Retirement Account Scenarios

Direct Answer

Retirement account scenarios analyze the tax and financial consequences of specific decisions and events within tax-advantaged accounts. The scenarios cover situations where account structure interacts with market conditions (sequence of returns risk during drawdown), tax law (Roth conversions, RMD timing), and life events (inheriting an IRA, early withdrawal for an exception). Understanding the mechanics before the event occurs is the difference between a planned outcome and an avoidable penalty.

Common questions

What is the 10-year rule for inherited IRAs?

The SECURE Act of 2019 eliminated the stretch IRA for most non-spouse beneficiaries, replacing it with a 10-year rule: inherited IRA funds must be fully distributed within 10 years of the original owner's death. The IRS subsequently clarified (in Proposed Regulations published in 2022) that if the original owner had already begun required minimum distributions, the beneficiary must also take annual RMDs in years 1 through 9, with the remaining balance fully distributed in year 10. Beneficiaries who are spouses, minor children, disabled, chronically ill, or within 10 years of the original owner's age have different rules.

When does a Roth IRA conversion make sense?

A Roth conversion pays income tax now in exchange for tax-free growth and withdrawals later. It makes the most sense when current income is temporarily low (a gap year, early retirement before Social Security, a business loss year), when the converted amount would be taxed at a lower rate than future withdrawals are expected to be, or when the investor has cash outside the retirement account to pay the tax without reducing the converted amount. Converting in a year when a market decline has lowered account values also means converting fewer dollars for the same economic exposure.

Every guide in this section

35 guides in this section.

All guides

• 401(k) When a Roth Conversion Is Followed by a Market Drop?

  Stocks fell 10% or more within the next 12 months in 12% of the 12-month windows since 1871 and 20% or more in 5%, and a Roth conversion is taxed on the value.

• 401(k) When Inflation Rises During Retirement?

  Across every month someone could have retired since 1871 (1509 thirty-year periods), a retiree who took 4% of the starting balance a year.

• 401(k) When Interest Rates Fall During Retirement?

  Across every month someone could have retired since 1871 (1509 thirty-year periods), a retiree who took 4% of the starting balance a year.

• 401(k) When Interest Rates Rise During Retirement?

  Across every month someone could have retired since 1871 (1509 thirty-year periods), a retiree who took 4% of the starting balance a year.

• 401(k) When Required Minimum Distributions Rise?

  The IRS Uniform Lifetime Table sets a required minimum distribution as the prior year-end balance divided by a life-expectancy factor.

• 401(k) When the Market Crashes Right After Retirement?

  Across every month someone could have retired since 1871 (1509 thirty-year periods), a retiree who took 4% of the starting balance a year.

• 401(k) When the Market Falls Before Retirement?

  Across every month someone could have retired since 1871 (1509 thirty-year periods), a retiree who took 4% of the starting balance a year.

• 401(k) When Withdrawals Continue Through a Bear Market?

  Across every month someone could have retired since 1871 (1509 thirty-year periods), a retiree who took 4% of the starting balance a year.

• 529 Plan When a 529 Plan Falls Just Before College?

  A 529 plan that falls just before college leaves less money for tuition at the moment it is needed, because there is no time to recover.

• Household Portfolio When Taxable

  A household that holds the same investment in taxable and IRA accounts has the same market risk in both but different tax outcomes.

• HSA When an HSA Is Invested Aggressively?

  A health savings account invested aggressively can grow more over decades than one held in cash, but it can also lose value just when medical expenses arise.

• Retirement Portfolio When a Roth Conversion Is Followed by a Market Drop?

  Stocks fell 10% or more within the next 12 months in 12% of the 12-month windows since 1871 and 20% or more in 5%, and a Roth conversion is taxed on the value.

• Retirement Portfolio When Inflation Rises During Retirement?

  Across every month someone could have retired since 1871 (1509 thirty-year periods), a retiree who took 4% of the starting balance a year.

• Retirement Portfolio When Interest Rates Fall During Retirement?

