Those Who don't/didn't do Roth Conversions

[CardsFan]

What is the rational of converting DWs account first?

Not sure about Winemaker's rationale but I did the same thing. My rationale was:

- she is 6 months older and, under old the rules, would have had RMD's a year before me (this is no longer in play based on the new rules)

- simplifying RMD's by only having one account. Not a big deal, but since her account was smaller, it was fairly easy to do over 3-4 years.

So, no big shakes and the main reason has disappeared.

For the record, I don't think we will ever spend a significant amount of our IRA dollars unless one of us (or both) ends up in a LTC facility. So our conversion planning considers the rate DS and DDIL would pay while they are still working.

And, as I write this, it occurs to me that could be a good argument for converting mine first and making DS beneficiary of hers.

 

[RetireBy90]

Not sure about Winemaker's rationale but I did the same thing. My rationale was:

- she is 6 months older and, under old the rules, would have had RMD's a year before me (this is no longer in play based on the new rules)

- simplifying RMD's by only having one account. Not a big deal, but since her account was smaller, it was fairly easy to do over 3-4 years.

So, no big shakes and the main reason has disappeared.

For the record, I don't think we will ever spend a significant amount of our IRA dollars unless one of us (or both) ends up in a LTC facility. So our conversion planning considers the rate DS and DDIL would pay while they are still working.

And, as I write this, it occurs to me that could be a good argument for converting mine first and making DS beneficiary of hers.

I did same, now we only have one TIRA left and working on conversions for it. I’ll have some left and plan to do QCDs when RMDs kick in, so DS will get Roth.

 

[JDARNELL]

Not sure about Winemaker's rationale but I did the same thing. My rationale was:

- she is 6 months older and, under old the rules, would have had RMD's a year before me (this is no longer in play based on the new rules)

- simplifying RMD's by only having one account. Not a big deal, but since her account was smaller, it was fairly easy to do over 3-4 years.

So, no big shakes and the main reason has disappeared.

For the record, I don't think we will ever spend a significant amount of our IRA dollars unless one of us (or both) ends up in a LTC facility. So our conversion planning considers the rate DS and DDIL would pay while they are still working.

And, as I write this, it occurs to me that could be a good argument for converting mine first and making DS beneficiary of hers.

I can't come up with a good reason of one over the other except for simplification. Thus the reason I was asking. I think no matter what we do we are just rearranging the chairs on the titanic and it's not gonna matter in the end.

 

[CardsFan]

I can't come up with a good reason of one over the other except for simplification. Thus the reason I was asking. I think no matter what we do we are just rearranging the chairs on the titanic and it's not gonna matter in the end.

For the most part I agree. But a conversion now is at the same marginal rate we would pay later on RMD's, so it can't hurt. And there are some cases where it could help (but only a little). They might delay IRMAA for a few years. They might keep us in the 22% bracket longer. Brackets are likely to increase in the future, but no one knows for sure. All of this is nibbling around the edges.

When we deferred, we made a pact with the [-]devil[/-] US government. We (or our heirs) will pay taxes on that tIRA.

 

[RetireBy90]

When we deferred, we made a pact with the [-]devil[/-] US government. We (or our heirs) will pay taxes on that tIRA.

I track the TIRA at current balance but also with 28% (22% Fed and 6% state)
I use the after tax number for any projections and to remind me how much is really mine (ours).

 

[Slim11]

Its really complicated figuring it out, so many variables. So, you do a small roth each year and them pay the taxes, or do you leave the same money in your ira and invest the money you would pay in taxes. Mostly it comes up as a wash. The more I think about thr more I am hesitating. I will probably still do it just because, I am younger and really dont need the money, so If my kido can keep it tax free for 10 years after I die, that would be great. Otherwise, for me its almost a wash. Even if you go up a tax bracket later. I will be content, that I am just spliting the money between a roth and my 457 ( ira). I keep doing the numbers and I do come out ahead with the roth, but not by much and only after 20 years. So, its not life altering.

 

[Winemaker]

What is the rational of converting DWs account first?

Statistics say the male dies first. If I die in the next 3 years, she will have over $1,000k in her Roth, with a $123k annual income stream. She will have over $2,000k in my tIRA, and 401k to either take conversions/RMDs, allow the 2 kids to inherit, or give it away. She will be in either be in the 32 or 35% bracket. 2 Easier planning and options, I say.

