Has anyone used Income Strategy website/software?

[busdriver]

With retirement less than a year away, I'm trying to figure how to distribute my 401K & rollover IRA funds tax-efficiently. I will hold-off on my SS and PBGC pension until 70, but will draw on my spousal benefit starting at 66, so I've got from 65-70 to whittle-down a low 7 digit tax-deferred portfolio in hopes to lessen tax burden of after 70 income of appx. 198K/yr., before any RMD's are taken.

In my quest to find a calculator or software to help with the complexities of my dilemma, I found the Income Strategy website, (https://www.incomestrategy.com), from the same people, (William Meyer & Dr. William Reichenstein), that produce Income Solver, a professional version for CFP's as well as Social Security Solutions for best SS withdrawal strategy.

It's a subscription service for $20/mo. for basic plan and $50/mo. for premier plan. Just wondering if anyone has used it and if there's any need to continue subscription after your plan has been generated?

[jaybee747]

I am not using it but it looks very interesting, I hope someone can share more info.

[racy]

No, but also interested if others have, and how it differs from (free) iORP. https://i-orp.com/BigGraph/index.html

[barelybarefoot]

Bumped

[busdriver]

Since there was no feedback from my original post on this and since Fidelity, (holder of all of our tax deferred funds), has told me that their retirement drawdown analysis planning is no longer a service they provide, I decided to try the $20/month subscription service.

After inputting personal information, several strategies are generated. The recommended strategy is the one which is the most tax-efficient allowing for the highest account balance at the end period of your planned lifespan. Plan details of the different strategies can be reviewed and you can decide which plan works best for you.

In my case, I liked the recommended strategy with the idea of having the highest account balance at the end for my heirs. The process for me involves using my first five years of retirement, (ages 65-69) to live off of and convert all of my tax-deferred accounts to Roth IRA. My wife, who is already retired and a year younger, would convert her IRA to Roth in year six of my retirement. This would eliminate RMD’s from the picture.

At age 70 and beyond, I would start living off of SS & PBGC pension with the previously converted tax-free Roth funds not needed.

I must say that this strategy appears to be a bit painful in the beginning due to a higher tax bracket than other strategies; however, by doing so, it lowers the tax brackets for later remaining years of the plan which results with less overall taxes paid.

Again, there are several strategies generated from the info inputted. It is up to you to choose which strategy suits your needs best. Changing/revising inputted info will generate new details of the different strategies.

Subscription can be terminated at any time, so for $20, you can come up with some pretty sophisticated retirement drawdown plans. Continuing the subscription allows your details to be constantly updated, if you’ve linked your accounts with the software.

If you’d like to get additional help with your plan, it’s available for $125/hour. Before I found the Income Strategy website, I had considered using other financial planners who either charge up to $450/hr. or several thousands of dollars for a plan, (I am opposed to an AUM based plan). In my case, I felt $125/hr was reasonable for expert help. Due to complexities of our various sources of income, I’ve already had a few sessions with them to refine our plan for optimum results. I have been very pleased with each session I’ve had and plan to have a few more to tweak it to perfection.

I think that the recommended strategy that is generated may be contrary to conventional wisdom; however, I am unaware of any other software, including i-ORP, that can forecast the most tax-efficient strategy at the end-game like this one.

I hope that others might give this a try and post their feedback.

[danielm]

Hi Busdriver,

I'm also considering this product (as well as Maxifi planner). Any additional feedback you can offer since you last posted? Are you aware of features in the 'premier' version that would make it worth the extra $? Your comments are about the only ones I could find on the Internet and the info on their web site is not very detailed.

[busdriver]

I was hoping someone else would have tried the product by now, but apparently not. I still subscribe with the basic $20/mo., but feel no need in our case to use the premier plan. I have spent four or five hour-long sessions to tweak my plan as I have some special issues to contend with to refine tax-efficiency that the software would not pick up without manual manipulation. I still plan to follow the guidance of the software to convert all my tax-deferred accounts to Roth in time to eliminate age 70 RMD's when they would come into play.

[The Wizard]

...I still plan to follow the guidance of the software to convert all my tax-deferred accounts to Roth in time to eliminate age 70 RMD's when they would come into play.

I think it's a suboptimal idea, generally, to convert all of a substantial tax deferred portfolio to Roth by age 70.
You'll pay a large amount of additional income tax to do that.

More optimal approach is to levelize your income before and after age 70 to keep your AGI and resulting taxable income about the same or increasing slightly year to year.
Do this by doing comparatively modest Roth conversions in the pre-70 years.

Also keep an eye on Medicare IRMAA thresholds to avoid being just over a threshold due to Roth conversion. It's fine to be over the first $85,000 per person threshold, but be aware of the others in your planning...

[spammagnet]

Prompted by this thread, I subscribed to the basic plan. Being able to cancel at any time makes that a low ante.

I have a lot of experience with MaxiFi (primarily through its predecessor, ESPlanner Plus) and find its theoretical basis more appealing to my way of thinking. Instead of defining a desired spending level, as required by Income Strategy, MaxiFi maximizes your spending based on your desired terminal wealth. Both allow you to specify irregular spending events such as weddings, big vacations and long-term care.

I have less than a couple of hours experience with Income Strategy but, so far, find no way to control the SS benefit strategy, nor to edit the benefit forecast. (I prefer to include the Trustee's forecast of the trust fund drying up in 2035.) MaxiFi allows both. In it, I set benefits to drop 25% in 2035, and for DW to start benefits at age 62. I know benefits increase 8% per year deferred. In our case, that provides only a nominal difference over the life of our plan. Starting hers early allows us to preserve her assets, makes for much smoother cash flow, and significantly reduces the amount of term insurance required to assure financial security to her if I die early. YMMV.