  Across every month someone could have retired since 1871 (1509 thirty-year periods), a retiree who took 4% of the starting balance a year.

• Retirement Portfolio When Interest Rates Rise During Retirement?

  Across every month someone could have retired since 1871 (1509 thirty-year periods), a retiree who took 4% of the starting balance a year.

• Retirement Portfolio When Required Minimum Distributions Rise?

  The IRS Uniform Lifetime Table sets a required minimum distribution as the prior year-end balance divided by a life-expectancy factor.

• Retirement Portfolio When the Market Crashes Right After Retirement?

  Across every month someone could have retired since 1871 (1509 thirty-year periods), a retiree who took 4% of the starting balance a year.

• Retirement Portfolio When the Market Falls Before Retirement?

  Across every month someone could have retired since 1871 (1509 thirty-year periods), a retiree who took 4% of the starting balance a year.

• Retirement Portfolio When Withdrawals Continue Through a Bear Market?

  Across every month someone could have retired since 1871 (1509 thirty-year periods), a retiree who took 4% of the starting balance a year.

• Roth IRA When a Roth Conversion Is Followed by a Market Drop?

  Stocks fell 10% or more within the next 12 months in 12% of the 12-month windows since 1871 and 20% or more in 5%, and a Roth conversion is taxed on the value.

• Roth IRA When Inflation Rises During Retirement?

  Across every month someone could have retired since 1871 (1509 thirty-year periods), a retiree who took 4% of the starting balance a year.

• Roth IRA When Interest Rates Fall During Retirement?

  Across every month someone could have retired since 1871 (1509 thirty-year periods), a retiree who took 4% of the starting balance a year.

• Roth IRA When Interest Rates Rise During Retirement?

  Across every month someone could have retired since 1871 (1509 thirty-year periods), a retiree who took 4% of the starting balance a year.

• Roth IRA When Required Minimum Distributions Rise?

  A Roth IRA has no required minimum distributions during the original owner's lifetime, so the schedule below applies to the pre-tax accounts that usually sit.

• Roth IRA When the Market Crashes Right After Retirement?

  Across every month someone could have retired since 1871 (1509 thirty-year periods), a retiree who took 4% of the starting balance a year.

• Roth IRA When the Market Falls Before Retirement?

  Across every month someone could have retired since 1871 (1509 thirty-year periods), a retiree who took 4% of the starting balance a year.

• Roth IRA When Withdrawals Continue Through a Bear Market?

  Across every month someone could have retired since 1871 (1509 thirty-year periods), a retiree who took 4% of the starting balance a year.

• Traditional IRA When a Roth Conversion Is Followed by a Market Drop?

  Stocks fell 10% or more within the next 12 months in 12% of the 12-month windows since 1871 and 20% or more in 5%, and a Roth conversion is taxed on the value.

• Traditional IRA When Inflation Rises During Retirement?

  Across every month someone could have retired since 1871 (1509 thirty-year periods), a retiree who took 4% of the starting balance a year.

• Traditional IRA When Interest Rates Fall During Retirement?

  Across every month someone could have retired since 1871 (1509 thirty-year periods), a retiree who took 4% of the starting balance a year.

• Traditional IRA When Interest Rates Rise During Retirement?

  Across every month someone could have retired since 1871 (1509 thirty-year periods), a retiree who took 4% of the starting balance a year.

• Traditional IRA When Required Minimum Distributions Rise?

  The IRS Uniform Lifetime Table sets a required minimum distribution as the prior year-end balance divided by a life-expectancy factor.

• Traditional IRA When the Market Crashes Right After Retirement?

  Across every month someone could have retired since 1871 (1509 thirty-year periods), a retiree who took 4% of the starting balance a year.

• Traditional IRA When the Market Falls Before Retirement?

  Across every month someone could have retired since 1871 (1509 thirty-year periods), a retiree who took 4% of the starting balance a year.

• Traditional IRA When Withdrawals Continue Through a Bear Market?

  Across every month someone could have retired since 1871 (1509 thirty-year periods), a retiree who took 4% of the starting balance a year.