If I don't go room temp by then, we'll have an $143k stream in 4 more years when I turn 70, and we'll have my tIRA and 401k to take 7 more years of distributions/conversions before RMDs.

 

[PatrickA5]

We'll probably still be in the 12% bracket even after RMDs kick in. Maybe a little over. So, the tax savings will be minimal while I'm alive. But, DW will be pushing the current 24% bracket when I'm gone, so it doesn't hurt anything to do some 12% conversions for the next few years.

If our Roths are high enough, I've thought about doing a Roth SPIA down the road. Something about having a steady, tax-free income is appealing to me. I'll ponder that in a few years.

 

[Koolau]

A bit hard to follow your numbers (that's on me not you) but I think I got the gist of it. Basically, you're suggesting I think in terms of after-tax figures, and also account for the fact that expenses are likely to drop materially for a single vs couple.

In our case, DW had the smaller amount in tIRAs. Dealing with the smaller amount first made the most sense to us. We're the same age, so RMD's were not the issue.

 

[LateToFIRE]

We'll probably still be in the 12% bracket even after RMDs kick in. Maybe a little over. So, the tax savings will be minimal while I'm alive. But, DW will be pushing the current 24% bracket when I'm gone, so it doesn't hurt anything to do some 12% conversions for the next few years.

If our Roths are high enough, I've thought about doing a Roth SPIA down the road. Something about having a steady, tax-free income is appealing to me. I'll ponder that in a few years.

Ohh, that never occurred to me. So, the income from an SPIA would be completely tax-free if purchased via a Roth IRA?

What's the tax treatment if purchased from Taxable funds?

I assume if from tIRA would be 100% income taxable, right?

 

[pb4uski]

Yes, the account type dictates the taxability. In a taxable account for a life contingent SPIA part of your benefit payments are principal and part is interest. You can Google the calculation of how the allocation is calculated but it is based on your age at issue.

 

[Odduck]

I'm a novice at any of this. I'm 55, just retired, have about 1M in 401k and about 1M in taxable/brokerage and my expenses have always been very low compared to those figures - time to spend! I've been staring at this Roth conversion stuff for quite a while and feel like it's a hole that gets deeper and deeper. What about how that affects SSI taxes? What about how it affects medicare or ACA or all these other things?

Last year, my state got rid of taxes on "retirement" income for those 55 or older and that includes Roth conversions - so those just got 5-6% cheaper.
Thinking about all this, I chose to take retiree medical for $10k/year for now as that's a one-way door. If I drop it, then I'm on ACA, whatever that looks like for the next 10 years. I can change my mind in a few years if I'm pretty sure the ACA won't go away or turn really ugly.

I ran across an advisor's video talking about how most people make a mistake when doing yearly conversions by doing the conversion at the end of the year and projected many years down the road, that's worse than doing it at the beginning of the year or doing 2 conversions during the year, etc. because the sooner money goes into a Roth and starts earning tax-free, the better.

So I've done a few simulations and I'm more puzzled. Now I'm around to using "Retiree Portfolio Model v24.0.xlsm" from the Boglehead forum:
https://www.bogleheads.org/forum/viewtopic.php?t=97352
This seems to be the most comprehensive model I've come across.

Inputting round numbers for expenses, etc. and then just changing the Roth conversions, I get the following outputs at 94 years old (when someone will need to be paid to care for me if I'm still around).

No Roth conversions: Ending at 5.36M, total Federal Taxes of 1.29M
13 years 55-67 of 60K: Ending at 6.44M, Federal Taxes of .678M
4 years 55-58 of 200K: Ending 6.85M, Federal Taxes of .523M

So according to whatever crazy stuff I've done with this spreadsheet, it says that it's best to go up to the end of the 24% bracket and convert the majority of my 401k over ASAP, compared to a longer set of conversions staying in the 12% range.

I'm a bit biased here as I like the idea of paying a chunk of taxes now and locking in the future a bit. I don't think they'd ever change the rules on existing Roths, but to change existing tax rates would be easy and I feel a bit of doom and gloom ahead with fiscal easing and the deficit. If future taxes end up lower - boo hoo/don't care - but if I plan for a large tax bill and it doubles or something, that would hurt.