I'll continue to play with Income Strategy for the rest of this subscription month but probably won't extend after that. I don't see the incremental value to me over MaxiFi alone and the latter is cheaper on an annual basis. That's the only way you can subscribe to it.

[busdriver]

I think it's a suboptimal idea, generally, to convert all of a substantial tax deferred portfolio to Roth by age 70.
You'll pay a large amount of additional income tax to do that.

More optimal approach is to levelize your income before and after age 70 to keep your AGI and resulting taxable income about the same or increasing slightly year to year.
Do this by doing comparatively modest Roth conversions in the pre-70 years.

Also keep an eye on Medicare IRMAA thresholds to avoid being just over a threshold due to Roth conversion. It's fine to be over the first $85,000 per person threshold, but be aware of the others in your planning...

I am aware of the high tax price tag in the beginning as well as the IRMAA issues. There are several ways to adjust the software to come up with a specific goal. It will initially recommend the plan that will amount the least tax dollars spent over your and your spouse's forecast lifetime, (an age you choose). This is the plan I chose as it also comes up with the largest amount of money left over when we are both gone, which will all reside in a tax-free Roth account to pass on to our kids tax-free.

I understand that level annual taxes and staying in the same bracket year after year is the conventional thinking of most plans, but this software can show how much more that kind of plan can cost over your lifetime vs take the big hit in the early years and wind up with a lower bracket for the mid to late years of retirement along with more tax-free money left over to pass on, depending on your spending level.

I think there is no other program like this, other than Income Solver, which is their professional one used by CFP's. I think $20 for a one month trial is a fair price to run as many scenarios as you'd like in that time to get some unconventional ideas on a different way of spending and saving your nest egg.

[busdriver]

I have less than a couple of hours experience with Income Strategy but, so far, find no way to control the SS benefit strategy, nor to edit the benefit forecast. (I prefer to include the Trustee's forecast of the trust fund drying up in 2035.) MaxiFi allows both. In it, I set benefits to drop 25% in 2035, and for DW to start benefits at age 62. I know benefits increase 8% per year deferred. In our case, that provides only a nominal difference over the life of our plan. Starting hers early allows us to preserve her assets, makes for much smoother cash flow, and significantly reduces the amount of term insurance required to assure financial security to her if I die early. YMMV.

I'll continue to play with Income Strategy for the rest of this subscription month but probably won't extend after that. I don't see the incremental value to me over MaxiFi alone and the latter is cheaper on an annual basis. That's the only way you can subscribe to it.

I suggest you call them for some pointers on how to work with the program. They worked with me for about an hour at no charge to get a handle on how to make various changes. I'm certain your social security claiming strategy can be changed; however, the default is what will result in the most dollars for your projected lifespan. In my case, it's file at 66 and my wife at 65, (she's a year younger than me). I will restrict my application to spousal benefits until I turn 70, then switch to my own benefits which she will switch to when I pass. I'm sure that they can explain why the software came up with what it did and help you change it to whatever strategy you desire. I suspect they can help with the trust fund issues as well. Let us know please.

[spammagnet]

I suggest you call them for some pointers on how to work with the program. They worked with me for about an hour at no charge to get a handle on how to make various changes. I'm certain your social security claiming strategy can be changed; however, the default is what will result in the most dollars for your projected lifespan. In my case, it's file at 66 and my wife at 65, (she's a year younger than me). I will restrict my application to spousal benefits until I turn 70, then switch to my own benefits which she will switch to when I pass. I'm sure that they can explain why the software came up with what it did and help you change it to whatever strategy you desire. I suspect they can help with the trust fund issues as well. Let us know please.

Thanks for your response and suggestions. I'm retiring in a couple of weeks and will have more time to play with it then.

Are spousal-only benefits still an option? I thought those got killed a couple of years ago?

[busdriver]

If you were born on or before January 1, 1954, after you reach FRA, you can choose to receive only the spousal benefit by filing a restricted application. By doing this you delay receiving your own retirement benefits based on your earnings record, until a later date.

I will be retiring in November, so have been actively revising the method of the decumulation plan. I used the Social Security Solutions software, (same company as Income Strategy & Income Solver), a few years back to come up with the method to allow for the most SS dollars for us.

[danielm]

Busdriver and Spammagnet,

Thanks for your feedback on those two products. Spammagnet, have you found incomestrategy easier to use for inputting assets (specifically stocks and bonds as they use an aggregator)? Busdriver, the incomestrategy monthly model sort of assumes one would use on a regular basis throughout the year. Have you found this to be the case? Or did you use it a lot during the first couple of months and then not need it so much afterwards?

-daniel-

[busdriver]

Busdriver, the incomestrategy monthly model sort of assumes one would use on a regular basis throughout the year. Have you found this to be the case? Or did you use it a lot during the first couple of months and then not need it so much afterwards?

-daniel-

The first several months I worked with it and have had it manually modified by them to come up with the plan that will work best for us. I haven't really spent much time with it the last month; however, I intend to work with it in November-December time frame to check for possibility of Roth conversion this year. Early next year I will be utilizing 401K to IRA rollover along with NUA, (net unrealized appreciation), transfer and sale of company stock while trying to keep under the 15% capital gains threshold and avoid bumping into 20% capital gains. After I accomplish that, I will re-evaluate if I want to keep the subscription ongoing. I suspect I will maintain it through age 70 or 71. If I'm successful in converting all tax-deferred funds to Roth, I don't see any reason to keep the subscription past that time.

