Understanding Your Income & Withdrawal Report

This page explains how to read the detailed spreadsheet report generated by The Best Third. The report shows your projected income, withdrawals, and taxes year by year.

A full explanation of the underlying methodology is available in the Methodology White Paper.

Key assumptions and interpretation

These are projections of future income, withdrawals, and taxes, not guarantees.
All dollar values are inflation-adjusted and expressed in today’s dollars.
Stock-related results are based on historical U.S. market returns, using a sequence corresponding to approximately the 20th percentile of historical outcomes.
Tax estimates reflect federal taxes only, based on current law (2026 rules), projected forward and adjusted for inflation. Future tax rules may differ.
The model uses simplifying assumptions and does not capture all real-world complexities of individual behavior, investment outcomes, or tax situations.

How to use this report

Start with TOTAL AFTER-TAX INCOME to understand your expected spending level each year.
Check that Base Income (after tax, standalone) meets your target for base spending. If it falls short, your target exceeds what your resources can support. Reduce the target or adjust inputs (e.g., retirement timing or assets).
Check Residual Income After Base to see how much additional income depends on market performance.

You do not need to understand every row to use the plan. This guide is for users who want to see exactly how the calculations work.

Row Label	Meaning
Year →	Calendar year of projection. Each column corresponds to one year.
Age (one such row for each member of the household)	The household member’s age on their birthday that year, used for RMDs, Social Security, and withdrawal eligibility.
SECTION 1 — INCOME & CASH FLOWS (PRE-TAX)
Non-Portfolio Income	Income not generated from investment accounts, including Social Security, pensions, and earnings.
Social Security (gross)	Total Social Security benefits received before tax, and before Medicare deductions. If a household member starts taking benefits mid-year, the number will represent the partial year’s benefits.
Pension / Annuity	Income from pensions or annuity payments, typically taxed as ordinary income.
Earnings & Other	Employment income or other miscellaneous income included in ordinary income.
Total Non-Portfolio Income	Sum of all non-investment income sources.
TIPS Ladder — Taxable Account	Cashflows from TIPS held in taxable accounts.
Principal Repayment (bond maturity)	Inflation-adjusted principal returned at maturity; not taxable because inflation accrual was already taxed.
Coupon Interest	Interest payments from TIPS, taxed as ordinary income.
Cash Withdrawal (prematurely liquidated TIPS from RMD)	In order to satisfy RMD requirements, some TIPS may be sold before maturity. The proceeds are held in reserves in the taxable account, to be withdrawn during the year that the liquidated TIPS would have matured. This row represents those withdrawals.
TIPS Ladder — Tax-Deferred (IRA / 401k)	Withdrawals from TIPS held in tax-deferred accounts, taxed as ordinary income
Principal Repayment (bond maturity)	TIPS principal withdrawn from tax-deferred accounts
Coupon Interest	Interest earned and withdrawn from tax-deferred accounts
↳ Not distributed — reinvested in stocks within account	When TIPS in a retirement account pay interest before the account owner is eligible to take a penalty-free withdrawal, those funds are invested in stocks within the same account.
TIPS Ladder — Tax-Exempt (Roth Accounts)	Withdrawals from TIPS held in tax-exempt accounts; exempt from tax
Principal Repayment (bond maturity)	TIPS principal withdrawn within tax-exempt accounts.
Coupon Interest	Interest earned and withdrawn from tax-exempt accounts
↳ Not distributed — reinvested in stocks within account	When TIPS in a retirement account pay interest before the account owner is eligible to take a penalty-free withdrawal, those funds are invested in stocks within the same account.
Total TIPS Cashflows (All Accounts)	Total cash withdrawn from all TIPS holdings across taxable, tax-deferred, and tax-exempt accounts.
Stock Index Fund Withdrawals	Withdrawals sourced from stock investments.