I'm not sure I understand these results and suspect that I'm doing something wrong.

 

[qwerty3656]

I'm a novice at any of this. I'm 55, just retired, have about 1M in 401k and about 1M in taxable/brokerage and my expenses have always been very low compared to those figures - time to spend! I've been staring at this Roth conversion stuff for quite a while and feel like it's a hole that gets deeper and deeper. What about how that affects SSI taxes? What about how it affects medicare or ACA or all these other things?

Last year, my state got rid of taxes on "retirement" income for those 55 or older and that includes Roth conversions - so those just got 5-6% cheaper.
Thinking about all this, I chose to take retiree medical for $10k/year for now as that's a one-way door. If I drop it, then I'm on ACA, whatever that looks like for the next 10 years. I can change my mind in a few years if I'm pretty sure the ACA won't go away or turn really ugly.

I ran across an advisor's video talking about how most people make a mistake when doing yearly conversions by doing the conversion at the end of the year and projected many years down the road, that's worse than doing it at the beginning of the year or doing 2 conversions during the year, etc. because the sooner money goes into a Roth and starts earning tax-free, the better.

So I've done a few simulations and I'm more puzzled. Now I'm around to using "Retiree Portfolio Model v24.0.xlsm" from the Boglehead forum:
https://www.bogleheads.org/forum/viewtopic.php?t=97352
This seems to be the most comprehensive model I've come across.

Inputting round numbers for expenses, etc. and then just changing the Roth conversions, I get the following outputs at 94 years old (when someone will need to be paid to care for me if I'm still around).

No Roth conversions: Ending at 5.36M, total Federal Taxes of 1.29M
13 years 55-67 of 60K: Ending at 6.44M, Federal Taxes of .678M
4 years 55-58 of 200K: Ending 6.85M, Federal Taxes of .523M

So according to whatever crazy stuff I've done with this spreadsheet, it says that it's best to go up to the end of the 24% bracket and convert the majority of my 401k over ASAP, compared to a longer set of conversions staying in the 12% range.

I'm a bit biased here as I like the idea of paying a chunk of taxes now and locking in the future a bit. I don't think they'd ever change the rules on existing Roths, but to change existing tax rates would be easy and I feel a bit of doom and gloom ahead with fiscal easing and the deficit. If future taxes end up lower - boo hoo/don't care - but if I plan for a large tax bill and it doubles or something, that would hurt.

I'm not sure I understand these results and suspect that I'm doing something wrong.

I wonder if you've got optimistic assumptions on your growth rates? If you make great returns, your future tax brackets will be higher (and it would suggest converting more sooner).

 

[LateToFIRE]

I wonder if you've got optimistic assumptions on your growth rates? If you make great returns, your future tax brackets will be higher (and it would suggest converting more sooner).

FYI, RPM is a "linear" model. It does not do Monte Carlo or historic simulation. It's just a really really tricked out Excel spreadsheet which is why the results may seem optimistic even with conservative return assumptions. I've compared the end results I'm getting for RPM vs FireCalc and what gives me some comfort is that the results are very close in terms of RPM vs FireCalc's average ending portfolio. It's just that FireCalc goes a step further and provides probability of success, along with a band of potential outcomes based on historic market data, whereas RPM is only giving you the average result. Both very useful for different reasons. RPM is by far the most robust free tool I've found for tax calc's.

 

[LateToFIRE]

I'm a novice at any of this. I'm 55, just retired, have about 1M in 401k and about 1M in taxable/brokerage and my expenses have always been very low compared to those figures - time to spend! I've been staring at this Roth conversion stuff for quite a while and feel like it's a hole that gets deeper and deeper. What about how that affects SSI taxes? What about how it affects medicare or ACA or all these other things?

Last year, my state got rid of taxes on "retirement" income for those 55 or older and that includes Roth conversions - so those just got 5-6% cheaper.
Thinking about all this, I chose to take retiree medical for $10k/year for now as that's a one-way door. If I drop it, then I'm on ACA, whatever that looks like for the next 10 years. I can change my mind in a few years if I'm pretty sure the ACA won't go away or turn really ugly.

I ran across an advisor's video talking about how most people make a mistake when doing yearly conversions by doing the conversion at the end of the year and projected many years down the road, that's worse than doing it at the beginning of the year or doing 2 conversions during the year, etc. because the sooner money goes into a Roth and starts earning tax-free, the better.

