IRA

This is the first year of one of your IRA accounts.

Here we see your assets deployed to ensure a steady stream of payments throughout your retirement. Of the starting balance, a big chunk goes to S&P. The remainder goes to build a ladder of TIPS bonds. These will drop a tranche of cash every year sufficient to anchor the cash leg of your hedged payment.

In later years, listed transactions might include:

• Cash draws
• S&P draws
• Cash rollovers to Roth
• S&P rollovers to Roth

Charts

Three charts are shown. Swipe to view each in turn.

Account Assets

Yearly total account balances, with cash and S&P assets highlighted. The black line shows your required minimum distribution, or RMD.

Here we see we took our starting balance and bought some bonds and S&P. The bonds are exhausted in a few years. The total balance trends down under pressure from yearly draws and Roth roll-overs. By 2048 most of your assets are in your broker or Roth account.

Taxable Draws

Withdrawals from your IRA account. These numbers are taxed as ordinary income. There are two ways to draw from an IRA:

• A regular distribution is included in your expenses for the year.
• IRA assets can also be “rolled over” to your Roth account. Pay your taxes on the withdrawal when you roll over, and later withdraw them tax-free from the Roth account. Hedgematic uses this strategy to smooth your tax rates over the entire course of your retirement.

Withdrawals and rollovers from cash and S&P are shown separately.

Untaxed Earnings

These numbers are for information only and not entered on your tax return. Regretably, they all show up as ordinary income when they are eventually drawn or rolled.

We can see:

• Bond coupons in the first couple years.
• Diminishing S&P dividends as the position shrinks.
• Capital gains as S&P portion is rolled.