Taxable Account — Return of Basis (cost)	Portion of stock withdrawals representing return of principal; not taxable.
Taxable Account — Long-Term Capital Gain (Loss)	Realized capital gain or loss from stock sales; taxed at preferential rates.
Taxable Account — Qualified Dividends	Dividend income taxed at preferential rates. For modeling purposes, all stock dividend income is assumed to be qualified.
Tax-Deferred Account (IRA / 401k)	Withdrawals from tax-deferred accounts; fully taxed as ordinary income.
Tax-Exempt Account (Roth)	Withdrawals from tax-exempt accounts; not taxable.
Total Stock Withdrawals	Total withdrawals sourced from stocks across all accounts.
TOTAL CASH INFLOWS (PRE-TAX)	Total cash available before taxes from all sources: non-portfolio income, TIPS and stocks
SECTION 2 — TAXABLE INCOME CALCULATION
Ordinary Income Components	Income taxed at ordinary income rates.
Taxable Portion of Social Security	The portion of Social Security subject to taxation, which depends on total household income. The maximum taxable portion is 85%
Other Ordinary Income	Non-investment income subject to ordinary tax rates.
IRA / 401k Withdrawals	Withdrawals from tax-deferred accounts included in taxable income.
TIPS Coupon Interest (taxable accounts)	Interest from TIPS held in taxable accounts.
TIPS Phantom Income (taxable accounts)	Inflation adjustment to TIPS principal is taxed, even though it is not received as cash.
Total Ordinary Income (Gross)	Total income subject to ordinary income tax.
Preferentially-Taxed Income	Income taxed at long-term capital gains rates.
Capital Loss (Current Year + Carry Forward)	Capital losses applied against gains; may offset gains, a limited portion may offset ordinary income. This amount is always <= 0. The amount in excess of any offsets is carried forward to the following year.
Long-Term Capital Gain	Total realized capital gains. The model assumes that all capital gains are long-term
Qualified Dividends	Dividend income which is taxed at the same rate as long-term capital gains.
Deductions & Taxable Income	Summary of taxable income and deductions
Adjusted Gross Income (AGI)	Total income before deductions.
Standard Deduction (including eligible senior deductions)	IRS deduction used to reduce taxable income.
Taxable Ordinary Income (net of deduction)	Ordinary income subject to tax after deductions.
Taxable LTCG / Qualified Dividends	Capital gains and dividends subject to tax.
SECTION 3 — FEDERAL TAX DETAIL
Tax Components	Breakdown of total federal tax into its component parts.
Tax on Ordinary Income	Federal income tax applied to ordinary income using progressive tax brackets.
Payroll Taxes	Taxes on earned income for Social Security and Medicare, including self-employment tax, if applicable
Tax on LTCG / Qualified Dividends	Tax on long-term capital gains and qualified dividends using preferential tax rates.
Net Investment Income Tax (NIIT)	Additional tax on investment income above income thresholds.
IRMAA Medicare Premium Surcharge	Income-based increase in Medicare premiums based on modified adjusted gross income. IRMAA payments in a given year are based on income from two years prior. For modeling purposes, these are attributed as tax in the year corresponding to the income which determines the premium.
TOTAL FEDERAL TAXES	Total federal tax liability, equal to the sum of all tax components.
Tax Rates	Summary metrics describing the overall tax burden.
Marginal Tax Rate (Ordinary Income)	Tax rate applied to the next dollar of ordinary income; important for withdrawal decisions.
Marginal Tax Rate (Preferential Income)	Tax rate applied to additional capital gains or qualified dividends.
Average Effective Tax Rate (on Taxable Income)	Total tax divided by taxable income, measuring overall tax burden on taxable income.
Average Effective Tax Rate (on Total Cashflow)	Total tax divided by total cash inflows, a more intuitive measure for retirees.
SECTION 4 — PORTFOLIO MECHANICS
Stock Portfolio	Tracks the evolution of stock investments over time. Each “year” represents a modeled 12-month period of returns and withdrawals, rather than a calendar year.
Beginning-of-Year Market Value	Value of the stock portfolio at the end of the prior 12-month period
Annual Return (%)	Market return applied to the stock portfolio for the 12-month period, based on the selected historical scenario.