So I've done a few simulations and I'm more puzzled. Now I'm around to using "Retiree Portfolio Model v24.0.xlsm" from the Boglehead forum:
https://www.bogleheads.org/forum/viewtopic.php?t=97352
This seems to be the most comprehensive model I've come across.

Inputting round numbers for expenses, etc. and then just changing the Roth conversions, I get the following outputs at 94 years old (when someone will need to be paid to care for me if I'm still around).

No Roth conversions: Ending at 5.36M, total Federal Taxes of 1.29M
13 years 55-67 of 60K: Ending at 6.44M, Federal Taxes of .678M
4 years 55-58 of 200K: Ending 6.85M, Federal Taxes of .523M

So according to whatever crazy stuff I've done with this spreadsheet, it says that it's best to go up to the end of the 24% bracket and convert the majority of my 401k over ASAP, compared to a longer set of conversions staying in the 12% range.

I'm a bit biased here as I like the idea of paying a chunk of taxes now and locking in the future a bit. I don't think they'd ever change the rules on existing Roths, but to change existing tax rates would be easy and I feel a bit of doom and gloom ahead with fiscal easing and the deficit. If future taxes end up lower - boo hoo/don't care - but if I plan for a large tax bill and it doubles or something, that would hurt.

I'm not sure I understand these results and suspect that I'm doing something wrong.

I've been using RPM quite extensively and would be very cautious about drawing too many conclusions on the Roth question. Keep in mind that what its giving you is something of an average result for a linear path - basically one possible scenario out of thousands of possible variations in other inputs. So, it is something of a sledge hammer when trying to answer the Roth conversion question.

It's also quite manual. It does a lot of things well, but for example, it does not automatically optimize which account is best for WD's - it just takes everything blindly from the Taxable account unless you manually intervene.

I don't have enough info to know why you're getting such a huge benefit, especially if you are not drawing funds from the Roth later in life. In my case, the benefit was minimal, partly because (in the model) I never run out of Taxable funds, so never need the Roth funds. And partly because I'm naturally in the higher tax brackets due to various income sources. I should try modeling it differently, but only want to spend so much time on it.

This is a topic folks can really split hairs on ad nauseam. The thing is... unless you can convert at 0% or something very low, like 12%, there is no way to truly know if you'll come out ahead.

My pwn personal rational for converting (when I get the oppty to) is to avoid big tax bills if/when I need to make large chunky WD's (ex. to by a condo someplace warm).

[P.S. Also, occurred to me that you're a few years younger than me. If you are able to start conversions at age 55, at a fairly low tax rate, that probably makes a huge difference by the time you're 94.]

 

[thefist]

Inputting round numbers for expenses, etc. and then just changing the Roth conversions, I get the following outputs at 94 years old (when someone will need to be paid to care for me if I'm still around).

No Roth conversions: Ending at 5.36M, total Federal Taxes of 1.29M
13 years 55-67 of 60K: Ending at 6.44M, Federal Taxes of .678M
4 years 55-58 of 200K: Ending 6.85M, Federal Taxes of .523M

So according to whatever crazy stuff I've done with this spreadsheet, it says that it's best to go up to the end of the 24% bracket and convert the majority of my 401k over ASAP, compared to a longer set of conversions staying in the 12% range.

I’ve never used RPM, but it sounds like it might be similar to I-ORP.
Optimal Retirement Planner - Extended Parameter Form

Run your numbers in i-orp. The output reports are excellent. They show you where your withdrawals come from, and the tax brackets every year.
We are similar in age. I’m 58 and started conversions around 54.
Here’s what to watch out for…
The benefit of these large conversions happens quickly. In your 200k example, run 4 sims, updating the starting numbers after the prior year conversions. Increment your age each time.
After 2 or 3 large conversions the benefits of them are reduced. So you may find a stopping point earlier. Now, if you tell I-orp to Roth convert, it will convert it all, so go into it with a predetermined limit if you don’t want to do that.

I had less to convert than you. I encountered some interesting timing.
Did a large conversion in January 2022 (oops). After that, and the market drop, the IRA balance got close to my goal. The sims then showed very little benefit thereafter, as distributions could then be taken at 12%.