[spammagnet]

Having more free time since retirement, I've played with the software some. An intro session from their software support staff, along with a couple of followup questions, have provided some insight into how it operates. The UI is not the friendliest I've ever used but, once you understand how it works, it's useful. Whether the $240/ or $600/year subscription is worth it is a different issue. For me, probably not, but a month or two is to worthwhile to develop an optimal plan (in their way of approaching things) and to decide whether or not I want to follow it.

For my given circumstances the software concludes that doing Roth conversions in early years "to target [my] adjusted gross income up to $319,998.00" results in the highest present value. Ignoring whether or not you believe that to be true, does a MAGI of $319,800 have some special significance? Is it a break point for taxes or something related?

Thanks

[spammagnet]

.. does a MAGI of $319,800 have some special significance? Is it a break point for taxes or something related? ...

I found the answer to my own question. First, it's 319,998.00, not 319,800.00. Second, It's the level at which IRMAA Medicare premiums go to $428.60. Why that level was specified, rather than a lower IRMAA break point, I don't know.

https://medicare.com/about-medicare/med ... bles-2018/

Code: Select all

2018 Medicare Part B premiums based on income (as reported on your tax return 2 years ago)
Your Annual Income 							2018 Premium Amount
Individual Tax Return 		Joint Tax Return 			You Pay
$85,000 or less 		$170,000 or less 			$ 134.00
$85,001 up to $107,000 		$170,001 up to $214,000 		$ 187.50
$107,001 up to $133,500 	$214,001 up to $267,000 		$ 267.90
Above $133,500 up to $160,000 	Above $267,000 up to $320,000 		$ 348.30
Over $160,000 			Over $320,000				$ 428.60

[Txflyer]

Do the reports give you any additional information on your investments and cash holdings other than the recommended draw down strategy? I have several investment accounts and having an analysis showing different views of how the roll up together would be helpful. Growth, value, balanced... types of bonds held or even the underlying stocks and bonds held in the mutual funds or ETFs.

Any chance that is provided by the Income Strategy reports?

[Phil DeMuth]

I have spent the past year working with Income Solver, the Income Strategy software for financial advisors. There is a learning curve so here are my thoughts:

I recommend starting with i-ORP, which is free. Once you have that down and a good understanding of the inputs and outputs and how they work together, then -- if your retirement plan is anything but a slam dunk, and especially if you have significant assets, I would move to Income Strategy. This is like going from High School to Grad School.

Even though I'm a cheapskate, I would recommend starting with a more expensive option that includes several hours of phone consultation. You will be looking at the top plan off the shelf, but these guys look at these scenarios all day long and can advise you as to the trade-offs as well as with any issues with your inputs and assumptions that might be skewing the recommendations. They are smart and helpful. If there were a 400-page manual you wouldn't need them, but there isn't, and you do. There is so much money on the line that you want to see through your plan like plate glass. You want an expert looking over your shoulder. The computer is the expert but you also need the person who understands what the computer is doing.

Once I had a plan that I loved, then I would pare back my usage to most minimal coverage or maybe even discontinue it, perhaps re-upping when something significant changed in the tax code or my financial world.

[busdriver]

Phil:

Thank you for your reply. Unfortunately, I am challenged when it comes to I-ORP and never felt like I could work with it properly. I am also unable to work with spreadsheets, so any free programs that run on excel aren't any help to me. I am happy with the Income Strategy product and am still subscribing to the basic $20/mo and will likely continue to do so for the next several years of the Roth conversion process. I have had several sessions with them to fine-tune the plan for our specific situation and feel it was money well spent.

Txflyer:

The program doesn't provide any investment analysis other than there is an asset summary pie chart based on all your investments that you've linked. It also forecasts what your projected growth and balances, (on what I was told), are based on conservative market expectations along with your investment style when all your accounts have been linked. It breaks down withdrawals from taxable, tax-deferred and tax-free accounts. I would recommend that you and anyone else to try the product for a month basic service and see if you feel it's a good product or not and post your thoughts. If it's not to your liking, cancel subscription and you're only out $20. The ability to generate multiple plans and compare results of one vs another to me is a good value.

[yobyot]

I have spent the past year working with Income Solver, the Income Strategy software for financial advisors. There is a learning curve so here are my thoughts:

I recommend starting with i-ORP, which is free. Once you have that down and a good understanding of the inputs and outputs and how they work together, then -- if your retirement plan is anything but a slam dunk, and especially if you have significant assets, I would move to Income Strategy. This is like going from High School to Grad School.

Even though I'm a cheapskate, I would recommend starting with a more expensive option that includes several hours of phone consultation. You will be looking at the top plan off the shelf, but these guys look at these scenarios all day long and can advise you as to the trade-offs as well as with any issues with your inputs and assumptions that might be skewing the recommendations. They are smart and helpful. If there were a 400-page manual you wouldn't need them, but there isn't, and you do. There is so much money on the line that you want to see through your plan like plate glass. You want an expert looking over your shoulder. The computer is the expert but you also need the person who understands what the computer is doing.

Once I had a plan that I loved, then I would pare back my usage to most minimal coverage or maybe even discontinue it, perhaps re-upping when something significant changed in the tax code or my financial world.

What an excellent suggestion to start with i-ORP! I've been looking all around for some place to start. We are fortunate enough to have the first-world problem of having done well enough to have plenty of account types, making a distribution strategy impossible to template in just my head.

