Welcome to ETFMathGuy, a site for investors interested in tax-efficient investing with ETFs

What is ETFMathGuy?

ETFMathGuy LLC is a subscription-based education service created by James A. “Jim” DiLellio, Ph.D., MBA. On this site, will find insights on a variety of topics for individual investors and financial advisors.

  • An interactive retirement calculator that plans for tax-efficient asset decumulation in retirement, which includes income and capital gains tax forecasts
  • An interactive pre-retirement savings forecast to estimate what your account values may be at retirement.
  • Periodic commentary on ETFs, taxes, the economy, and alternative investments like cryptocurrency.

How much is ETFMathGuy?

The majority of our content is completely free. So, we hope you find this content educational!

Periodic Newsletter

To subscribe to our periodic newsletter, just add your name and email to the slide-in screen when you first visit our website. You will then receive all blog posts automatically via email. Alternatively, you can just add your name and email address to the form below.

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Interactive Calculator

Our interactive retirement calculator offers free, registered, and registered+subscribed access. So, here is a summary of what each user offers.

Guest users: Based on your input, this calculator will forecast a current or future retiree’s (and their spouse or domestic partner’s) portfolio sustainability using the Common Rule for account drawdowns. Consequently, our software provides either expected portfolio longevity or inheritance based on your inputs.

Registered users: By registering with us, you can save profile data to expedite future calculations. Interested? If so, you can register for free here.

Registered + Subscribed users: For this option, you will also have the ability to identify an improved retirement income strategy that uses either a Modified Common Rule or an Optimal Rule for account drawdowns. The table below summarizes the features of each of these options.

Interactive calculators by ETFMathGuy, feature list

What questions can this calculator help to answer?

With this application, you will be able to answer fundamental questions about your retirement.

  • How long will my portfolio support my annual after-tax retirement income needs, such as discretionary and non-discretionary expenses?
  • If I have sufficient or excessive retirement funds, how much will my heir or favorite charitable organization receive?
  • What will my future tax liabilities look like, such as from income and capital gains?

Watch my webinar on this interactive calculator

Financial Experts Webinar hosted me as a presenter on March 1, 2022

Additional Resources from this webinar

This webinar contained several useful additional resources. For example, you can download the presentation and my latest whitepaper. Also, you can access the detailed reports presented for Case Study #1  and Case Study #2.

What other features can this application provide?

The calculator provides a significant amount of information to consider when planning for retirement income.

  • Identifies a withdrawal plan that differs from the Common Rule to optimize your heir’s inheritance, such as when tax-deferred accounts should be used earlier.
  • Uses current tax brackets for either single or married filing jointly, including the possibility of a surviving spouse.
  • Supports increasing or decreasing taxes in the future, such as at the expiration of the TCJA after 2025.
  • Reports potential bequest to an heir in current year dollars.
  • Provides an option for your heir(s) to value the stretch provision in their inherited IRA, based on the SECURE Act, signed into law in late 2019.
  • Reinvests excess retirement income due to Required Minimum Distributions (RMDs).
  • Calculates taxation for both ordinary income and capital gains.
  • Imposes RMD requirements consistent with your age and the SECURE Act, so that either age 70.5 or 72 applies.
  • Provides options for starting balances on tax-deferred accounts (e.g. IRA, 401(k)) and tax-exempt accounts (e.g. Roth IRAs)
  • Provides options to delay social security benefits and pension benefits.
  • Want to hear more? If so, please check out our instructions for use and our retirement calculator FAQ.

My Published Research on Tax-Efficient Retirement

Over the last 10 years, I’ve published several articles on tax-efficient retirement income strategies. So, please contact us if you would like a personal copy of any of these articles.

Seeking tax alpha in retirement income 
(with A. Simon)

We provide a framework to find an optimal decision for tax-efficient retirement income. By
developing a model for income and capital gains tax with stock and bond investments in taxdeferred,
tax-exempt, and taxable accounts, we identify three categories of retirees based on their
income needs and net worth. We propose and evaluate a simple heuristic to determine the optimal
retirement income strategy, quantifying a 0.5% annual return benefit. We call this benefit tax alpha
and show its robustness to varying model input parameters. We also suggest approaches for large
institutions or FinTech firms to improve their existing financial planning tools.