These free tools can be very valuable, once you figure out how to use them properly and understand their limitations.

 

[Exchme]

I'm a novice at any of this. I'm 55, just retired, have about 1M in 401k and about 1M in taxable/brokerage and my expenses have always been very low compared to those figures - time to spend! I've been staring at this Roth conversion stuff for quite a while and feel like it's a hole that gets deeper and deeper. What about how that affects SSI taxes? What about how it affects medicare or ACA or all these other things?

Last year, my state got rid of taxes on "retirement" income for those 55 or older and that includes Roth conversions - so those just got 5-6% cheaper.
Thinking about all this, I chose to take retiree medical for $10k/year for now as that's a one-way door. If I drop it, then I'm on ACA, whatever that looks like for the next 10 years. I can change my mind in a few years if I'm pretty sure the ACA won't go away or turn really ugly.

I ran across an advisor's video talking about how most people make a mistake when doing yearly conversions by doing the conversion at the end of the year and projected many years down the road, that's worse than doing it at the beginning of the year or doing 2 conversions during the year, etc. because the sooner money goes into a Roth and starts earning tax-free, the better.

So I've done a few simulations and I'm more puzzled. Now I'm around to using "Retiree Portfolio Model v24.0.xlsm" from the Boglehead forum:
https://www.bogleheads.org/forum/viewtopic.php?t=97352
This seems to be the most comprehensive model I've come across.

Inputting round numbers for expenses, etc. and then just changing the Roth conversions, I get the following outputs at 94 years old (when someone will need to be paid to care for me if I'm still around).

No Roth conversions: Ending at 5.36M, total Federal Taxes of 1.29M
13 years 55-67 of 60K: Ending at 6.44M, Federal Taxes of .678M
4 years 55-58 of 200K: Ending 6.85M, Federal Taxes of .523M

So according to whatever crazy stuff I've done with this spreadsheet, it says that it's best to go up to the end of the 24% bracket and convert the majority of my 401k over ASAP, compared to a longer set of conversions staying in the 12% range.

I'm a bit biased here as I like the idea of paying a chunk of taxes now and locking in the future a bit. I don't think they'd ever change the rules on existing Roths, but to change existing tax rates would be easy and I feel a bit of doom and gloom ahead with fiscal easing and the deficit. If future taxes end up lower - boo hoo/don't care - but if I plan for a large tax bill and it doubles or something, that would hurt.

I'm not sure I understand these results and suspect that I'm doing something wrong.

Remember that RPM uses nominal values, so you have to inflation adjust those back to earth to see values in today's $. Since IRMAA surcharges will start at age 63 (your Medicare cost goes up two years later), that is probably affecting your 55-67 results. So I would start by reducing conversions from age 63 on to avoid paying IRMAA surcharges. In RPM, you have to go to a sheet like Details, row 286 to see if it is charging you IRMAA.

You are probably right to try to get Roth Conversions done prior to claiming SS,on the Details sheet, row 166, you can see the % of SS subject to taxation. Saving taxes on SS benefits may be a significant source of return for you.

RPM misses the taxes as you sell assets and realize capital gains. That can understate the cost of Roth Conversions.

Don't forget that taxes are due to revert to 2026 to the Pre-TCJA law, even if you input new rates for 2026 on the Setup sheet, RPM does not fully handle the pre-TCJA law as the personal exemption was removed with TCJA, that would come back under the old law, but the developer zeroed that out.

RPM is built around steady expenses though you can use a row provided for user entry on the Details sheet, row 143 to enter formulas or values.

Also, RPM doesn't correct for the embedded tax cost on the residual value of the IRA when you pass (or need the money sooner than you thought).

I eventually gave up on the shortcomings and bought a copy of Pralana Gold, it's much more flexible, it handles the tax situations I mentioned better and it has an optimizer for Roth Conversions that will find the best ordinary tax bracket each year for conversions. You can then fine tune, testing things like IRMAA tiers and whether to stay below the start of the LTCG phase-in. If you do go on ACA, it allows you to select the FPL multiple to limit Roth Conversions to. It has Monte Carlo and historical results. One cool thing is you can get a graph or year by year detailed accounting of what would have happened with your plan in any historical starting year you select. It's always good to test a really bad starting year like 1966 to make sure you are comfortable pre-paying taxes when we could always have another bad sequence of return when stocks go down for years and years.