I've had a subscription to MaxiFi for almost a year. But it doesn't do what i-ORP does as it's first output: tell you which accounts when. I've gone round and round with the support folks at MaxiFi on this point and, despite very detailed responses to my queries, they just don't seem to get it. MaxiFi can tell you what the true, inflation adjusted amount is that you can spend across your lifespan. And it accounts for Medicare part B costs and has great flexibility when it comes to scenario development. But there's a single binary switch for Roths: you can select to either spend them first or not. In either case, the outputs don't tell you which accounts are tapped when. There's also no breakdown of RMDs, which loom large in my initial planning.

i-ORP tells you immediately which accounts go in which order even in the simplest scenarios. As the help says, "The Nominal Withdrawal Report separates ORP from the herd of retirement calculators." I couldn't agree more.

I look forward to spending hours and hours with it to see what I can learn from it.

One advantage of using all these products, IMHO: when you use more than one and they all tell you that you have accumulated "enough" (whatever that means to you) it's a comforting thought. Using all of them can give you a set of data points that let you move from the concern about sufficiency to how to develop the most tax-efficient plan possible.

[spammagnet]

What an excellent suggestion to start with i-ORP! I've been looking all around for some place to start. We are fortunate enough to have the first-world problem of having done well enough to have plenty of account types, making a distribution strategy impossible to template in just my head.

... i-ORP tells you immediately which accounts go in which order even in the simplest scenarios. As the help says, "The Nominal Withdrawal Report separates ORP from the herd of retirement calculators." I couldn't agree more.

I look forward to spending hours and hours with it to see what I can learn from it. ...

i-ORP was created and is run by a single person, self-described as "... an octogenarian, well past [his] euthanize-by-date." (i-ORP: FAQ) When he is no longer able to maintain the system personally, the vendor who hosts it for free will continue to host it but there will be no more maintenance. When inevitable OS updates require changes (the code is 30 years old), it will fail. That will be a loss to a lot of us.

The author invites other proposals for a succession plan and can be contacted at orplanner@gmail.org. Unfortunately, I have neither the hardware resources nor software skills required to manage such a project. Hopefully, someone (or some group) does.

[roboracer]

I just subscribed to the Premier Version

- Pretty buggy (cryptic errors) with non-existent to abysmal support. Pathetic user manual
- Seems overly optimistic in it's projections

I have signed up for an advisor session. Let's see if it is any better. If not, this is a waste

I signed up for a trial version of WealthTrace, which seems far better from a support perspective. Though it looks not to be equivalent in capability.

[yobyot]

Thanks.

I can't wait to hear how the advisor session goes.

[anu]

I just subscribed to the Premier Version

- Pretty buggy (cryptic errors) with non-existent to abysmal support. Pathetic user manual
- Seems overly optimistic in it's projections

I have signed up for an advisor session. Let's see if it is any better. If not, this is a waste

I signed up for a trial version of WealthTrace, which seems far better from a support perspective. Though it looks not to be equivalent in capability.

How was the advisor session

[danielm]

I bit the bullet and started using the Basic version of Income Strategy back in the fall. My initial reaction was that it seemed very powerful but a bit buggy. There is an included training session that just goes over basics but doesn't answer any questions about how best to use the product. After playing around with it for a few days I found some definite minor bugs that I reported to them and they have since corrected.

The tech support is pretty bad. I pointed out several issues and they promised to get back to me and didn't. They don't have any sort of email support that I know of.

The product results were confusing and there are settings that weren't clear to me how they should be used. This includes the 'model' portfolios which are used for projection purposes regardless of your actual portfolio. I decided to pay for a one-hour session (which I had with Chris) and that was extremely helpful. He both helped with critical settings as well as better explained how the model portfolios and product work. I spent some more time with the product and had a 2nd paid session with Chris which also was very helpful.

Based on settings, selected model portfolio (which you can customize), personal profile, and actual portfolio (which fortunately can be automatically updated) the software generates a list of suggested and ranked strategies. The strategies include maximizing social security benefits, minimizing taxes, and possibly using Roth conversions. Each strategy has a well defined plan which shows year by year the withdrawals, taxes, Roth conversions (if any), required minimum distributions from tax-deferred accounts, and expected Medicare premium payments. You would typically pick the most optimized plan (the one that results with the largest value at the end of your lifespan or that lasts the longest during your lifespan). Once you get the hang of the software it is fairly easy to run some 'what-if' type of analyses.

There are some things the software does that I'm not sure are optimal. For example, it wanted me to move my REITS index funds from my Tax Deferred accounts to Taxable accounts. The plan includes details on selling and buying assets at the front-end but I discovered bugs in the results that Income Strategy never fully explained.

Overall I think it has been a positive experience for me and at least confirmed summarized projection results I've seen in other similar products. The details on withdrawals over the years is very helpful as that was probably my primary concern going in. I'm not sure how much value there is in continuing the subscription but it does provide rebalancing suggestions. I would only recommend the product if you plan on spending extra money for at least 1 or 2 sessions with one of their planners.

PS - I also tried out Maxifi Planner. The inputting of portfolio information is difficult and doesn't seem very useful as you only enter totals by account types and not by actual holdings. They are not updated automatically so as the markets change you would have to update yourself. The results primarily just try to determine that maximum yearly amount you can spend to last your lifetime. Between the two I've found Income Strategy much more useful.

Hope this helps!

-daniel-

[roboracer]

Confirm danielm's comments.

I had 2 advisor sessions, which I used to understand the settings and logic used by the software. Once you understand this, it is a lot easier. Arguably, a well written user manual will negate the need for such sessions.

I ran trials for On strategy, Wealthtrace and Income strategy. Given my requirement of linking my investment accounts, I found this the best.

[busdriver]

danielm & roboracer:

Thank you for posting your thoughts on Income Strategy.

I am still subscribing and still believe it's a good product. While I still don't think it understands the taxation of my company stock for NUA purposes, I still like that it can show results of total taxes paid and ending balance over lifespan for various strategies.

