Do you use i-orp.

[nun]

ER is fast becoming a reality for me rather than a dream. So now the real work of money management starts, or at least my earned income can't paper over the mistakes I make.

Tax planning is very important and I'm running my numbers through i-orp. So does anyone rigorously follow it's withdrawal and transfer recommendations? and if you do are you happy?

[Jack_Pine]

Will be interested to see who follows the withdrawal recommendations or at least who has compared I-ORP to what they are doing.

It is one of the three planners I am using. not to the withdrawal stage as of yet.

[Gotadimple]

I use it as a check on my planned withdrawal strategy. The site documentation indicates that the numbers should be used as a guideline, not an absolute.

-- Rita

[pb4uski]

I don't because it would have me doing Roth conversions right now but I have substantial LTCGs in my taxable account that I want to take advantage of the current 0% LTCG rate which fills up my 15% tax bracket. i-orp doesn't take this nuance into account.

Once those LTCGs are taken (rolled over into my basis) I had planned to start doing Roth conversions as i-orp would recommend, up to the top of the 15% bracket.

But beginning in 2014, I will be limiting my LTCG/Roth conversions to keep my O-MAGI under 400% FPL because from that point to the top of the 15% tax bracket the economic cost of lost Obamacare subsidies, taxes, lost property tax relief is about 36% of the additional income and I view that as too high a cost to pay.

[Ed_The_Gypsy]

i-ORP says I can take $30k/year more than I think I can.

I have yet to investigate this claim really close, but it is in the class of extraordinary claims require extraordinary proofs.

I doan tink so.

[anethum]

Quote:

Originally Posted by pb4uski I don't because it would have me doing Roth conversions right now but I have substantial LTCGs in my taxable account that I want to take advantage of the current 0% LTCG rate which fills up my 15% tax bracket. i-orp doesn't take this nuance into account. Once those LTCGs are taken (rolled over into my basis) I had planned to start doing Roth conversions as i-orp would recommend, up to the top of the 15% bracket.

I'm in a similar situation and I haven't yet decided how to best handle it. Is there a specific reason why you favor harvesting LTCGs before doing Roth conversions?

[Ed_The_Gypsy]

I should mention that I am investigating claim-and-suspend and backdoor IRA-Roth conversions and the i-ORP info is significantly in excess of that. Not going to ride that rainbow without a lot more explanation. And maybe not then.

[Chuckanut]

I-ORP has me convering most of my regular IRA to a Roth IRA in the first seven years of my retirement. But as far as I can see, much of that conversion will take place in the 25% bracket. (My massive solid gold platinum plated modest pine and brass pension is the problem.) I am not certain that makes sense, though with so many things now based upon taxable income (ACA subsidy, property tax reduction) and the requirement for minimum distributions from the reg IRA, it may make some sense. If only I could predict the future.

Since I have about $5 in reg IRA for every $1 in an Roth IRA, I am thinking of perhaps converting enough to change the ratio to $4 Reg/$2 Roth just to keep some taxable income options open in the future. However, this is far from a done deal.

[Chuckanut]

I-ORP has me converting all of my regular IRA to a Roth IRA in the first seven years of my retirement. But as far as I can see, much of that conversion will take place in the 25% bracket.

I am not certain that makes sense for now, though with so many things now based upon taxable income (ACA subsidy, property tax reduction), and the future requirement for minimum distributions from the reg IRA, it may make some sense for the future.

I am thinking more diversity between Reg IRA and Roth IRA so I can control future taxable income may be a wise precaution.

[pb4uski]

Quote:

Originally Posted by anethum I'm in a similar situation and I haven't yet decided how to best handle it. Is there a specific reason why you favor harvesting LTCGs before doing Roth conversions?

Initially (like last year), I was favoring it due to uncertainty as to whether 0% LTCGs would survive the fiscal cliff. That reason is a bit moot now.

Now, I'm doing it to have more flexibility in riding my taxable account to age 70 when I will begin SS. If I take LTCG for the next 2-3 years they will be gone, then I'll transition to Roth conversions for ~10 years before RMDs begin.

Similar to others, i-orp says I can withdraw more than I am but it is reasonable consistent with other calculators using the same inputs. After I become more comfortable that I won't outlive my money I'll probably be more comfortable splurging more here and there.

[Midpack]

Timely question, after talking to Vanguard last week, I ran i-ORP again yesterday and then spent several hours on ESPlanner as well. i-ORP results have us aggressively converting between now and age 70, but there's not near enough detail on taxes and various income sources to induce me to act.

Evidently ESPlanner can model Roth Conversions, but it's a manual entry exercise which is easy for a couple year conversion but somewhat of a PITA for a lengthy conversion, and it's not clear from what I've read if it treats taxes properly. I'm working on it, but who knows...

I also found this literally just a few minutes ago, which I plan to experiment with but I don't know anything about it yet http://www.bogleheads.org/forum/view...hp?f=1&t=97352, note dropbox link to spreadsheet. FWIW

[Fred123]

Does anyone know of software that takes into account the trade off between maximizing Roth conversions in the lowest tax bracket and avoiding the ACA subsidy "cliff"?

[fh2000]

I am using 5% for investment return. I guess counter-balance default inflation of 3.5% on the form, my true return projection is 1.5%.