Whatever tool you use, get very comfortable that you understand it and come back and share more results to get more feedback before you start moving money around. While Roth Conversions sound like a good idea in your case, it's very possible to go overboard and hurt yourself if you don't fully understand the tool.

 

[thefist]

In my reply above I left out one thing.
Each time you change the account balances, run a scenario with, and then without Roth conversions to see the difference. You should see the benefit reduce after a few large conversions.

 

[big-papa]

I’ve never used RPM, but it sounds like it might be similar to I-ORP.
Optimal Retirement Planner - Extended Parameter Form

Run your numbers in i-orp. The output reports are excellent. They show you where your withdrawals come from, and the tax brackets every year.
We are similar in age. I’m 58 and started conversions around 54.
Here’s what to watch out for…
The benefit of these large conversions happens quickly. In your 200k example, run 4 sims, updating the starting numbers after the prior year conversions. Increment your age each time.
After 2 or 3 large conversions the benefits of them are reduced. So you may find a stopping point earlier. Now, if you tell I-orp to Roth convert, it will convert it all, so go into it with a predetermined limit if you don’t want to do that.

I had less to convert than you. I encountered some interesting timing.
Did a large conversion in January 2022 (oops). After that, and the market drop, the IRA balance got close to my goal. The sims then showed very little benefit thereafter, as distributions could then be taken at 12%.

These free tools can be very valuable, once you figure out how to use them properly and understand their limitations.

They're pretty different. RPM is a massive spreadsheet that is continually updated. Takes some time to come up to speed and isn't focused solely on Roth conversions. There is no optimizer but it is good at letting you see the results of your plan. Some over on bogleheads have been playing around with using Excel Solver along with RPM for optimization purposes.

I-ORP is completely web based, but it's frozen-in-time and not maintained. And it does provide optimization. The author of it passed away a while back and the tax code programmed into it is quite some time ago.

 

[Exchme]

I’ve never used RPM, but it sounds like it might be similar to I-ORP.
Optimal Retirement Planner - Extended Parameter Form

Run your numbers in i-orp. The output reports are excellent. They show you where your withdrawals come from, and the tax brackets every year.
We are similar in age. I’m 58 and started conversions around 54.
Here’s what to watch out for…
The benefit of these large conversions happens quickly. In your 200k example, run 4 sims, updating the starting numbers after the prior year conversions. Increment your age each time.
After 2 or 3 large conversions the benefits of them are reduced. So you may find a stopping point earlier. Now, if you tell I-orp to Roth convert, it will convert it all, so go into it with a predetermined limit if you don’t want to do that.

I had less to convert than you. I encountered some interesting timing.
Did a large conversion in January 2022 (oops). After that, and the market drop, the IRA balance got close to my goal. The sims then showed very little benefit thereafter, as distributions could then be taken at 12%.

These free tools can be very valuable, once you figure out how to use them properly and understand their limitations.

I-orp was last updated for tax rates in 2020, so it's going to do those wrong, plus it will take RMDs at 72, plus it had longstanding nuisances like determining IRMAA based on the current year's income, not two years prior and failing to converge if you overconstrained it.

If I-orp was converting everything, you probably fell into a trap that's been discussed several times before. If you told the program that you hold a higher stock allocation in Roth than in your IRA, then it would hugely favor doing Roth Conversions (I'll call this the "i-orp trap", but any calculator would do the same thing, I-orp just did it faster), but this would not because Roth Conversions were a good idea, but because it was increasing your stock allocation as it did Roth Conversions, where it dumped the bonds you told it were in your IRA and bought stocks that you told it that were in Roth. The only way to get valid Roth Conversion studies from I-orp was to use the same asset allocation in all accounts.

RPM has more flexibility. You can either choose to use the same allocation in all accounts by setting the same (Setup sheet, select A in "method to use" (e76) and then input the same numbers for each account in rows 91-96 and 104-110) or you can set the allocation for the portfolio (Setup sheet, select C in "method to use" and set the overall portfolio allocation in rows 99 and 112, it's possible to make the same mistake. You can also set "asset allocation method" (E77) and the target overall allocation so the program fills the IRA with bonds first and then either puts overflow bonds in Roth or Taxable.