It helped me come up with the mechanics of how to best decumulate our assets and will continue with the basic subscription to see how it tracks what we do over the next 5 years or so.

[mikemartin82]

I used Income Strategy for about 6 months. The concept is exactly what I am looking for - how I should draw down retirement savings, tell us when to start social security and recommendations for converting traditional sheltered savings to ROTH. Being able to compare strategies side-by-side is big bonus.

Everything with Income Strategy started out great...the initial consult - and for the first several months the results made sense. But recently, the results changed and were no longer making sense to me. (for instance, the PRIMARY/best strategy did not include any ROTH conversions. Most of my 35 years of retirement savings are traditional IRA/401K)

I called Income Strategy. The support person was able to see the same output and agreed the results I was getting didn't seem right. I waited for over a week and a half to hear something (anything, really) and when I didn't hear back...I emailed the support person to cancel my subscription.

Maybe I'll check back in - another year from now. I figure by then... they will either improve or they won't be around anymore. In the meantime, I will search for something else.

Mike

[jburd]

Is Income Strategy capable of handling the scenario where one needs to limit one's income for the purpose of qualifying for ACA subsidies before age 65?

[CRTR]

Is Income Strategy capable of handling the scenario where one needs to limit one's income for the purpose of qualifying for ACA subsidies before age 65?

I contacted them with the same question, a little while ago. Here is the response I received:

"Yes, our software is able to factor in tax credits. If you have an idea of the possible ACA subsidy amount, we can plug it right into the software and label it a Tax Credit, offsetting expenses in the same year. We can also reflect itemized deductions on a variety of tax items as well (and in the years the itemized deductions do not overcome the standard deduction, the standard deduction will automatically be applied).

Yes, by delaying Roth Conversions and keeping your taxes lower during the early years of retirement, and if that allows you to qualify for subsidies, we’ll plug in the subsidies for the appropriate time frame, and the software will then accommodate that component into the overall withdrawal plan and Roth Conversion plan! Then, we can see if Roth Conversions make sense down the road, or you may decide you don’t want to do any conversions at all. It’s extremely specific to everyone’s own situation, as I’m sure you know, but it’s all about quantifying the different options so you can make the most informed decisions."



FYI, I-ORP let you do the above rather easily . . . .for free

[abuss368]

Have you considered combining the 401k with the IRA to simplify from a planning perspective?

[CRTR]

Ok, so I signed up for the site.. . . .on the down side, not a very useful service for my situation. On the plus side, I didn't waste much money!

My primary goal was to get help deciding whether to to delay Roth conversions and capture the ACA tax credit or forgo the credit and start with Roth conversions right away. It was NOT readily apparent and there was no guide on how to set up the ACA credit simulation. I threw in the towel and paid for $125 for an hour of help. The woman from customer service was very nice. It took her 40 minutes to walk me through the basic set up and I'm pretty sure it's not completely right. When I mentioned the MAGI calculation and limits for the ACA, I realized we had a problem. I don't know why they haven't simplified that process (like I-ORP) It is a hugely cumbersome website for anything but the simplest of simulations.

While I had her on the phone, I asked about income real estate properties and how to model. I asked about adjusted basis and depreciation recapture and how the software handled them . . . . it seemed those concepts have not been addressed. So, if you're looking for help deciding whether to sell or not .. .good luck.

Finally, for kicks and giggles, I asked about longevity insurance (delayed annuities). You can add annuities to your profile but you have to trial and error all the possible combinations yourself. Software makes no recommendations.

So, for my relatively simple situation (ACA or not, keep or sell rental), the service was a waste of my time and money. If, as a poster above recommended, I need to pay for "several hours" of phone support just to fill in my data, it changes the price point for the product. Finally, given that I-ORP, Flexible Retirement Planner and IncomeStrategy all came up with almost identical recommendations for me (Roth conversions until 70), I'd recommend going with one of the freebies. If IncomeStrategy spends some resources on the software and website and improves its usability, I might change my mind . .. .

[gdl9988]

Hi,

I'm about 5 years from retirement. The question I have is whether it is worthwhile now to do ROTH conversions. Would income strategy be helpful in answering that question?

Thanks

Gary

[busdriver]

Yes, I believe it will come up with the most tax-advantaged plan for your projected future based on your inputs.

[Silk McCue]

Yes, I believe it will come up with the most tax-advantaged plan for your projected future based on your inputs.

Any chance you created a cheat sheet for yourself documenting exactly what the Settings tab items controlled. Some are obvious but others are clearly not. Any other tidbits you could share if you have the time regarding anything you discovered about the Profile entries would be great as well.I just signed up this afternoon and having been familiar with i-orp extended inputs, having all numbers handy and having done a lot of my own sophisticated spreadsheets, I was able to do a good job of populating the Profile and getting a look at the results. Pretty impressive work they have done here.

I am currently performing Roth conversions for the past 3 years and will do so for the next 9 or so. Their jump into the stratosphere of brackets in the first year is a bit much for me.

They absolutely need documentation to allow folks to not have to ask unnecessary questions. I'm trying to figure out their presentation of COLA'd and non COLA'd pensions/SS to understand how that interacts with their presentation of account balances. I just need to become certain that everything presented is either nominal or real. Only spent 2.5 hours on it today so I will look further into that this weekend.

Cheers

[busdriver]

Yes, I believe it will come up with the most tax-advantaged plan for your projected future based on your inputs.

