We believe financial software should be a glass box, not a black box. Below is the exact step-by-step logic, sequence of operations, and standardized proxy assumptions our engine uses to simulate your retirement legacy.
The calculator runs a yearly loop starting in 2026. It stops running when the primary user (if single) or the last surviving spouse (if joint) reaches their inputted Life Expectancy, capping at a maximum of 100 years. Each year (t), the tool establishes three compound multipliers based on your market inputs:
Before any conversions take place, the tool calculates your baseline financial footprint for the year. It actively compares the age-adjusted Standard Deduction against your custom Itemized Deductions (inflated annually), and automatically applies whichever gives you the greater tax break.
If a user has reached their SS Start Age, their benefit is added to the pool. If one spouse passes away, the tool automatically drops the lower benefit and retains the higher one (Survivor Step-Up). The tool assumes a simplified fixed 85% taxability on all Social Security benefits.
RMDs are triggered at age 73 (if born before 1960) or age 75 (if born 1960 or later). RMDs are calculated dynamically using the 2022 IRS Uniform Lifetime Table (Table III). Furthermore, if you file Jointly and your spouse is strictly more than 10 years younger than you, the engine automatically shifts to an actuarial approximation of the Joint Life and Last Survivor Expectancy Table (Table II), minimizing your required distributions in accordance with IRS rules.
Having a $0 MAGI does not mean you are living on $0—it simply means your living expenses are being funded by non-taxable sources. The tool explicitly models real-world cash flow and the tax consequences of funding your lifestyle from a taxable brokerage account.
If you select a target bracket, the tool calculates how much "room" is left between your Baseline MAGI (now including capital gains) and the ceiling of your chosen tax bracket.
Smooth Depletion: If you select the "Smooth Depletion" algorithm, the tool ignores static bracket ceilings. Instead, it divides your remaining pre-tax IRA balance by the exact number of years remaining until your RMDs begin. This spreads your tax liability perfectly evenly across your early retirement runway.
ACA Subsidy Protection: If enabled, the tool actively checks if anyone in the household is under the age of 65. If true, it establishes a secondary ceiling at 400% of the Federal Poverty Level (using a conservative base proxy of $15,060 for a single individual plus $5,380 per additional member, indexed to inflation). The tool will aggressively restrict the conversion amount to ensure your final MAGI does not cross the 400% FPL cliff.
Medicare Part B/D premium surcharges (IRMAA) are calculated with a strict 2-Year Lookback. The tool checks your simulated MAGI from two years prior. If it exceeded the inflated cliff threshold ($218k Joint / $109k Single base), a penalty proxy is applied ($2,300 Joint / $1,150 Single).
The Tax Column in the results table is a blended master total. It includes your Progressive Marginal Income Tax + Long-Term Capital Gains Tax + NIIT. Note: If you select "Brokerage (10% STCG Drag)" as your tax payment source, the engine applies a 10% penalty directly to the conversion tax cost to simulate state taxes or short-term gains drag.
If your living expenses completely drain your Outside Cash/Brokerage account, the engine initiates Shortfall Logic to keep you afloat. First, it will drain your existing Roth IRA balance. If your Roth reaches $0, the engine is forced to execute an emergency, unplanned withdrawal from your Pre-Tax IRA. To accurately simulate the severe tax drag and potential early withdrawal penalties of unplanned IRA distributions, the tool grosses up these emergency distributions by 25%.
When the loop concludes at life expectancy, the tool calculates the "Final Legacy Wealth" (the After-Tax value passed to heirs). It sums the tax-free Roth and Cash, and assumes a flat 25% inheritance tax cut on remaining pre-tax IRA funds.