CardsFan
Thinks s/he gets paid by the post
I had not been to the iORP site for a while. When I visited today, the first page has changed to a "quick check" with a variety of canned assumptions.
Of particular note was this:
IRA to Roth IRA conversions are not included. At least one quantitative study (See page 47) reports that conversions offer little economic advantage but their dramatic increase in taxes paid in early retirement tends to panic the novice.
I did peruse the referenced study (which was done by Welch himself), but have not yet read it in detail. Here is the link: http://www.iarfc.org/documents/issues/Vol 15 Issue1.pdf .Per the article:
We find that in comparing two optimal plans, differing
only in whether or not conversions are allowed, that there
is in the neighborhood of a 1 percent improvement in the
conversion plan’s disposable income compared to the
non-conversion plan.
Buried in the study there is a comment that conversions at market lows would be a big improvement over this (seems obvious).
Since I can't guess my disposable income needs to 1% in advance, I wonder about the real, tangible, benefits to the retiree. I understand the benefits to heirs.
Note that the sample portfolio is for a 66yo, so it might really benefit very early retirees more.
Comments?
Of particular note was this:
IRA to Roth IRA conversions are not included. At least one quantitative study (See page 47) reports that conversions offer little economic advantage but their dramatic increase in taxes paid in early retirement tends to panic the novice.
I did peruse the referenced study (which was done by Welch himself), but have not yet read it in detail. Here is the link: http://www.iarfc.org/documents/issues/Vol 15 Issue1.pdf .Per the article:
We find that in comparing two optimal plans, differing
only in whether or not conversions are allowed, that there
is in the neighborhood of a 1 percent improvement in the
conversion plan’s disposable income compared to the
non-conversion plan.
Buried in the study there is a comment that conversions at market lows would be a big improvement over this (seems obvious).
Since I can't guess my disposable income needs to 1% in advance, I wonder about the real, tangible, benefits to the retiree. I understand the benefits to heirs.
Note that the sample portfolio is for a 66yo, so it might really benefit very early retirees more.
Comments?