With that, I-ORP, tells me to do Roth conversion for 12 years, and it gives me an annual spending $ very close to my current projection. I am on my OMY.

So, I-ORP provides more favorable result than FireCalc in my case.

[Animorph]

Quote:

Originally Posted by Chuckanut I-ORP has me converting all of my regular IRA to a Roth IRA in the first seven years of my retirement. But as far as I can see, much of that conversion will take place in the 25% bracket. I am not certain that makes sense for now, though with so many things now based upon taxable income (ACA subsidy, property tax reduction), and the future requirement for minimum distributions from the reg IRA, it may make some sense for the future. I am thinking more diversity between Reg IRA and Roth IRA so I can control future taxable income may be a wise precaution.

This is what my own custom software is telling me to do. That includes doing Roth conversions instead of 0% capital gains as well. All the tax rate stuff is in there, except I'm not worrying about the ACA income limit. I optimize the amount of tIRA funds I withdraw each year to maximize my yearly spending throughout retirement. I change that to a Roth conversion if I make a tIRA withdrawal and have taxable funds to replace that income and pay the taxes.

If I don't Roth convert now at 25% (actually up until AMT kicks in) then I end up withdrawing at 25% later in retirement due to RMD's. So roughly equal tax rates, plus the Roth account holds more after-tax value than the tIRA account. So, especially early on, its worth it to do the Roth conversions even if the tax rates now and later will be the same or even a tiny bit unfavorable. The additional value in the Roth that grows tax free after the conversion makes up for it.

After my Roth conversions stop in 2021 I'll be in the 15% bracket permanently, though with no capital gains to cash in at 0% any more. Of course that assumes the current tax brackets, adjusted for inflation. Assuming higher future income tax rates in the future favors Roth conversions that much more. Your assumptions of investment gains may also affect the Roth conversion benefits.

I don't have a great explanation for why Roth conversions are favored over capital gains breaks. I assume it is that Roth conversions can take place at 15% tax instead of 25%, 2/3 of the CG tax reduction, and then Roth shields extra non-taxed value. The first money into the Roth should be considered the last out, so the money that goes in early has a long time to grow tax free. I did try forcing 0% LTCG taxes in the first year or two, but it was always a worse outcome than maximum Roth conversions.

[LOL!]

I have looked at i-orp and decided that one should only use its suggestions as a rough outline of what is possible to do. I take that rough outline and run TurboTax in a "what if?" tweaking mode along with the Fidelity Retirement Income Planner.

All these tools together seem to give me something I can trust, whereas none of them separately can.

[Free To Canoe]

I like I-orp. I use it and several other calculators. I would never blindly follow the advice of any calculated estimate because of the numerous assumptions that go into each estimate. I am relying on the calculators for my withdrawals however. The calculator estimates are in the same ball park. My actual withdrawals are at the minimum. I would not hesitate to use an average of them. Most of the mutual fund calculators should be on the conservative side since they want to hang on to your $.

[teejayevans]

I ran it once, some of the results were a little screwy (didn't like the way it spent down my taxable account), and it doesn't take ACA into account. I'll just do manual calculations (spreadsheet) of what I need to pull from where, better off that way.
TJ

[truenorth418]

Quote:

Originally Posted by Fred123 Does anyone know of software that takes into account the trade off between maximizing Roth conversions in the lowest tax bracket and avoiding the ACA subsidy "cliff"?

This is the holy grail we are all waiting for

[Ed_The_Gypsy]

Quote:

Originally Posted by Midpack Timely question, after talking to Vanguard last week, I ran i-ORP again yesterday and then spent several hours on ESPlanner as well. i-ORP results have us aggressively converting between now and age 70, but there's not near enough detail on taxes and various income sources to induce me to act. Evidently ESPlanner can model Roth Conversions, but it's a manual entry exercise which is easy for a couple year conversion but somewhat of a PITA for a lengthy conversion, and it's not clear from what I've read if it treats taxes properly. I'm working on it, but who knows... I also found this literally just a few minutes ago, which I plan to experiment with but I don't know anything about it yet Bogleheads • View topic - Retiree Roth Conversion Decision Model, note dropbox link to spreadsheet. FWIW

Midpack, I have been using an on-line tax estimator program with many cases. My situation is much simpler than yours, but if you can do some simplifying yourself, screening to reduce the number of interesting cases, you may find it useful. (I was concerned about Scott Burns' Tax Torpedo with SS and decided to give his method--using TurboTax or the like--a try. It works for me.)

[truenorth418]

I use as many online calculators as I can. i-ORP is unique because of the Roth conversion feature, but I haven't been able to act on it due to remaining in a high combined tax bracket since retiring 2 years ago. I have had some residual ordinary income and I live in NYC so my combined marginal tax rate has been about 35%. I have run several Roth conversion calculators recently and none have given me the green light. That should change next year when my income will likely consist of only dividends and cap gains and I try to keep my income under the ACA cliff. Although I have no specific plans at the moment, I think eventually I will relocate to an income tax free state which should also help the situation.

I also notice that i-ORP projects that I could safely increase my withdrawal rate by a large amount. This adds to my confidence, but I don't feel compelled to increase my withdrawals at this juncture.