Any chance you created a cheat sheet for yourself documenting exactly what the Settings tab items controlled. Some are obvious but others are clearly not. Any other tidbits you could share if you have the time regarding anything you discovered about the Profile entries would be great as well.I just signed up this afternoon and having been familiar with i-orp extended inputs, having all numbers handy and having done a lot of my own sophisticated spreadsheets, I was able to do a good job of populating the Profile and getting a look at the results. Pretty impressive work they have done here.

I am currently performing Roth conversions for the past 3 years and will do so for the next 9 or so. Their jump into the stratosphere of brackets in the first year is a bit much for me.

They absolutely need documentation to allow folks to not have to ask unnecessary questions. I'm trying to figure out their presentation of COLA'd and non COLA'd pensions/SS to understand how that interacts with their presentation of account balances. I just need to become certain that everything presented is either nominal or real. Only spent 2.5 hours on it today so I will look further into that this weekend.

Cheers

Sorry, but I didn't keep notes. I filled out the profile to the best of my ability, then spent several sessions with Chris to customize my plan to utilize a 401k to IRA rollover with 401k company stock going to taxable account to utilize NUA followed by selling the stock this year and limit MAGI to stay within the 15% CG's bracket. 2020 and beyond was to stay within 35% income bracket for following years until all TDA's are converted to Roth.

The initial bias for the software said to do Roth conversions up to $749,999 MAGI which would put us in 37% bracket. The < 750k is for staying out of the highest IRMAA tier. Next year I will re-visit whether I want to limit MAGI to stay in the 35% bracket or jump into the 37% bracket and limit MAGI to < 750k.

I am newly retired at age 65 and will start restricted spousal application SS at 66 in November, holding off on my own SS benefit as well as my pension until age 70 to allow for 5 years to Roth convert the majority of our TDA's. While the taxes & IRMAA will be painful, Income Strategy has shown me that taking the pain up front will be less costly than keeping it at a minimum on a year by year basis with the added bonus of having a tax free Roth account to pass on after we both check out.

[Midpack]

I just subscribed to the Income Strategy basic package, and the results have been fascinating. I didn’t find manually inputting my data to be difficult. The results were mostly self explanatory but not entirely, so I plan to sign up for a $125 one hour session - looking forward to it, we’ll see how it goes. The Primary plan (of many) has us doing Roth conversions from TIRAs aggressively to age 70, which is hard to pull the trigger on as tax savings are almost a wash, but I-ORP suggests same for us. The only confusing result, the report shows cap gains of almost $1MM in 2020, and I can’t see how/why? I assume they’re suggesting I sell off all my taxable holdings (a fairly normal VG passive index fund AA) and reinvest in others - but I haven’t figured out where that’s shown? I need to get that sorted out before my help session, I can’t imagine taking a cap gains tax hit like that under any circumstances. Otherwise it’s been very interesting so far.

[EDIT] I did find the investment recommendations, and they ARE suggesting I sell off almost all my holdings to reinvest in others. Mostly from mutual funds to ETFs, using largely the same asset classes I already hold? Counter-intuitive to me that would be the best course to maximize income from the portfolio, but I'll see what they say. It would be most helpful if I could see a report/plan using my current holdings and how that impacts income, taxes, etc. or at least spreading out cap gains taxes instead of one huge hit in 2020?

[Midpack]

FOLLOW UP:

I've been very pleased with Income Strategy, though it has taken a few weeks, and a one hour session for $125 to get a few questions answered that I could not figure out on my own. I'd say I'm middle savvy for this forum audience, not as savvy as many here (many I can name), but not a newbie either. A newbie would be completely lost with Income Strategy as a DIY package. I'd say it's best for someone who knows what all the many moving parts are, and just can't or doesn't want to do all the math - much less do it over again for various scenarios.

All the first strategies it provided sold off all my holdings and put me into their suggested holdings for an AA I selected - even though the AA was very similar to my current. Of course that generated punishing cap gains taxes in 2020, something I don't think any sane person would do. By creating my own custom portfolio (matching my current AA/holdings), easily done in Income Strategy, I was able to take the influence of mass cap gains taxes out. From there, the software has been very helpful.

It generates about two dozen strategies (one dozen non Roth conversions, and a dozen with conversions) right off the bat. And you can create almost anything else that might be of interest, and then compare any two side by side in great detail. You can also generate PDF reports for as many as you'd like.

The optimal plan for me was fully converting both our TIRAs, which put us in the 24% bracket. Converting to a limit of 22% moved about 2/3rds of our TIRA into Roth accounts. That saved us about $400K lifetime on federal taxes, but it only bumped our ending balance up a little over $100K. So we're planning on converting to 22%, so the tax hit over the next 5-6 years isn't as painful as converting to 24%. Sure I'd prefer to pay less taxes, but the primary goal is portfolio value over just minimizing taxes. And it turns out if we don't do any Roth conversions, we'll pay really low taxes until we're 70 and then be in the 22% bracket for the rest of our years (25 years or so). If we convert to 22% for the next 5-6 years, we'll never see the 22% bracket again until one of us dies and the survivor starts paying single (vs MFJ).

Yes I know predicting future tax rates/brackets plus Soc Sec and Medicare laws is impossible. So my models are all based on TCJA and then inflation adjusted 2017 tax rates/brackets for the balance. IMO there is no way future taxes/regs won't be more punitive. YMMV

All in all, it's been the best money I've spent on financial planning - maybe ever. Only $20 for a monthly subscription (no contract) and $125 for a one hour session - that'll easily save us 6 figures.

