Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Old 12-03-2013, 08:54 PM   #21
Thinks s/he gets paid by the post
MasterBlaster's Avatar
 
Join Date: Jun 2005
Posts: 4,359
Quote:
Originally Posted by Rustward View Post
Then maybe we should just hope the asteroid gets here soon so we don't have to deal with all the gloom and doom?

Sorry. It's a little OT.
I don't know if you were joking or not ?

The concern though is that after you have optimally gamed the system and paid your front-loaded ROTH conversion taxes, then the rules change to your detriment. Considering all that's coming in the next decade and beyond, it is a very realistic concern.

I personally wouldn't want to be in that position.
__________________

__________________
MasterBlaster is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 12-03-2013, 10:06 PM   #22
Thinks s/he gets paid by the post
Rustward's Avatar
 
Join Date: Apr 2006
Posts: 1,572
Quote:
Originally Posted by MasterBlaster View Post
I don't know if you were joking or not ?

The concern though is that after you have optimally gamed the system and paid your front-loaded ROTH conversion taxes, then the rules change to your detriment. Considering all that's coming in the next decade and beyond, it is a very realistic concern.

I personally wouldn't want to be in that position.
So, what do you do? How can you be sure you made all the right decisions?
Just about anything can change in the future. You might save multi-millions and then get hit by a beer truck, or contract some rare quick-killing disease for which there is no cure. I think you have to make the decisions that are likely in your best interest, but there are no guarantees. Again -- what do you do?
__________________

__________________
Rustward is offline   Reply With Quote
Old 12-03-2013, 11:13 PM   #23
Moderator
Alan's Avatar
 
Join Date: Jul 2005
Location: Eee Bah Gum
Posts: 21,091
Quote:
Originally Posted by Rustward View Post
So, what do you do? How can you be sure you made all the right decisions?
Just about anything can change in the future. You might save multi-millions and then get hit by a beer truck, or contract some rare quick-killing disease for which there is no cure. I think you have to make the decisions that are likely in your best interest, but there are no guarantees. Again -- what do you do?
+1

For the government to tax you when withdraw from an IRA and place it in a ROTH and tax you again when you withdraw from the ROTH sounds very unlikely so I am willing to take the risk. They are more likely to raise taxes with a VAT than resort to this IMO. It's all a gamble when it comes to guessing future tax policy.
__________________
Retired in Jan, 2010 at 55, moved to England in May 2016
Now it's adventure before dementia
Alan is offline   Reply With Quote
Old 12-03-2013, 11:59 PM   #24
Thinks s/he gets paid by the post
Katsmeow's Avatar
 
Join Date: Jul 2009
Posts: 3,395
Quote:
Originally Posted by Brooks Saddle View Post
Just call me stupid. I don't understand ORP as it has me taking considerably much more money than firecalc, FIDO or any other retirement calculator I've tried. When I say considerably more I mean considerably more.
Same for me. One thing I realized was that it really makes a difference in a married couple as to which one you put as retiree and which you put as spouse.

If I put DH who is 6 1/2 years older than me as retiree and me as spouse it says we can spend $4000 more a year than if I put me as the retiree and DH as spouse.

Basically when DH is shown as spouse it shows the plan ending when he is 92 (when I would be 86) versus when I am shown as retiree it goes through when I'm 92.


One reason I don't get much from ORP is that it assumes that you will spend the same amount every year and doesn't give the option to have any one time expenditures or variable spending. In our case we will be spending more for the next 3 years (2 kids in college) and then our spending will go down a lot. That doesn't really get modeled in ORP.
__________________
Katsmeow is offline   Reply With Quote
Old 12-04-2013, 05:01 AM   #25
Thinks s/he gets paid by the post
2B's Avatar
 
Join Date: Mar 2006
Location: Houston
Posts: 4,330
Quote:
Originally Posted by Brooks Saddle View Post
Just call me stupid. I don't understand ORP as it has me taking considerably much more money than firecalc, FIDO or any other retirement calculator I've tried. When I say considerably more I mean considerably more.
Orp is a fancy spread sheet that sequences the values you enter for assets, SS and pensions. It all comes down to the difference between ORP's constant return/inflation and FireCalc'c historical sequencing. You can lower the return and get a lower withdrawal rate if you want. ORP has more degrees of freedom for entering assets but lacks the historical returns. ORP has no Roaring 20's, Great Depression, Stagflation, Arab Oil Embargo, WWI, WWII, Korea, Cold War......
__________________
The object of life is not to be on the side of the majority, but to escape finding oneself in the ranks of the insane -- Marcus Aurelius
2B is offline   Reply With Quote
Old 12-04-2013, 11:01 AM   #26
Thinks s/he gets paid by the post
Rustward's Avatar
 