The Arithmetic of Roth Conversions (with E.  McQuarrie)

• Roth conversions continue to vex planners. To clarify matters, this paper submits conventional rules of thumb to a strictly arithmetic analysis.
• The treatment shows that it must be optimal to pay tax outside the conversion with cash, confirming one common rule. But if tax must be paid to raise the cash used to pay the conversion tax, there will be an initial loss on the conversion and a subsequent breakeven point. This paper shows how to determine time to break even.
• By the same arithmetic, the paper refutes the common rule that future tax rates must be higher for a conversion to pay off. Given enough time, conversions can overcome moderately lower future tax rates and still produce a substantial payoff due to the power of compounding.
• Most Roth conversions will show a substantial payoff if the client’s planning horizon stretches over decades; however, shorter time frames may produce only a minimal payoff or even a loss.
• The paper gives practical advice regarding the optimum time to convert, points in the tax structure that favor or disfavor conversion, and the clients most and least likely to receive a substantial payoff from conversion.

Optimal Strategies for Traditional versus Roth IRA/401(k) Consumption During Retirement
(with D. Ostrov)

We establish an algorithm that produces an optimal strategy for retirees to withdraw funds between their tax-deferred accounts (TDAs), like traditional IRA/401(k) accounts, and their Roth IRA/401(k) accounts, in the context of a financial model based on Amer- ican tax law. This optimal strategy follows a geometrically simple, intuitive approach that can be used to maximize the size of a retiree’s bequest to an heir or, alternatively, to maximize a retiree’s portfolio longevity. We give examples where retirees following the approach currently implemented by major investment firms, like Fidelity and Vanguard, will reduce their bequests by approximately 10% or lose 18 months of portfolio longevity compared to our optimal approach. Further, our strategy and algorithm can be extended to many cases where the retiree has additional, known yearly sources of money, such as income from part-time work, taxable investment accounts, and Social Se- curity. 

Toward constructing tax efficient withdrawal strategies for retirees with traditional 401(k)/IRAs, Roth 401(k)/IRAs, and taxable accounts
(with D. Ostrov)

We construct an algorithm for U.S. retirees that computes individualized tax efficient annual withdrawals from tax-deferred, tax-exempt, and taxable accounts. Our algorithm applies a new approach using informa- tion from all years that generates an individualized strategy, in contrast to most previous approaches that chronologically generate a suboptimal strategy. Results equal or improve the chronological “naıve” withdrawal strategies advocated by many financial institutions, as well as the chronological “informed” strategies advanced by academics. Our approach allows us to determine the optimal switching times between tax-exempt and taxable account consumption, as well as between tax-deferred and taxable account consumption. It also allows us to understand the significant impact of an heir’s tax and withdrawal rate on a retiree’s optimal withdrawal strategy. Our model, which can work to optimize either portfolio longevity or the bequest to an heir, accommodates many salient tax code features, including dividends, different taxable lots, and required minimum distributions.

The SECURE Act and your retirement objectives 
(with M. Kinsman)

On December 20, 2019, the SECURE (Setting Every Community Up for Retirement Enhancement) Act became law after broad bi-partisan Congressional support. SECURE changed many aspects of retirement accounts, benefitting some areas and harming others. Among the benefits are an expansion of the ability to contribute to IRAs and an increase in the age at which the first Required Minimum Distribution (RMD) must be taken. On the other side of the coin, the law shortens the timeframe for heirs to take distributions from their inherited Individual Retirement Accounts (IRAs).  This article summarizes how prescriptive analytics techniques are used in practice by retirees to maximize retirement portfolio longevity. The authors then contribute to this applied research by assessing how the SECURE Act affects the value of a retiree’s bequest.

DiLellio and Kinsman (2020) “The SECURE Act and your retirement objectives“, The Graziadio Business Review 23(2).

Optimal decisions under price dynamics for Roth conversions
(with P. Goldfeder and E. McQuarrie)

Retirees are faced with a variety of choices during their working and retirement years on how to best support their retirement lifestyle and estate planning goals. One of these choices is the option to convert a portion of their pretax savings from a tax-deferred account (TDA) into a tax-exempt Roth account. In this article, we quantify the Roth conversion payoff and when/how it depends on investment returns. We show that, while the use of taxable account assets may produce a larger payoff than early withdrawals from the Roth IRA, large unrealized taxable account gains and estate plans may change this calculus. Our work provides a recommendation on how current dividends or cash versus appreciated assets should be used to optimize Roth conversion payoffs, and informs FinTech companies and robo-advisors on how to best support this important option for millions of current and future retirees.

ETFMathGuy is a subscription-based education service for investors interested in using commission-free ETFs in efficient portfolios.
ETFMathGuy is a subscription-based education service for investors interested in tax-efficient investing with ETFs

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