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Old 04-10-2015, 08:57 PM   #21
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I would do 2 speadsheets, one with maxing out at 10%, the other at 15% (don't forget that includes all other income including dividends to keep from pushing you into 15+15%). Factor in an estimated growth rate on your remaining IRA. See where that leaves you at age 70. You should be able to find the MRD formula and see how much you'll get then, along with SS (and any pension?) to see what tax bracket it looks like you'd be in, if all else stays unchanged. If you find that maxing 15% is more than you need you could always do a bit less, but I don't think it matters so much whether you pay a little more at 15% now (and let it grow tax free) or 15% later. However, with as much as you have, I'm going to guess that you may not be able to stay in the 15% bracket.

What I'm saying is, I don't think there's an exact number that is a sweet spot, just an indication of whether to the top of 10%, 15%, or possibly even into 25% would seem to be best.

Another factor to consider is what the IRA income on MRDs does to SS taxation (again, assuming current rules are unchanged). It may be to your advantage to convert all or as much of your IRA as you can to reduce SS taxation, or you may find you'll be at the max anyway.
That sounds pretty good. The only thing I'd like to add is that it tends to be beneficial to convert more now rather than later. So you may find it beneficial, again depending on your specific tax situation, to Roth convert beyond your target tax rate if it's only a few percent above your expected age 70 tax rate.
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Old 04-10-2015, 09:03 PM   #22
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That's where you see questions on the board about projected rates of growth for stocks and bonds. Take your pick of growth rates and inflation rates and do the best you can to model your finances for each year.....
Yes, the potential Achilles heel of my plan is growth. Given my relatively conservative growth rate assumption if I continue to do Roth conversions until I am 70 then I'll only be in the 25% bracket for a year, however if growth is better than my assumption then I'll spend more years in the 25% tax bracket. The way I view it, if it happens then it will be a nice problem to have to deal with.
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Old 04-10-2015, 09:21 PM   #23
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Would you say that you wish you had started converting to Roth as soon as you retired instead of 59.5? OTOH, you're in great position nevertheless.
Not if I had to pay a 10% penalty before 59 1/2.
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Old 04-10-2015, 09:39 PM   #24
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Not if I had to pay a 10% penalty before 59 1/2.
You don't pay a penalty for Roth conversions.
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Old 04-11-2015, 05:17 PM   #25
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don't forget as time goes on the brackets expand to allow more and more income through at lower tax rates. pretty soon 100k will be 15%.

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Yes, the potential Achilles heel of my plan is growth. Given my relatively conservative growth rate assumption if I continue to do Roth conversions until I am 70 then I'll only be in the 25% bracket for a year, however if growth is better than my assumption then I'll spend more years in the 25% tax bracket. The way I view it, if it happens then it will be a nice problem to have to deal with.
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Old 04-11-2015, 10:40 PM   #26
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don't forget as time goes on the brackets expand to allow more and more income through at lower tax rates. pretty soon 100k will be 15%.
Yes, I know... built into my model... in 2024 according to my projections.
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Old 04-12-2015, 04:02 AM   #27
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In addition to what others have said, you will need to consider State Income Taxes and MAGI as it relates to ObamaCare subsidies.

It is unclear what other income you have after you retire early. But if it is mainly qualified dividends and capital gains from your taxable account, then you have lots of room in the lowest brackets to convert yearly.

For instance, your personal exemptions plus standard deduction amount to over $20,000 income tax free. Plus another $18,000 in the 10% tax bracket. That is $38,000 per year right there.

I am early retired in my late 40's with a large taxable account. I convert up to the top of the 10% bracket each year. The net taxes I pay on the conversion are much less than 10% because I fill up the unused portion of the 0% bracket and I also get to use my foreign tax credit which would otherwise go to complete waste since my taxes would be zero without the conversion.

I then fill up to the top of the 15% bracket with capital gains harvesting.

I don't have a pension coming. So I don't want my IRA to go to zero before RMD (since I expect all or most of the RMD to be taxed at 0% or 10%) although I am trying to reduce the size before age 70.

