My analysis revealed some interesting things. In order to create the tables I needed specific RMD data
The graphs look like this
20 years of actual side by side yearly data for the 2 conditions looks like this
The side by side of the taxes was 338K vs 94K, so I paid myself about 225K across 20 years to optimize.
Here is a kicker
This is the above RMD schedule for the 2 versions according to WR. Notice how the WR increases every year forcing more to be extracted and greater taxes to be paid. You essentially loose control of the WR. The smaller account does the same thing but it’s a smaller % of the total monthly WR allowing you to actually control the WR for longer. If you planned around a 4% WR by year 5 you’re already at 4.1%. That’s how the extra taxes are generated. If you planned a 3% WR you already start at 3.5%.
You can see even to year 20 the 6% chart just starts to loose steam. You still have more money than when you started and you lived a good life off the proceeds. In the lower yield smaller IRA case you consumed 37% of the asset but still have 2/3 left. Volatility for the small TIRA is lower. All of this analysis therefore may be moot for you. If you have 1.5M to start you may just decide to let it RMD and pay the taxes. You die well off with more money than when you started at the mercy of the government RMD and progressive tax structure. What comes out will pay for you and partially for someone else, a kind of forced charitable giving. You will experience greater volatility in case #1 than case #2, but either way there is money to pass along. In case 2 the excess 1M stays in your control to be spent when and where and in an amount you like.
For many the hassle may outweigh the benefit. For me I’m getting paid to enjoy the hassle, paid by tax savings and freedom to control my income. I guess you could call this my side “frugality” gig. By setting up and following through the side gig pays me back year over year with no added work. By parsing out the future you gain a lot of insight into how to get there. You gain insight into the security you really possess because the plan is tailored to your resources. You can let go of the past and the W2 income and move into the future of passive income with confidence.