Join Date: Apr 2006
Posts: 1,572
Quote:
Originally Posted by 2B View Post
Orp is a fancy spread sheet that sequences the values you enter for assets, SS and pensions. It all comes down to the difference between ORP's constant return/inflation and FireCalc'c historical sequencing. You can lower the return and get a lower withdrawal rate if you want. ORP has more degrees of freedom for entering assets but lacks the historical returns. ORP has no Roaring 20's, Great Depression, Stagflation, Arab Oil Embargo, WWI, WWII, Korea, Cold War......
If you believe that ORP is "just a spreadsheet" you probably do not fully understand it.

Let me google that for you

Unlike FireCalc, ORP works with return and inflation rates that the user provides. ORP and FireCalc are different. I would say that ORP is a level or two more sophisticated than FireCalc. But FireCalc and ORP answer different questions. I don't think anybody can say that one is better than the other.
__________________
Rustward is offline   Reply With Quote
Old 12-04-2013, 11:13 AM   #27
Full time employment: Posting here.
dtbach's Avatar
 
Join Date: Apr 2011
Location: Madison
Posts: 752
Quote:
Originally Posted by Rustward View Post
If you believe that ORP is "just a spreadsheet" you probably do not fully understand it.

Let me google that for you

Unlike FireCalc, ORP works with return and inflation rates that the user provides. ORP and FireCalc are different. I would say that ORP is a level or two more sophisticated than FireCalc. But FireCalc and ORP answer different questions. I don't think anybody can say that one is better than the other.
When I put my numbers in it had me spending 10.8% of my portfolio in the first year! Insane! Plus selling ROTH IRA funds instead of waiting until I turn 70 and have RMD. No, I'll stick with FireCalc.
__________________
Wild Bill shoulda taken more out of his IRA when he could have. . . .
dtbach is offline   Reply With Quote
Old 12-04-2013, 11:48 AM   #28
Thinks s/he gets paid by the post
2B's Avatar
 
Join Date: Mar 2006
Location: Houston
Posts: 4,330
Quote:
Originally Posted by dtbach View Post
When I put my numbers in it had me spending 10.8% of my portfolio in the first year! Insane! Plus selling ROTH IRA funds instead of waiting until I turn 70 and have RMD. No, I'll stick with FireCalc.
I've found that you can get really strange numbers when you put in different rates of return between types of accounts. I had a lower return for my IRA to reflect the bonds in it and a higher return for my Roth and after-tax. ORP had a massive move of assets from my IRA to the Roth to get the supposed higher return. That can create some questionable spending patterns. I can only guess what you put in to get that.

ORP is good at taking the inputs and then using its algorithms to maximize total spending over the life of the plan. My plans all have major shifts of assets from my IRA to Roth in the early years. This tends to maximize my 15% bracket and smooths out the amount in the 25% bracket. That's something to try to do even if you use FireCalc.

FireCalc depends on the user moving between different types of accounts to self-optimize tax planning. FireCalc just gives a spending level or a % success depending on the criteria. ORP tends to give a higher spending level but it also isn't faced with the sequence of return issues built into FireCalc. A decade of poor stock market performance and/or high inflation is death to a retirement plan. ORP and most Monte Carlo calculators ignore this.
__________________
The object of life is not to be on the side of the majority, but to escape finding oneself in the ranks of the insane -- Marcus Aurelius
2B is offline   Reply With Quote
Old 12-10-2013, 11:39 AM   #29
Dryer sheet aficionado
 
Join Date: Dec 2010
Posts: 28
I can't find any inputs on ORP to calculate Roth conversion. I checked all the help guides. I'm just not seeing it anywhere.

How is everyone getting ORP to calculate the Roth conversions?