As I get closer to age 70 and have a better idea on what the tax laws will be then as well as my wealth level, I know I will have time to make adjustments by converting up into the 15% bracket. But I am not going to do that until I am pretty sure that I will need to.
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Old 05-15-2015, 07:34 AM   #28
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Here's a spreadsheet I developed to optimize spending, including taxes, SS, Roth conversions and everything else I could think of. It uses iteration to optimize spending, has minimal instructions, and who knows what numbers I left in it (though they're not mine)...
Very impressive and helpful, thank you. If that's your "Simple" version, I'd hate to see your "Complex" version!

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Old 07-17-2015, 05:27 PM   #29
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Here's a spreadsheet I developed to optimize spending, including taxes, SS, Roth conversions and everything else I could think of. It uses iteration to optimize spending, has minimal instructions, and who knows what numbers I left in it (though they're not mine)...
I was excited to try this out, but my Excel (2002) didn't know how to do the YEARFRAC function. I started this post to ask what to do about it, but discovered the problem before posting! If you add the Analysis ToolPak (Tools > Add-ins) it works! Off to the races!
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Old 07-18-2015, 12:59 PM   #30
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Very impressive and helpful, thank you. If that's your "Simple" version, I'd hate to see your "Complex" version!

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Glad you found it helpful. My complex version is a C language program that I wrote. It handles all my details and optimizations, but would not be as generally applicable, nor at all user friendly.
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Old 07-18-2015, 01:17 PM   #31
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Glad you found it helpful. My complex version is a C language program that I wrote. It handles all my details and optimizations, but would not be as generally applicable, nor at all user friendly.
I need to spend more time looking at the underlying code... and read your notes. I was shocked when a big red box popped up and said UR F@*#ed ....
I think the retirement time bomb is alive and well.

It looks like a good useful spreadsheet... just bad data. thanks
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Old 07-19-2015, 01:26 PM   #32
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Glad you found it helpful. My complex version is a C language program that I wrote. It handles all my details and optimizations, but would not be as generally applicable, nor at all user friendly.
I've got the model running pretty well, I think. Awesome piece of work, I must say. Thank you very much for sharing it. I keep plugging my numbers into different models. Sometimes I have a good feeling about a model, sometimes not. I feel like this model has got it right.

I think I can see what the fractional bracket fill thing does, but I'm not sure of the meaning (260% of what). When I change it, I can see that during the years where I have Roth funds, it pulls only up to a certain amount out of the tIRA and gets the rest from the Roth. That works to force filling up the low tax brackets, but not to the top of the 15%, which might be too much for ACA cliff. So I like 260%, I think, but I'm not "getting it" with respect to the table at S1...W12.

I put my ACA credits in as "Income non-taxable". And I put the value of my house now (today's dollars) also in non-taxable in the year which I plan to sell it. Is that right? I see that various things are not indexed for inflation, so I presume we don't inflate today's house value out X years to determine the 'windfall' cash that the house sale would bring.

The model is giving me a bit higher annual spending after tax than i-orp, given the same inputs. A some point, I might try to find a way to discover where the differences are, just for grins, but it's close enough. After all, it's only got to be "roughly good" for year number 2 through 'n'. That gives a framework for current year spending and tax strategies...the only time I can actually DO something is this year. Next year, I'll be running another, (probably updated and better fine-tuned) model, with whatever the latest tax and ACA laws are then.
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Old 07-19-2015, 09:33 PM   #33
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I've got the model running pretty well, I think. Awesome piece of work, I must say. Thank you very much for sharing it. I keep plugging my numbers into different models. Sometimes I have a good feeling about a model, sometimes not. I feel like this model has got it right.

I think I can see what the fractional bracket fill thing does, but I'm not sure of the meaning (260% of what). When I change it, I can see that during the years where I have Roth funds, it pulls only up to a certain amount out of the tIRA and gets the rest from the Roth. That works to force filling up the low tax brackets, but not to the top of the 15%, which might be too much for ACA cliff. So I like 260%, I think, but I'm not "getting it" with respect to the table at S1...W12.