Since you will (correctly) get larger recommended Roth Conversions if you hold bonds in taxable vs. if you hold them in tax deferred and many people actually do hold their portfolio that way, the flexibility in RPM is an important advancement.

Pralana Gold also allows you to hold the overall portfolio allocation constant while varying what's held in each type of account. It has asset allocation Mode 1, where you set the allocations in each account or Mode 2 where you set the order of which one to have more stocks.

-In Mode 1, you can set allocations for 5 different time periods, but in any time period, they better all be equal or you will fall in the same "i-orp trap" of incorrect Roth Conversions.
-In Mode 2, you set the overall allocation and set a hoped for allocation for each account. The program will quickly have to move off your "hoped for" allocation in some accounts to keep the overall allocation steady.​

Someone correct me if I'm wrong, but I don't think other free or consumer grade tools allow you to hold bonds preferentially in tax deferred without falling into the "i-orp trap" of falsely high recommended conversions.

 

[big-papa]

I-orp was last updated for tax rates in 2020, so it's going to do those wrong, plus it will take RMDs at 72, plus it had longstanding nuisances like determining IRMAA based on the current year's income, not two years prior and failing to converge if you overconstrained it.

If I-orp was converting everything, you probably fell into a trap that's been discussed several times before. If you told the program that you hold a higher stock allocation in Roth than in your IRA, then it would hugely favor doing Roth Conversions (I'll call this the "i-orp trap", but any calculator would do the same thing, I-orp just did it faster), but this would not because Roth Conversions were a good idea, but because it was increasing your stock allocation as it did Roth Conversions, where it dumped the bonds you told it were in your IRA and bought stocks that you told it that were in Roth. The only way to get valid Roth Conversion studies from I-orp was to use the same asset allocation in all accounts.

RPM has more flexibility. You can either choose to use the same allocation in all accounts by setting the same (Setup sheet, select A in "method to use" (e76) and then input the same numbers for each account in rows 91-96 and 104-110) or you can set the allocation for the portfolio (Setup sheet, select C in "method to use" and set the overall portfolio allocation in rows 99 and 112, it's possible to make the same mistake. You can also set "asset allocation method" (E77) and the target overall allocation so the program fills the IRA with bonds first and then either puts overflow bonds in Roth or Taxable.

Since you will (correctly) get larger recommended Roth Conversions if you hold bonds in taxable vs. if you hold them in tax deferred and many people actually do hold their portfolio that way, the flexibility in RPM is an important advancement.

Pralana Gold also allows you to hold the overall portfolio allocation constant while varying what's held in each type of account. It has asset allocation Mode 1, where you set the allocations in each account or Mode 2 where you set the order of which one to have more stocks.

-In Mode 1, you can set allocations for 5 different time periods, but in any time period, they better all be equal or you will fall in the same "i-orp trap" of incorrect Roth Conversions.
-In Mode 2, you set the overall allocation and set a hoped for allocation for each account. The program will quickly have to move off your "hoped for" allocation in some accounts to keep the overall allocation steady.​

Someone correct me if I'm wrong, but I don't think other free or consumer grade tools allow you to hold bonds preferentially in tax deferred without falling into the "i-orp trap" of falsely high recommended conversions.

For the special case of a bond ladder that you don't rebalance in or out of, in Pralana and some other tools, you can treat it like a pension.

Cheers.

 

[thefist]

They're pretty different. RPM is a massive spreadsheet that is continually updated. Takes some time to come up to speed and isn't focused solely on Roth conversions. There is no optimizer but it is good at letting you see the results of your plan. Some over on bogleheads have been playing around with using Excel Solver along with RPM for optimization purposes.

I-ORP is completely web based, but it's frozen-in-time and not maintained. And it does provide optimization. The author of it passed away a while back and the tax code programmed into it is quite some time ago.

To the end user, a spreadsheet is nothing but a physical interface to enter data. So is a webform. What I’ve read is that both RPM and I-orp are linear programming models when it comes to their optimizations. So they are likely more alike under the covers than you realize.
I use Pralana Gold too. That’s a massive spreadsheet that is migrating to web-based application in mid-2024. That update has been long overdue.

I-orp definitely needs an update. I don’t think it models NIIT. It’s missing the changes from the Secure Acts. Personally, I don’t consider this to be a big deal. You can change your age to compensate somewhat.

