- Joined
- Oct 13, 2010
- Messages
- 10,735
Like comic acting, in retirement planning timing is everything.
James Welsh wrote another paper recently. You can get it by going to i-orp.com, scrolling down to the bottom, and click on "A new white paper about IRA to Roth IRA conversions is posted on the ORP". You might consider dropping a fiver in the tip jar while you're there.
The paper compares scenarios with and without Roth conversions, and spells out, for those examples, what the "levers" are. In other words, what makes Roth conversions more worthwhile, and what makes them less worthwhile. Of course you could feed your own information into the i-orp page and run one with and one without the Roth conversion checkbox, and see how your situation measures up. As an aside, that's worth five bucks, for sure, probably worth more like $50, actually. I have no axe to grind except I think this tool is awesome and don't want a smallish server bill to cause the tool to evaporate. From my first hand experience, I can say that just about nobody clicks the donate button for free sites. Maybe I'm wrong, since this site has a lot of "good tippers" when it comes to restaurants, maybe that translates to PayPal donate buttons too. James deserves at least as much as your waitress, n'est-ce pas?
Anyway, back to the content of the paper...
Our results are that partial conversions increase disposable income by less than 1% in most situations...the financial benefits of doing partial IRA to Roth IRA conversions may not warrant the extra paperwork.
Of course, if you thrive on optimization, and you take that away, life would become so much less interesting, lol! This is where I fall on the question of whether to bother with conversions
One thing that the paper called to my attention was the break-even age for the two scenarios (the Roth conversion approach and the non-conversion approach). For the example, about 2/3 of the time between 65 and 92 was spent in territory that, should you die, you would have been better-off not doing the conversions indicated by the optimization.
It should be no surprise if you've read the i-orp help and/or James' comments on the subject, the conclusion of the paper:
The conversion decision should probably be made based on considerations other than financial gain.