ORP Calculator Question

[Rustward]

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.

 

[dtbach]

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.

 

[2B]

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.

 

[Steven]

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.

 

[Rustward]

Just fill in the form with your data and run the scenario. In the withdrawal report look for the IRA2Roth column.

 

[Steven]

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.

 

[MileKing]

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.

 

[Rustward]

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.

 

[MileKing]

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.