I put my ACA credits in as "Income non-taxable". And I put the value of my house now (today's dollars) also in non-taxable in the year which I plan to sell it. Is that right? I see that various things are not indexed for inflation, so I presume we don't inflate today's house value out X years to determine the 'windfall' cash that the house sale would bring.

The model is giving me a bit higher annual spending after tax than i-orp, given the same inputs. A some point, I might try to find a way to discover where the differences are, just for grins, but it's close enough. After all, it's only got to be "roughly good" for year number 2 through 'n'. That gives a framework for current year spending and tax strategies...the only time I can actually DO something is this year. Next year, I'll be running another, (probably updated and better fine-tuned) model, with whatever the latest tax and ACA laws are then.
It's been a while...

The 260% means something like tax bracket #2 (the 100's digit) plus 60%. The number isn't particularly meaningful but gives a single number input that can be optimized. The spreadsheet will make sure each year's income fills the tax bracket to that level by making additional tIRA withdrawals if necessary.

Yes, no inflation, so everything stays in today's dollars.

I'm happy to be close to i-orp. There are many ways to optimize.
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Old 07-19-2015, 10:01 PM   #34
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Lol. I agree wow nice spread sheet. If that is the easy one I would hate to see the hard one 😀

This info is a little over me. Sounds like some reading on my part.

Thanks all


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same issue..same concerns
Old 07-20-2015, 06:54 AM   #35
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same issue..same concerns

I still need to runs the scenarios, but I have the same issues & concerns. The path of least resistance (for me) appears to be the ESPlanner software.
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Old 07-21-2015, 09:04 AM   #36
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It's been a while...
I know...sometimes when I come back to one of my complex spreadsheets after a long while, I wonder who was smart enough to come-up with all of this stuff...couldn't have been me

Thank for the explanation of the fill value...that's logical. The spend is 6% higher, and I'm not quite sure the inputs are perfectly aligned yet. But considering the variability of markets, this level of agreement is plenty good.
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Old 07-21-2015, 10:17 PM   #37
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this spreadsheet looks interesting, unfortunately I'm having an issue.
I'm using openOffice calc and it gives an error in many of the cells:

When I first open it, it has #VALUE! for many of the cells.
I set the reset cell (AF9) to 0 and there are no errors and I see numbers all over.
When I put the reset back to 1 to calculate, it then gives me errors in many cells and its: Err:523

I googled this and it supposedly is an iteration thing, I go to change the iteration setting from 1,000 to 5,100 (since the sheet has notes it does 5,001 iterations). But calc will not make the new value stick, it resets itself to 1,000 which is weird.

I'll try this on libreOffice on the off chance its ok, but wondered if anyone had other ideas ?
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Old 07-21-2015, 11:15 PM   #38
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this spreadsheet looks interesting, unfortunately I'm having an issue.
I'm using openOffice calc and it gives an error in many of the cells:

When I first open it, it has #VALUE! for many of the cells.
I set the reset cell (AF9) to 0 and there are no errors and I see numbers all over.
When I put the reset back to 1 to calculate, it then gives me errors in many cells and its: Err:523

I googled this and it supposedly is an iteration thing, I go to change the iteration setting from 1,000 to 5,100 (since the sheet has notes it does 5,001 iterations). But calc will not make the new value stick, it resets itself to 1,000 which is weird.

I'll try this on libreOffice on the off chance its ok, but wondered if anyone had other ideas ?
I just tried in LibreOffice, and seems the same as you report. I have not looked any further yet. Looks like 1,000 is max iterations it will accept.

-ERD50
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Old 07-22-2015, 05:47 AM   #39
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I just tried in LibreOffice, and seems the same as you report. I have not looked any further yet. Looks like 1,000 is max iterations it will accept.

-ERD50
I have excel... but brought up libreoffice (basically openoffice)... complaint is wrong data type
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Old 07-22-2015, 06:36 AM   #40
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I tried looking a what was being complained about in the formula... copied bits of it to another cell.... working through it, the calc went OK. So playing with it I found that making some changes (adding a logical calc to other cell removed some. Finally, I loaded the spreadsheet and turned autocalc off and back on. It looked like this cleared the #VALUE error. Give that a try ... this was with libreoffice
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