My Recent Experience With i-orp

[sengsational]

If you haven't tried i-orp this year, you might consider running again...there's an "Obamacare Cliff" checkbox now (new to me, maybe old-hat to regular users).

In my case, the checkbox appeared to make things worse (the total annual spend was lower with the box checked). But to make it apples to apples, you have to add-in the annual subsidy. Once I did that, it was plain that fussing with income to get the subsidy is better than not. The model limits to under 400% FPL and presumes two people if you have the spouse age populated. I have two more years with three people, but I get the gist of what the model was doing, and I can easily go in that direction (more tIRA to Roth conversions).

The model does 72t (automatically if needed), but doesn't do age 55 rule 401k (I'm 56). I don't think that caused any big differences (gut feel after digging through the output).

I know v*riable annuity is a dirty word here. Mine is a Vanguard equity fund wrapped as insurance (nothing complicated or costly, never compelled to annuitize). I had my reasons. Anyway, the gains come out first, and then the contributions come out tax free. There is nowhere to put that in the inputs, so I put the tax free money (that's currently buried under gains) in the "Illiquid Assets" bucket, and through trial and error, had those assets released after I had done enough 59 1/2 pulls (paying tax just like pulling from a tIRA). I presume that my first priority would be to "un-bury" the basis in the VA. It does slam out of the VA into a different asset allocation (the destination [after tax] is a much lower percent equities). But all-in-all, I think I've got that worked out close enough in the model.

For my HSA, it's small right now, so doesn't hold much sway in the model, no matter how I manage it. But the model isn't going to tell you when to spend it. That's fine for me...reduce complexity of the input screen as well as the LP model and constraints.

My traditional IRA pool contains some (7%) after tax money. Not a big deal in my case, and the model errs on the conservative side.

In summary, getting my situation into i-orp worked pretty well. There are a few work-arounds that I had to use, but I think the model returned an accurate result. This is a fantastic tool, very glad to have access to it! Now I need to get out from behind this computer and spend some money!

 

[jebmke]

Have they improved the tax calculations at all? Last time I used it the tax calcs were fairly basic. They didn't include the various hidden tax "brackets" (like the 30% bracket).

 

[LOL!]

I think one needs to confirm everything that i-orp reports with some running of tax software such as TT.

I think i-orp can be used to give one a rough outline and what one needs to do, but if one runs TT with one's real numbers, I think one can see that one can tweak things quite a bit.

Perhaps this is how you confirmed the results that you got.

 

[Lsbcal]

...
In summary, getting my situation into i-orp worked pretty well. There are a few work-arounds that I had to use, but I think the model returned an accurate result. This is a fantastic tool, very glad to have access to it! Now I need to get out from behind this computer and spend some money!

Our situations on this forum cover quite a range. For us medical coverage is a non-issue but for others it's a big headache.

Spending money when one has been "careful" in the past is a somewhat stressful issue. I deal with it by figuring our upward bound for the year and telling myself (over and over) that it's OK to hit that limit. VPW helped to open my eyes to higher spending percentages but I still hold a few tenths percent back. Then during the year I still might hold a few more 0.1% back -- oh well.

Agree with LOL! about i-orp. I will credit i-orp with opening my eyes to spending more Roth money now that we are in some gap years between making Roth conversions and the onset of RMD's. I make a table using Turbo Tax each year to determine how much to spend from the IRA vs Roth's.

 

[sengsational]

Thanks all for your reflections on i-orp. I agree that the tax calculation is probably fairly basic, but I think it errs on the conservative side.

The reason I think i-orp is cool is because it lays out a possible future that's "thought about" the big stuff, and has a plan that's optimized (limited, of course, by the level of detail within the model).

I realize that the near-term stuff will need a finer look (TT), but with the general direction that the model's output gives me, I can glean what it was "trying" to do, and head off in that direction.

My validation was to download the result and run a few parallel calculations. Obviously I can't validate that the result is optimal, but it looks like I could execute the recommendations, and it would work (given the limitation that it gives equities exactly X% gains per year, year in, year out). Another useful feature that I didn't mention above would be to have it run the optimization with the defined inflation and growth rates (as usual), but present the output with inflation backed-out. That would make it easier to validate. You can set inflation to 0% and reduce the gains by the inflation rate, but I don't think the optimization would work the same then.

I make a table using Turbo Tax each year to determine how much to spend from the IRA vs Roth's.

Is this calculation basically to tell you how much IRA money to pull in order to snug up against your tax bracket or ACA limit, then pull the rest from Roths?