But really, these tools are great to get you directionally correct. Every new year is always a checkpoint.
The output reports in I-orp are very educational, IMHO. Well worth the time running and understanding its limitations.

 

[thefist]

I-orp was last updated for tax rates in 2020, so it's going to do those wrong, plus it will take RMDs at 72, plus it had longstanding nuisances like determining IRMAA based on the current year's income, not two years prior and failing to converge if you overconstrained it.

If I-orp was converting everything, you probably fell into a trap that's been discussed several times before. If you told the program that you hold a higher stock allocation in Roth than in your IRA, then it would hugely favor doing Roth Conversions (I'll call this the "i-orp trap", but any calculator would do the same thing, I-orp just did it faster), but this would not because Roth Conversions were a good idea, but because it was increasing your stock allocation as it did Roth Conversions, where it dumped the bonds you told it were in your IRA and bought stocks that you told it that were in Roth. The only way to get valid Roth Conversion studies from I-orp was to use the same asset allocation in all accounts.

Yeah I forgot about the I-orp trap. But artificially changing your AA isn’t accurate either. It’s definitely a limitation of the tool. I’d love for I-Orp to get an update, but I’m doubting that. Too many other competing tools out there ahead of it.

I’m a Pralana Gold user too. I’m looking forward to the upcoming web version. Stuart has squeezed about as much out of excel as anyone has over the years.

 

[big-papa]

To the end user, a spreadsheet is nothing but a physical interface to enter data. So is a webform. What I’ve read is that both RPM and I-orp are linear programming models when it comes to their optimizations. So they are likely more alike under the covers than you realize.
I use Pralana Gold too. That’s a massive spreadsheet that is migrating to web-based application in mid-2024. That update has been long overdue.

I-orp definitely needs an update. I don’t think it models NIIT. It’s missing the changes from the Secure Acts. Personally, I don’t consider this to be a big deal. You can change your age to compensate somewhat.

But really, these tools are great to get you directionally correct. Every new year is always a checkpoint.
The output reports in I-orp are very educational, IMHO. Well worth the time running and understanding its limitations.

I-ORP definitely uses linear programming for optimization.
RPM does not contain an optimizer. As noted above, some bogleheads have started playing around with the built-in Excel Solver when using RPM, but it's not currently supported by the author.

I'm also a Pralana gold user and am looking forward to the web version. I also have my own spreadsheet suite for optimizing as well.

 

[Exchme]

To the end user, a spreadsheet is nothing but a physical interface to enter data. So is a webform. What I’ve read is that both RPM and I-orp are linear programming models when it comes to their optimizations. So they are likely more alike under the covers than you realize.
I use Pralana Gold too. That’s a massive spreadsheet that is migrating to web-based application in mid-2024. That update has been long overdue.

I-orp definitely needs an update. I don’t think it models NIIT. It’s missing the changes from the Secure Acts. Personally, I don’t consider this to be a big deal. You can change your age to compensate somewhat.

But really, these tools are great to get you directionally correct. Every new year is always a checkpoint.
The output reports in I-orp are very educational, IMHO. Well worth the time running and understanding its limitations.

You are correct that amongst other things, I-orp doesn't do NIIT. The super-annoying limitation was that it used the current year's income for IRMAA surcharges in the current year, so you could never really use its Roth Conversion plan as it might tell you to convert heavily at 63 and 64, when it's programming thought you weren't subject to IRMAA surcharges. I think the author has passed, so it doesn't seem likely anyone will take up the mantle to bring it back to life.

RPM is a free spreadsheet at the bogleheads wiki, it's been around for ~20 years. if you already have Pralana Gold, there is no reason to learn RPM, it's more limited, it does things manually that Pralana automates, and the layout of the inputs is really quirky. There is a boglehead user that developed an LP based tool, but I can't recall the author's username. I tried that shortly after it was developed, had to download a GNU based solver for Excel. I couldn't get it to run back then, but that was a couple years ago, the author may have improved it since or the failure may have been an error on my part.

I think you are right that Pralana Gold is up against the limits of what you can do in Excel, there are hundreds of controls and must be hundreds of macros to make it all work. The web version is being written by his partner, so that will provide us users continuing support on into the future (Stuart is approaching his mid 70's)