Best Models to Determine Roth Conversions

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Topic Author
ModifiedDuration
Posts: 431
Joined: Sat Dec 05, 2015 4:33 pm

Best Models to Determine Roth Conversions

Post by ModifiedDuration »

What are the best models to determine how much to do in Roth conversions?

Retiree Planning Model (RPM)? MaxiFi? Something else?

What are the advantages and disadvantages of the models?
smitcat
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Joined: Mon Nov 07, 2016 10:51 am

Re: Best Models to Determine Roth Conversions

Post by smitcat »

RPM and Pralana gold.
They each require a lot of time to setup, then run each of your most likely models, and then understand the impacts of your runs.
RetiredCSProf
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Joined: Tue Feb 28, 2017 4:59 pm

Re: Best Models to Determine Roth Conversions

Post by RetiredCSProf »

I was unsuccessful in using RPM -- either because I am using an old Mac with a really old version of Excel or because I cannot convince RPM that I am divorced and filing single, which would alter the results.

Instead, I have created my own spreadsheet in Numbers for estimating my annual income taxes. I calculate my Roth space (amount to convert) each year based on the difference between my estimate of MAGI and my best guess for the top of IRMAA tier #3 (two-year look back). If I reach for the top of the 24% tax bracket that throws me over a cliff into IRMAA tier #4. If I aim for the top of IRMAA tier #2, then I have only about $10K in my Roth space.
ByThePond
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Joined: Thu Dec 31, 2015 11:21 am

Re: Best Models to Determine Roth Conversions

Post by ByThePond »

+1 for RPM.

It takes a bit to set up (OK, more than a bit), but it's a powerful and wide-reaching tool. I use it not only to guide my Roth conversions, but also to approximate taxes and withdrawals, etc.
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Eagle33
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Re: Best Models to Determine Roth Conversions

Post by Eagle33 »

I-ORP
Rocket science is not “rocket science” to a rocket scientist, just as personal finance is not “rocket science” to a Boglehead.
smitcat
Posts: 8622
Joined: Mon Nov 07, 2016 10:51 am

Re: Best Models to Determine Roth Conversions

Post by smitcat »

Eagle33 wrote: Tue Jan 11, 2022 3:12 pmI-ORP
You must be very careful utilizing IORP and make sure you set all categories of investments (Roth, taxable, tax deferred) to the same %'s in stock/bonds otherwise the calculator will drive all investments to Roth.
Also ...we have had a number of issues with the tax calculations, please check them with tax software.
is50xenough
Posts: 262
Joined: Sat Jul 28, 2018 1:37 pm

Re: Best Models to Determine Roth Conversions

Post by is50xenough »

RetiredCSProf wrote: Mon Jan 10, 2022 1:03 pm I was unsuccessful in using RPM -- either because I am using an old Mac with a really old version of Excel or because I cannot convince RPM that I am divorced and filing single, which would alter the results.

Instead, I have created my own spreadsheet in Numbers for estimating my annual income taxes. I calculate my Roth space (amount to convert) each year based on the difference between my estimate of MAGI and my best guess for the top of IRMAA tier #3 (two-year look back). If I reach for the top of the 24% tax bracket that throws me over a cliff into IRMAA tier #4. If I aim for the top of IRMAA tier #2, then I have only about $10K in my Roth space.
Might you make available?
RetiredCSProf
Posts: 799
Joined: Tue Feb 28, 2017 4:59 pm

Re: Best Models to Determine Roth Conversions

Post by RetiredCSProf »

is50xenough wrote: Thu Jan 13, 2022 10:27 am
RetiredCSProf wrote: Mon Jan 10, 2022 1:03 pm I was unsuccessful in using RPM -- either because I am using an old Mac with a really old version of Excel or because I cannot convince RPM that I am divorced and filing single, which would alter the results.

Instead, I have created my own spreadsheet in Numbers for estimating my annual income taxes. I calculate my Roth space (amount to convert) each year based on the difference between my estimate of MAGI and my best guess for the top of IRMAA tier #3 (two-year look back). If I reach for the top of the 24% tax bracket that throws me over a cliff into IRMAA tier #4. If I aim for the top of IRMAA tier #2, then I have only about $10K in my Roth space.
Might you make available?
If there is enough interest, I would be willing to make my Numbers spreadsheet available. It is tailored to my tax situation; e.g., assumes that 85% of my SS income is subject to federal taxes but not to state income taxes. I update it each year in February with changes in the tax code and tax tables.
Exchme
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Re: Best Models to Determine Roth Conversions

Post by Exchme »

I do my modeling in Pralana Gold and RPM.

The new version of Pralana Gold will be out shortly (buying now gets you the upgrade when available) and the newsletter says the new version has a brand new Roth Conversion module where you pick whose account to convert, the Tax Bracket, IRMAA Tier or FPL multiple for each year and it shows you the improvement. Much easier than RPM to do the Roth analyses and Pralana offers a lot of other flexibility as well (HSAs, inherited Roth IRAs, after tax money in IRA, 529s, insurance...). Also Pralana gives historical and Monte Carlo results, allows you to apply any historical year to your year by year results so you can look in depth at a great or terrible sequence of returns, has lots of options for withdrawal strategies like ABW, Guyton-Klinger and Consumption Smoothing.

I use RPM for situations where I want to program in something extra, Pralana doesn't allow any formula writing.

Both the new version of Pralana and RPM will allow you to do tax efficient asset location where you put your bonds in tax deferred to slow its growth. Most other programs don't allow that or will give bad answers if you try (and you may not realize you have a bad answer).
Topic Author
ModifiedDuration
Posts: 431
Joined: Sat Dec 05, 2015 4:33 pm

Re: Best Models to Determine Roth Conversions

Post by ModifiedDuration »

Thank you, everyone.

I will look at RPM, take a look at Pralana Bronze to see if I like their format, and I-ORP.

I’m going to be busy.
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