Financial Services Review | 2010
Authors:
DOI: 10.61190/fsr.v19i1.4964
Journal: Financial Services Review
Year: 2010
Publisher: Academy of Financial Services
Document Type: Article
Open Access: All Open Access; Gold Open Access
Cited by: 1
This paper demonstrates how to correctly model withdrawals from a taxable account. The presented framework is largely generalized as it accommodates for varying rates of return, changing tax rates, different time periods, flexible withdrawal amounts, inflation, cost basis, and level of capital gains annual distribution. Closed-form solutions for special cases of constant rate of return, constant annual after-tax withdrawal, constant tax rates and constant share of distributed capital gains as well as the inflation-adjusted after-tax withdrawal are derived and supplemented by illustrative examples. The results have broad applications for the research in financial planning whenever modeling of the withdrawal phase has to be incorporated into the analysis. © 2010 Academy of Financial Services. All rights reserved.
After-tax value; Annuitization; Taxable equity account; Withdrawal