How exactly are taxes handled?
Before retirement, taxes are taken out of your income and the remainder is applied to the expenses you have specified. This is because before retirement, the simulator is calculating your asset growth and hopefully you are saving something each year and adding it to your assets. The situation changes when you reach retirement. Then the assumption is that you will probably start to draw down your assets. Now asset withdrawals are very complicated when you consider tax-advantaged and taxable investments, different asset allocations in each account, pre and post-tax contributions, minimum required distributions, etc. The approach taken here is that in retirement, you want to maintain a level of income. Yes, your net income will certainly be different based upon how you’ve invested but that is for you to work with your financial planner. To simulate all of that here would too much; it would provide maybe more precision but not likely more accuracy.