I'm in the stupid club too.
__________________
Steven is offline   Reply With Quote
Old 12-10-2013, 12:57 PM   #30
Thinks s/he gets paid by the post
Rustward's Avatar
 
Join Date: Apr 2006
Posts: 1,572
Just fill in the form with your data and run the scenario. In the withdrawal report look for the IRA2Roth column.
__________________
Rustward is offline   Reply With Quote
Old 12-10-2013, 01:08 PM   #31
Dryer sheet aficionado
 
Join Date: Dec 2010
Posts: 28
Quote:
Originally Posted by Rustward View Post
Just fill in the form with your data and run the scenario. In the withdrawal report look for the IRA2Roth column.
Thanks Rustward.
I finally saw that.
However, I've been doing that and no matter how I change the inputs it shows all zeros in the IRA2Roth column.
I tried running different investment returns in accounts, low current tax rates, I took out my pension and deferred SS until 70. No matter how I try, it won't show conversions.
__________________
Steven is offline   Reply With Quote
Old 02-17-2014, 04:15 PM   #32
Dryer sheet aficionado
 
Join Date: Jul 2004
Posts: 46
Used ORP for the first time today. Skeptical about the results as ORP recommends the spouse and I not make the full deferrals to tax deferred accounts (401k, 403b, etc.) that we are eligible for in the 3 years leading up to retirement. Given we are near the very top of the Fed 28% bracket, state income tax is 9%, and we plan on moving to a 0% income tax state in retirement, this doesn't make sense. I'm 49 (will be 50 this year) and wife is 45, and we plan on retiring when I'm 55. Between us we can contribute $58K this year to tax deferred accounts. Assuming no increases in the 401k/403b/457 limits over the next few years, ORP recommends deferring the full amount we can both this year and next year, but then cuts the deferral back to about 45% of max allowed for the following 3 years heading into retirement. Looking at the tax info chart provided in the ORP results shows a max fed tax in retirement of 25% so somehow ORP is calculating that I should pay 12% income tax (28%-25%+9% state) on some $30K of income that I could otherwise defer each year for 3 years. Again, this simply doesn't pass the sniff test. Think I'll stick with developing my own spreadsheet.
__________________
MileKing is offline   Reply With Quote
Old 02-17-2014, 06:30 PM   #33
Thinks s/he gets paid by the post
Rustward's Avatar
 
Join Date: Apr 2006
Posts: 1,572
Quote:
Originally Posted by MileKing View Post
Again, this simply doesn't pass the sniff test. Think I'll stick with developing my own spreadsheet.
Mile, I don't doubt anything you have posted. Are you planning to take distributions at 55? I don't know if ORP "knows" that you will be able to take them penalty-free because you are planning to terminate in the year you are 55.

Really, unless you post the whole scenario (and I'm not suggesting that you do that), it will be difficult for anyone to agree or disagree with your observation.

And when you say "a 0% income tax state", are you meaning a state that does not have a state income tax, or something else?

Edit to add: You could email James Welch and ask him why ORP is giving you these results.
__________________
Rustward is offline   Reply With Quote
Old 02-17-2014, 09:01 PM   #34
Dryer sheet aficionado
 
Join Date: Jul 2004
Posts: 46
Quote:
Originally Posted by Rustward View Post
Mile, I don't doubt anything you have posted. Are you planning to take distributions at 55? I don't know if ORP "knows" that you will be able to take them penalty-free because you are planning to terminate in the year you are 55.

Really, unless you post the whole scenario (and I'm not suggesting that you do that), it will be difficult for anyone to agree or disagree with your observation.

And when you say "a 0% income tax state", are you meaning a state that does not have a state income tax, or something else?

Edit to add: You could email James Welch and ask him why ORP is giving you these results.
As far as the "0% income tax state", yes I meant a state with no income tax.

There will be no need to take early distributions from tax deferred accounts to support our spending level as we have sufficient after-tax assets to cover that in the early stages of retirement. ORP shows IRA2Roth conversions of very moderate amounts from ages 55-64. Not sure what you mean by "don't know if ORP knows that you will be able to take them penalty-free because you are planning to terminate in the year you are 55."

Also, ORP has us in the 0% Fed tax bracket from 55-58 as we would be using after-tax funds. Not clear why ORP would not have us converting IRA2Roth at some level during those years, perhaps up to the 10 or 15% tax bracket, in order to lower 25% Fed tax bracket further down the line.
__________________

__________________
MileKing is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


 

 
All times are GMT -6. The time now is 02:59 PM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.