[eli80]

I just subscribed to Income Strategy. I inputted my assets and projected spending, then looked at the Strategies that were produced. I also ended up with all the strategies suggesting to sell large portions of my taxable account and pay a large amount of capital gains tax in the first couple of years or at the very least - the first year. I talked to a couple of people with them, trying to understand if I was doing something incorrectly because the results were illogical to me. They suggested I have an hour consultation. I am starting to wonder if part of their modus operandi is to offer the monthly subscription at $20 knowing that most people will sign up for a $125 consultation. That said, in reviewing all all the strategies produced, if you are trying to maximize spending with no regard to what you will leave behind, I'm not so sure that the amount and timing of Roth conversions will make that much of a difference.

[tenant13]

There's a parallel thread about this software at early-retirement forum. Worth perusing.

http://www.early-retirement.org/forums/ ... 99854.html

[busdriver]

Thought I'd add an update as I've been spending a bunch of time with the program running different scenarios, (being retired for a little over a year now with lots of additional free-time ). I've actually come up with a few plans with better results than what was initially generated when I first started subscribing back in 2018.

At this time, I'm looking for the the highest balance at the end, for the best value of taxes paid. As an example, in some cases, paying another $3,000 in taxes could up the final balance by $25,000. I realize that we can't take it with us; however, I still think of it as investing.

In 2019 I limited my Roth conversion to take advantage of 15% CG tax for a NUA stock sales, but 2020-25 will begin a heavy streak for Roth conversions with TDA's being empty by year-end 2027.

To compare, using conventional wisdom, (taxable, tax-deferred, Roth), I would have 78K more final balance than my plan; however, at an additional 750K of taxes paid. The CW plan has the majority of funds in taxable, followed by tax-deferred, then a small amount in Roth. My plan the entire balance will be all Roth with zero tax consequences for heirs.

The software has the current tax laws thru 2025 with reversion to previous laws in 2026. It also calculates for IRMAA tiers. For those interested in trying to come up with a plan to maximize balance, minimize taxes, passing to heirs tax-free or somewhere between, I think this program along with a few consultation sessions is money well spent.

[palanzo]

...I still plan to follow the guidance of the software to convert all my tax-deferred accounts to Roth in time to eliminate age 70 RMD's when they would come into play.

I think it's a suboptimal idea, generally, to convert all of a substantial tax deferred portfolio to Roth by age 70.
You'll pay a large amount of additional income tax to do that.

More optimal approach is to levelize your income before and after age 70 to keep your AGI and resulting taxable income about the same or increasing slightly year to year.
Do this by doing comparatively modest Roth conversions in the pre-70 years.

Also keep an eye on Medicare IRMAA thresholds to avoid being just over a threshold due to Roth conversion. It's fine to be over the first $85,000 per person threshold, but be aware of the others in your planning...

Do you have a spreadsheet that encapsulates income, dividends, Social Security, IRMAA, RMDs, modest Roth conversions etc to keep one's AGI approximately the same from year to year? This would be really helpful.

[busdriver]

...I still plan to follow the guidance of the software to convert all my tax-deferred accounts to Roth in time to eliminate age 70 RMD's when they would come into play.

I think it's a suboptimal idea, generally, to convert all of a substantial tax deferred portfolio to Roth by age 70.
You'll pay a large amount of additional income tax to do that.

More optimal approach is to levelize your income before and after age 70 to keep your AGI and resulting taxable income about the same or increasing slightly year to year.
Do this by doing comparatively modest Roth conversions in the pre-70 years.

Also keep an eye on Medicare IRMAA thresholds to avoid being just over a threshold due to Roth conversion. It's fine to be over the first $85,000 per person threshold, but be aware of the others in your planning...

Do you have a spreadsheet that encapsulates income, dividends, Social Security, IRMAA, RMDs, modest Roth conversions etc to keep one's AGI approximately the same from year to year? This would be really helpful.

I believe this was directed to The Wizard, but I'd like to add that with the current tax laws going away after 2025, having a constant AGI from the start, while seemingly feeling like you're paying less tax each year could possibly result with more taxes paid over lifetime vs taking a large hit early to substantially lower AGI & tax bracket for the majority of your life, (much lower constant AGI for the majority of life).

Income Strategy lets you run any number of strategies of MAGI's, tax brackets and other combinations on any annual frequency you set to see what's left, what it costs and where the money is, (taxable/TDA/Roth). Many good strategies generated from the start, but you can what-if it as much as you want to see the results.

[busdriver]

While I realize this is a dated post, I thought I'd give a reply, now that I feel much more comfortable with the software to give a reasonable response.

...I still plan to follow the guidance of the software to convert all my tax-deferred accounts to Roth in time to eliminate age 70 RMD's when they would come into play.

I think it's a suboptimal idea, generally, to convert all of a substantial tax deferred portfolio to Roth by age 70.
You'll pay a large amount of additional income tax to do that.

In our case, I have a substantial pension and SS to begin in 2024. If we were to go the conventional wisdom route w/o any conversions, I'd be in 0% bracket for 2020-21, 12% bracket for 2022, 22% bracket for 2023, 24% bracket for 2024-25, then 33% thru 2049 where I projected our exits.

If we do Roth conversions up to 35% bracket, we will be in 35% bracket for 2020-24, 24% for 2025 then 28% bracket 2026-49.

CW w/o Roth's would result with appx 50K more in ending assets; however, the total taxes paid would be over 650K more than taking the big hit of 35% for the first few years for conversions to eliminate RMD's from the majority of our balance of time.

More optimal approach is to levelize your income before and after age 70 to keep your AGI and resulting taxable income about the same or increasing slightly year to year.
Do this by doing comparatively modest Roth conversions in the pre-70 years.

With taxes to go back to previous 2017 levels in 2026, I don't think this would result in the best ending balance for taxes paid. I also wish to pass on as much, (if not all), the assets to heirs tax free. I realize that others don't have that priority, but in our case, I feel that's the best we can do.