Stock Withdrawal (%)	Percentage of the stock portfolio withdrawn during each modeled year. For the first year in which withdrawals are planned, the withdrawal is applied proportionally if the withdrawal is planned to be mid-year.
Total Stock Withdrawals (All Accounts)	Total amount withdrawn from stocks across all account types during the period. Calculated as a percentage of the portfolio after applying returns, and includes both dividends and proceeds from sales.
End-of-Year Market Value	Stock portfolio value after applying returns and subtracting withdrawals. • If withdrawals begin in the future: the current year value equals today’s portfolio value. • If withdrawals begin during the current year: withdrawals prorated for the remaining months. • In the first withdrawal year: withdrawals reflect only the portion of the period after withdrawals begin. These timing details have minimal impact on long-term projections.
↳ Of which: investments in stock from undistributed TIPS interest	Portion of stock holdings originating from reinvested TIPS cashflows before withdrawals begin. These would be held in retirement accounts only.
TIPS Ladder — Remaining Market Value	Estimated remaining principal value of TIPS holdings (in current dollars). These estimates do not attempt to model changes in interest rates.
Taxable Account	TIPS remaining in taxable accounts.
↳ Of which: Reserved (from RMD-Forced Liquidation)	Portion of TIPS liquidated early to satisfy RMDs and held in reserve (e.g. CD or money market) , with withdrawals corresponding to the maturity dates of the liquidated bonds.
Tax-Deferred Account	TIPS remaining in IRA/401k accounts.
Roth Account	TIPS remaining in Roth accounts.
Total TIPS Market Value Remaining	Total remaining TIPS principal across all accounts.
Overall Portfolio	Combined view of all investment assets.
Total Portfolio Value	Total value of stocks and TIPS combined.
Asset Allocation (year-end %-age in stock)	Percentage of the portfolio allocated to stocks at the end of the year.
Legacy Reserve	The amount set aside in reserve to meet the legacy goal, i.e. the present value of the end-of-plan goal.
Reserve as % of Portfolio	The ratio of the Legacy Reserve to the Total Portfolio Value. (An approximate measure only, since the year’s reserve is determined before withdrawals and the total value is net of that years withdrawals).
SECTION 5 — REQUIRED MINIMUM DISTRIBUTIONS
One block of the following 3 rows for each person in the household	RMD calculations are shown separately for each individual in the household.
RMD Required Amount	Minimum distribution required by IRS rules based on age and account balances.
Total Tax-Deferred Withdrawals	Total withdrawals taken from tax-deferred accounts, which must meet or exceed the RMD.
↳ Of which: Future-Maturity TIPS Sold Early (face value liquidated)	TIPS sold before maturity to satisfy RMD requirements, with the proceeds held in reserve in the taxable account to be withdrawn when the sold TIPS would mature.
SECTION 6 — STRATEGY SUMMARY & TARGETS
Base Income Tracking	Tracks income intended to meet essential spending needs independent of market performance.
User Base Income Target (after-tax)	Minimum after-tax income goal specified by the user.
Base Income (after tax, standalone)	After-tax income produced from non-portfolio income sources and TIPS withdrawals only, evaluated in isolation without considering any stock holdings or stock-related taxes. This amount is designed to match the user’s targets. If the household does not have sufficient resources, it will fall short of the target.
Residual Income After Base (after tax)	Total After-Tax Income (below) minus Base Income (above). In most cases this value is positive and reflects income supported by stock investments (the variable “bonus” component). In some cases it may be negative when taxes associated with required minimum distributions (RMDs) reduce net income below the standalone base level. This occurs only when there are insufficient resources to meet the base income target.
TOTAL AFTER-TAX INCOME	Total income available from all sources after federal taxes, equal to the TOTAL CASH INFLOWS (PRE-TAX) row minus the TOTAL FEDERAL TAXES row.

Last updated May 10, 2026