I am wanting to determine the optimal withdrawal strategy each year, with a target legacy amount of $0. When I specify that I want the legacy amount to be $0, the software assumes that I want to increase expenses by the same amount each year, but that's not my goal. Is there a way of getting the software to assess each year individually (including the tax bracket, the available room to top up the tax bracket, tax implications of RRIF RMDs, OAS clawback, etc per year) to then recommend how many extra dollars would most optimally be spent each individual year in order to be most tax efficient and achieve the legacy goal of $0?
The Withdrawal Optimizer does not optimize expenses, only withdrawals. It maximizes the Legacy doing just what you describe (see https://www.moneyreadyapp.ca/blog/post/8 for details). If we were to allow it to optimize expenses, it would set them to 0 in all years! We can only optimize withdrawals given a known level of consumption, and in all years since it optimizes over your whole retirement.
The approach to take is to first use the Choose your Legacy tool to determine the spending level that gets you close to what you want in terms of legacy. That algorithm also considers taxes, clawbacks and RMDs in every year (see https://www.moneyreadyapp.ca/blog/post/10 although I don’t go into quite as much detail in that post ). It does not assume the amount to increase/decrease expenses will be the same every year, so you may see jumps up and down in the suggested expenses depending upon the scenario. It does try to minimize the number of times you would need to change the spending to make it easier for you to plan, but it will change it if it has to, particularly to avoid running out of money in any year. For example it might be financially advantageous even after tax to not spend a dime until the day you die and spend it all then, but that would not be a very useful plan.
The Choose your Legacy tool does not optimize the account withdrawals, it just uses your set strategy given your PRIORITIES and AUTOMATIC deposits/withdrawals.
Use the Withdrawal Optimizer as a second step to optimize the withdrawal strategy that meets that level of consumption suggested. If that gives you a much higher legacy, then use those results to check them against the results with your set strategy (your PRIORITIES and AUTOMATIC deposits/withdrawals) to see if you can improve it. It’s best to understand what the plan is doing, and if you can match the Withdrawal Optimizer, then you can be confident your plan is optimal.
Those two tools are sophisticated and work well, and their combination is powerful. I’m always looking for better optimization algorithms,