As an alternative plot metric to Net Worth: This metric would show your Net Worth after all taxes paid from liquidating everything, sales costs (for homes), and debts paid. It could also include early withdrawal penalties if applicable.
aka Nuclear scenario :D
A new use case for this metric arose in our discussion of Roth Conversions. Bug Out Net Worth would perhaps be the ideal metric to optimize for, when planning Roth Conversions for folks who intend to leave their money to their heirs.
+1. Simple is probably good, especially given different tax jurisdictions. But there may be three aspects - the rate of income tax (flat rate, progressive tax rates in final year); any tax-free allowance (nil, user set amount); and the population of assets impacted (tax-deferred, taxable, …)
Very important metric to compare two plans. One with tax-deferred balance and other with roth balance
I’d really like to see the post-tax net worth. It will help to determine whether a Roth conversion is worth it.
Love this
This is an essential metric in my opinion. Without adjusting tax deferred accounts for taxes, you cannot make a meaningful economic comparison of alternative scenarios. You cannot add a dollar of Roth account to a dollar of pre-tax IRA account. Like different currencies, you need to adjust to a common basis (i.e., after tax) to analyze results. Today, users should be manually making this adjustment to every projection to infer the optimal strategy. This should be automated. Hope to see this added to PL very soon!
I think the right metric for evaluating a Roth conversion strategy against anything else is the present value of all withdrawals (after taxes) that are spent (i.e., not reinvested) and the after-tax inheritance.
I don’t think you should ignore in-plan spending when evaluating a strategy.
Totally agree. Unless you are spending your last penny yourself. $100 left in a Roth IRA is worth more than $100 left in a regular IRA. The $100 left in the roth is worth more than $100 in a taxable account even because of the present value of the untaxed dividends and appreciation you get before it is fully distributed. Would be nice to somehow see this number as well, although I a not sure how you would weight them all. Maybe it could be simplified by inputing a tax rate applicable to your estate beneficiaries and applying 1 minus that to the IRA. I think that’s how some other financial planning software does it.