The question sometimes arises: Why is MaxiFi starting my retirement withdrawals at age 65?
First of all, the start age for withdrawals simply defaults to age 65, but this can be changed in Settings & Assumptions > Retirement Accounts > Smooth Withdrawal Start Age.
Note that it says "smooth withdrawal." MaxiFi would have you distinguish between "smooth withdrawals" and "RMD." The RMD refers to withdrawal amounts "required" by the IRS starting at age 72 and, thus, any withdrawal you see in MaxiFi before age 72 is, by definition, not an RMD.
The smooth withdrawals are MaxiFi's calculated dollar amount--given the current balance, rate of return, and years remaining in the plan--to withdraw every dollar by the end of the plan. It does so "safely" if you are using the safe assumptions of a near 0% "real" rate of return (e.g., 2.25% inflation and 2.25% rate of return) and removing longevity risk by not using "average age" or "family history age" of death but rather the outside possibility of how long you could possibly live.
Typically the "smooth withdrawals" are a higher dollar amount than RMD since RMD is required "minimum" withdrawal and will, by design. leave some of your assets in the estate or passed on to your survivor in the plan if you die before your partner (at which point those dollars will follow his or her percentage spending settings). Indeed, some users wish to take RMD only and leave the balance of non-required retirement withdrawals in estate. To accomplish this, one can set the "percent of non-annuitized assets to spend" to 0% and this will cause MaxiFi to take RMD only since the IRS will not allow you to withdraw (or spend) 0% of non-Roth assets. This setting is also in Settings & Assumptions > Retirement Accounts >
- If you have the percent of non-annuitized assets to spend set to 100% (the default) and the age of first smooth withdraw set to 65 (the default), you may see for example smooth, safe withdrawal amount of, for example, $24,123 each and every year through to the end of the plan.
- If you next change the percent of non-annuitized assets to spend to 0%, you will see that your withdrawal amounts at 65 through 71 go to $0 since there is no RMD before age 72 and MaxiFi is trying to spend 0% of non-annuitized assets. Then at age 72, you'd see the first RMD, at 73, the next RMD, etc. and these will not be "smooth" but rather recalculated each year based on the Uniform Life Table the IRS uses to calculate RMD.
- If you leave the percent of non-annuitized assets to spend at 100% but set your age of first smooth withdrawal to age 85 then in this case you would see RMD withdrawals from age 72-84 and then the balance liquidated as smooth withdrawals from 85-100 (or the end of the plan). If your plan goes out to age 100 (default) and you set your first smooth withdrawal to age 95, you will see RMD from 72-94 and then the entire remaining balance removed smoothly from 95-100. (not what most people would want).