SecondCor521
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Hi all,
I have a spreadsheet in which I attempt to predict and evaluate Roth conversions, RMDs, and IRMAA taxes.
Currently I have a spreadsheet which:
1. Goes from my current age (50) to 85 (end of my planning horizon).
2. Allows me to set my Roth conversions to anything I want each year.
3. Calculates my RMD from age 70.5 onward
4. Calculates my SS from age 70 onward.
5. Calculates my "rough" taxable income as "Conversions + RMD + 85% SS - Standard Deduction". (1, 2)
6. Calculates federal taxes and IRMAA taxes on my "rough" taxable income.
I don't use Excel, I use LibreOffice.
I'd like to ask LibreOffice's solver to tell me what the "best" series of Roth conversions are each year from 50 to 85 in order to minimize taxes. Basically, a poor man's I-ORP.
I have used I-ORP, and understand the principles on which it is based. But I can't see inside the calculations and so would like to replicate the results myself, however crudely.
I'm running into two problems.
First, I don't know how to define the goal properly. If I try to minimize taxes, then the solution is to obviously not Roth convert at all and do minimum RMD's. If I maximize spending, then the solution is to Roth convert a lot every year. If I maximize after tax spending, then I can do that but then I am ignoring the age 85 remaining tIRA balance, which it feels like I should account for somehow.
Currently what seems to be working somewhat is to calculate my effective tax rate each year as (income tax + IRMAA tax) / "rough" taxable income. I can then average those over the entire 50 to 85 period. Then I play around and try to minimize that number. So far the lowest I can get that is a bit under 20%, which seems pretty good.
Second problem is that if I try to use LibreOffice to solve for it the way I want to, it claims my model isn't linear and quits. I've googled that and the remedy I saw there isn't working for me.
Any thoughts or advice on either of these two problems would be great.
Thanks.
...
This year I think I'm probably going to kick the can down the road. I have a kid in an expensive college and he's getting financial aid, so I have a FAFSA cliff at an AGI of $49,999 for this year and next that it would be nice to be under.
So I think this year I'm Roth converting up to there, even though that leaves some non-refundable credits on the table. Some preliminary analysis suggests that this cliff isn't even that bad, especially if I go up to an AGI of $60K or $70K or so (it's effectively a hump, so once over it I can spread the pain out by converting more).
But if I just go to the FAFSA cliff, then I can ignore all this other analysis which honestly makes my head hurt trying to optimize.
...
Footnotes:
1. So I always assume 85% of my SS will be taxed; I know it could be less than this but it probably won't be in my case no matter what I do, and the extra complexity isn't worth addressing IMHO.
2. I say "rough" taxable income because of the flaw mentioned in footnote 1 plus the fact that I'll probably have other income at that point, and may have other deductions, etc.
I have a spreadsheet in which I attempt to predict and evaluate Roth conversions, RMDs, and IRMAA taxes.
Currently I have a spreadsheet which:
1. Goes from my current age (50) to 85 (end of my planning horizon).
2. Allows me to set my Roth conversions to anything I want each year.
3. Calculates my RMD from age 70.5 onward
4. Calculates my SS from age 70 onward.
5. Calculates my "rough" taxable income as "Conversions + RMD + 85% SS - Standard Deduction". (1, 2)
6. Calculates federal taxes and IRMAA taxes on my "rough" taxable income.
I don't use Excel, I use LibreOffice.
I'd like to ask LibreOffice's solver to tell me what the "best" series of Roth conversions are each year from 50 to 85 in order to minimize taxes. Basically, a poor man's I-ORP.
I have used I-ORP, and understand the principles on which it is based. But I can't see inside the calculations and so would like to replicate the results myself, however crudely.
I'm running into two problems.
First, I don't know how to define the goal properly. If I try to minimize taxes, then the solution is to obviously not Roth convert at all and do minimum RMD's. If I maximize spending, then the solution is to Roth convert a lot every year. If I maximize after tax spending, then I can do that but then I am ignoring the age 85 remaining tIRA balance, which it feels like I should account for somehow.
Currently what seems to be working somewhat is to calculate my effective tax rate each year as (income tax + IRMAA tax) / "rough" taxable income. I can then average those over the entire 50 to 85 period. Then I play around and try to minimize that number. So far the lowest I can get that is a bit under 20%, which seems pretty good.
Second problem is that if I try to use LibreOffice to solve for it the way I want to, it claims my model isn't linear and quits. I've googled that and the remedy I saw there isn't working for me.
Any thoughts or advice on either of these two problems would be great.
Thanks.
...
This year I think I'm probably going to kick the can down the road. I have a kid in an expensive college and he's getting financial aid, so I have a FAFSA cliff at an AGI of $49,999 for this year and next that it would be nice to be under.
So I think this year I'm Roth converting up to there, even though that leaves some non-refundable credits on the table. Some preliminary analysis suggests that this cliff isn't even that bad, especially if I go up to an AGI of $60K or $70K or so (it's effectively a hump, so once over it I can spread the pain out by converting more).
But if I just go to the FAFSA cliff, then I can ignore all this other analysis which honestly makes my head hurt trying to optimize.
...
Footnotes:
1. So I always assume 85% of my SS will be taxed; I know it could be less than this but it probably won't be in my case no matter what I do, and the extra complexity isn't worth addressing IMHO.
2. I say "rough" taxable income because of the flaw mentioned in footnote 1 plus the fact that I'll probably have other income at that point, and may have other deductions, etc.