate to help you plan — not tax advice, and not a substitute for a CPA or tax professional. Real tax law is far more detailed, and everyone's situation differs. Use these numbers to compare choices and spot problems, then confirm anything that matters with a qualified advisor.

What to do next

Set up your accounts so the model knows which withdrawals are taxable, then read the projection.