Retiree Roth Conversion Decision Model
I retired at 50, and for years read recommendations to do Roth conversions, usually with the suggestion to "create a model", but I kept putting it off. Finally, two years ago at 63, I did do a model, and put enough work into that I thought I would put some more in and make it available for anyone to use.
Briefly, the model consists of two spreadsheets, one without conversions and one with. These are compared in the summary to show the impact of doing the conversions you input. All the data and calculations are available for viewing, and none of the cells are password protected.
To start is easy. You input your financial data and assumptions for returns and inflation, and how much you want to convert each year, and the model instantly shows the result. You can adjust conversions to achieve the best tax liability result, such as filling the 15% bracket, and test the impact of later tax-free withdrawals from the Roth vs. the same from the tradition IRA.
I've also included a table for testing future tax increases, one of the reasons people use to justify conversions. And as a bonus, the model will also test the long-term results of alternative Social Security benefit starting years for you and your spouse, or you alone.
I welcome suggestions for improvement, or fixes for problems, and if you read the thread there have been a few of both over the last two years.
The thread is listed in the Bogleheads' Wiki, and is also now in ORP list of recommended programs. James Welch, the ORP creator, was very helpful as I recently tested my model against ORP (very similar results). I have also tested it against FIREcalc, also very close results.
I don't like over-promoting this model, so I hope users will find this post and make use of the model. It's especially useful for people that don't care to create their own for any reason.
I have a thread on this in the Bogleheads forum, explaining it in detail and containing a link to the current version which I host on Dropbox. The Excel 2003 model can also be run in Google Docs and LibreOffice Calc. The current version as I write this is 14.0, which indicates it is the first version for 2014 and contains the 2014 Federal income tax rates and factors.
Retiree Roth Conversion Decision Model