Also keep an eye on Medicare IRMAA thresholds to avoid being just over a threshold due to Roth conversion. It's fine to be over the first $85,000 per person threshold, but be aware of the others in your planning...

Very aware of IRMAA tiers. For us, there's no way to avoid it. The 35% plan has us in the second highest IRMAA tier for 2020-25, followed by dropping down 3 levels to the lowest IRMAA tier thru 2038, then in 2039, DW goes back to second highest IRMAA tier for the duration. This still results with the best ending assets for taxes paid, including IRMAA.

Should future taxes change, there might need for a revised plan. But for us, this is the plan for now.

I still like and enjoy toying with different strategies to see the results. I think Income Strategy is a very useful product once you get the hang of it.

[WoodSpinner]

...I still plan to follow the guidance of the software to convert all my tax-deferred accounts to Roth in time to eliminate age 70 RMD's when they would come into play.

I think it's a suboptimal idea, generally, to convert all of a substantial tax deferred portfolio to Roth by age 70.
You'll pay a large amount of additional income tax to do that.

More optimal approach is to levelize your income before and after age 70 to keep your AGI and resulting taxable income about the same or increasing slightly year to year.
Do this by doing comparatively modest Roth conversions in the pre-70 years.

Also keep an eye on Medicare IRMAA thresholds to avoid being just over a threshold due to Roth conversion. It's fine to be over the first $85,000 per person threshold, but be aware of the others in your planning...

Do you have a spreadsheet that encapsulates income, dividends, Social Security, IRMAA, RMDs, modest Roth conversions etc to keep one's AGI approximately the same from year to year? This would be really helpful.

Palazzo,

If you are in CA I have something that should work. OTOH, building your own is a great learning experience!

One issue with balancing AGI is if you are in a State that does not tax SS benefits (e.g. CA). This produces a sub optimal result since your taxes will be lower (Fed+State) when you start collecting SS.

I took a different approach and am front loading more conversions before they impact IRMAA and then dropping to hit my targeted IRMAA tier. At least that’s the plan for the next few years—so much can change it doesn’t make sense to lock in a plan beyond a year.

WoodSpinner

[LUVCalifornia]

Income Solver is buggy and results are suspect. I spent many hours trying to answer several questions and it was a complete waste of time and money. Very frustrating. I wrote to them and they offered a 'discounted' session for $125/hour. My biggest question is with early retirement, is it better to convert some or all 401K money to Roth in 50s & early 60s and not qualify for ACA subsidies or not (or to model capping income prior to 65). When I wrote to them they said they don't have the ability to model this. I also wanted to model paying off my mortgage early or not, claiming SS at various ages, impact of moving to a lower-tax state, IRMAA, and keeping a rental property or not. The software could not model any of these in any way that was useful. And it was nearly impossible to figure out how to quit my subscription. It was a terrible user experience all around and not one I'd wish on anyone.

[tenant13]

My biggest question is with early retirement, is it better to convert some or all 401K money to Roth in 50s & early 60s and not qualify for ACA subsidies or not (or to model capping income prior to 65). When I wrote to them they said they don't have the ability to model this. I also wanted to model paying off my mortgage early or not, claiming SS at various ages, impact of moving to a lower-tax state, IRMAA, and keeping a rental property or not.

Health question is a big one. I personally believe that paying a full price for insurance pretty much negates any advantages of spreading conversions over the years and losing the subsidy (or even minimizing it), especially if you end up with sudden problems that would max out your out of pocket number. And that's very easy with just one hospital visit. From that angle it would make most sense to convert one lump sum early on and go on Medicaid: ROTH distributions don't count towards MAGI and that's all expanded Medicaid cares about - not your net worth. That's where your IRMAA come in as well: once you're all ROTH, you wouldn't have to worry about IRMAA. And if your other income stays low (minimal SS at 62 and dividends/interest) you can even have Medicaid covering your Medicare premiums. [There's a moral aspect to this whole Medicaid thing but for everyone that thinks it's free: they go after your estate and reimburse themselves - so essentially it's a very expensive full coverage insurance with deferred payments].

In terms of paying your mortgage off: if you can put your money to work and make more than what you're paying in interest, then that's what you should do. Otherwise pay it off. That's the simplest answer. But there's also psychological aspect: it just feels good not to have a huge debt hanging over your head (and fully own your place) especially in times like these. I know for a fact that my stress levels are lower than they would have been had I been in debt.

No income tax state is a no-brainer unless the cost of moving is high and cost of living skyrockets. I looked into moving to FL but once I added up the the numbers I realized it would make very little financial sense. And I'm not moving to a [profanity removed by moderator oldcomputerguy] state just to save a few k a year. Quality of life has its price.

I myself will keep my rental property for as long as it's not a pain [profanity removed by moderator oldcomputerguy] to manage. First, it's a really good way to diversify my portfolio and secondly, I simply don't need the cash that the property would have brought if sold. It's possible you could make more if you invested in equities but it's only a possibility so if you're not hungry for that extra income, don't do it.

[spammagnet]

... No income tax state is a no-brainer unless the cost of moving is high and cost of living skyrockets. I looked into moving to FL but once I added up the the numbers I realized it would make very little financial sense. And I'm not moving to a s*hole state just to save a few k a year. Quality of life has its price. ...

Is Florida included in that last sentence? If so, how much time have you spent in different parts of the state? Or are you referring to other states with no income tax?

[Silk McCue]

The language you used in your post violates site rules. Baseless denigration of the great State of Florida isn’t appreciated either.

Cheers