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The basics
If the plan needs $40,000 to spend, a $40,000 taxable withdrawal may be too small. The withdrawal creates tax, which creates a slightly larger gap, which can require a larger withdrawal.
Illustrative numbers
A flat-rate intuition—not the engine’s shortcut
Net cash needed$40,000
Illustrative tax rate20%
Gross withdrawal$50,000
$50,000 less $10,000 tax leaves $40,000. The actual engine does not assume a flat 20%: it repeatedly reprices the connected tax worksheet until the net need is met.
Calculation transparency
How it works in MoneyWhatIf
- 01
Each candidate source is priced against the year’s existing federal, state, applicable local, gains, Social Security, NIIT, state retirement-exemption, and penalty context.
- 02
The solve is capped by the source’s actual balance and respects account tax character and owner eligibility.
- 03
If one source is exhausted, the remaining net gap passes to the next saved tier.
Keep in mind
Model limits
The answer is only as complete as the taxes and exceptions represented in the annual tax worksheet.
Withholding is not the cost; the model estimates annual liability created by the withdrawal.
A gross-up can cross bracket or surcharge thresholds, so a simple rate division is illustrative only.
This explanation documents the planning model. It is educational, not individualized tax, legal, Medicare, or investment advice.
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The words behind it
Related financial terms
Plain-English definitions, with 2026 figures and worked examples, from the financial terms glossary.