A lot of what we do is plan for retirement by accumulating money. However, there’s some planning that goes into the decumulation phase too. And it’s where one of my favorite retirement planning calculators excels: the Optimal Retirement Planner  (ORP).
There’s a lot of advice floating around to access your taxable accounts first, then your tax deferred accounts, and finally your Roth IRA . But in reality, it can be better to focus on optimizing withdrawals and Roth conversions  to minimize taxes. That’s where the ORP comes in handy.
Optimal Retirement Planner
The planner doesn’t just calculate a final number like many other retirement calculators, it helps you plan how to access your retirement accounts in the best way possible broken down by year:
The Optimal Retirement Planner (ORP) is a retirement decision support system (RDSS) that optimally schedules retirement savings and withdrawals to maximize the amount of after-tax money available for spending throughout retirement.
ORP Inputs and Outputs
Inputs: Run the ORP with your typical retirement planner information (ages, account balances, pension income, social security benefits , annual retirement savings, age to retire) and other financial based questions. The input screen is quick to run through, if you have all of your information at your fingertips.
Outputs: The outputs are where I think the ORP is a unique retirement planner. Here’s a list of the output schedules by year:
- Contributions to retirement savings accounts
- Annual after-tax income
- Withdrawals from retirement savings accounts
- IRA to Roth IRA rollovers
- IRA to After-tax Account transfers
- Annual personal income tax bracket
- Annual retirement account balances.
I really like the ORP to get a good sense of planning each year of withdrawals like an overall roadmap. I’ve run some scenarios that suggest high Roth conversions in early years. This makes sense based on minimizing taxes over a lifetime, but obviously, you still need to make decisions about what to do with the data.
In addition, you really need to read through the explanations of the report  to understand not only the outputs, but what the model does and doesn’t do.
The ORP allows you to save your input parameters using cookies, but unless I’m missing something, there isn’t a good way to save all your information to revisit in the future, so I’d recommend dumping the data in excel when you’re done.
Much of the ORP strategy is based on maximizing the lower tax brackets in the current tax environment. Obviously, one of the drawbacks (like with most retirement calculators) is that the tax brackets  can, and likely will, change over time. Since the calculator doesn’t have a way to account for this, you also need to add a layer of common sense to the outputs and understand exactly what it’s suggesting and why.
If you haven’t given the Optimal Retirement Planner  a try yet, it’s one of the retirement calculators that you might want to run your numbers through to see what it says. I’d be interested to hear what kind of strategy it recommends for drawing down your nest egg.
Have you used the Optimal Retirement Planner? What are your thoughts?
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