Anyone using i-orp as a guide for withdrawals?

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hawkfan55
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Anyone using i-orp as a guide for withdrawals?

Post by hawkfan55 » Wed Jan 18, 2017 4:52 pm

Is anyone using I-orp as a primary guide for making retirement withdrawals? How many years have you been using I-orp to help you determine optimal withdrawls and how has using this calculator worked out for you? I recently retired and am getting ready to make my first withdrawals.

Secondly, has anyone used their Roth IRA as a "holding account" for withdrawals transferred from a deferred account? I was thinking of opening a short term bond fund in my Roth IRA, then transferring a year of withdrawals to this Roth IRA fund. I would then withdraw from the Roth short term bond fund every couple months for expenses.

Thank you for sharing your experiences.

John Z
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Re: Anyone using i-orp as a guide for withdrawals?

Post by John Z » Wed Jan 18, 2017 5:31 pm

I wanted to use i-orp to help with withdrawal strategy but felt it was too drastic in what it was guiding me to do with TIRA and ROTH IRA. While searching found a much better reference: Living Off Your Money by Michael H. McClung. The entire book is written for just that, optimizing your earnings while withdrawing money from your portfolio to live on.

Go here http://livingoffyourmoney.com/ where you can download the first 3 chapters free, examine the table of contents or purchase the text. Chapter 3 is one of the best and easiest to follow and understand. It discusses about a dozen withdrawal strategies and using backtested data shows which 2 strategies maximize withdrawals.

Hope this helps.

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JDCarpenter
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Re: Anyone using i-orp as a guide for withdrawals?

Post by JDCarpenter » Wed Jan 18, 2017 6:15 pm

John Z wrote:I wanted to use i-orp to help with withdrawal strategy but felt it was too drastic in what it was guiding me to do with TIRA and ROTH IRA. While searching found a much better reference: Living Off Your Money by Michael H. McClung. The entire book is written for just that, optimizing your earnings while withdrawing money from your portfolio to live on.

Go here http://livingoffyourmoney.com/ where you can download the first 3 chapters free, examine the table of contents or purchase the text. Chapter 3 is one of the best and easiest to follow and understand. It discusses about a dozen withdrawal strategies and using backtested data shows which 2 strategies maximize withdrawals.

Hope this helps.


I am still pondering McClung's book; it does put some new ideas out and appears rigorous.... If hawkfan55 hasn't seen it there was a big discussion thread last year: viewtopic.php?t=192105 Price has gone down now that a paperback is out.
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curmudgeon
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Re: Anyone using i-orp as a guide for withdrawals?

Post by curmudgeon » Wed Jan 18, 2017 7:17 pm

I personally wouldn't use i-orp as a primary guide for withdrawal. I might use it as a secondary piece of input, along with the 4% rule and some of the other tools like cfiresim. My biggest concern is that it uses a uniform investment growth, and the real world is not so nicely behaved.

I might use, with care, i-orp as a primary guide to Roth conversions and choice/order of withdrawal account types. I would still sanity check and compare before taking action, because I have found it a little too easy to feed inappropriate data/options into i-orp (though it has definitely made improvements in recent times to help on this).

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Re: Anyone using i-orp as a guide for withdrawals?

Post by grok87 » Wed Jan 18, 2017 9:18 pm

So it took me a while to track down i-orp.
https://www.i-orp.com/
It seems to recommend starting retirement with a 60/40 stock/bond allocation.
The vanguard balanced index fund has this allocation and lost 22% in 2008.
Not sure how i would feel about that if i was starting retirement in that year...
"...people always live for ever when there is any annuity to be paid them"- Jane Austen

hawkfan55
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Re: Anyone using i-orp as a guide for withdrawals?

Post by hawkfan55 » Wed Jan 18, 2017 9:47 pm

JohnZ, JD, Curmudgeon and Grok,
Thanks for your replies. I remember reviewing McClung's book and will do so again, particularly chapter 3. The full I-orp (found below the standard program) allows one to put your stock, bond and cash allocations as you wish. We are currently 45/55 stock/bonds and, at ages 61 and 57, probably a little on the conservative side.

My DW is still working and will have PERS at her age 60, my age 64, when she retires. I will have a small pension starting at age 65. Since we are holding off on me taking SS till I'm 70 and my DW at 65 (actually I-ORP indicates that her taking SS at 65 instead of 66 & 10mo is optimal), we will need to withdraw from deferred and possibly Roth accounts to make up the difference.

I am thinking that I-orp could be very valuable if used once a year to determine that year's or next year's withdrawals.

Any thoughts on the Deferred to Roth withdrawals and using Roth as a holding account prior to bi-monthly or quarterly withdrawals to a checking account for spending?
Thanks again!

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Peter Foley
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Re: Anyone using i-orp as a guide for withdrawals?

Post by Peter Foley » Wed Jan 18, 2017 10:33 pm

I have run a number of scenarios in the full version of ORP and am not using it as a guide for withdrawals nor as a Roth conversion strategy.

Read the i-orp FAQs and see if the program's investment goals are the same as your goals. There have been a few recent threads about i-orp, including one I started about 6 months ago: Understanding I-orp Logic.

https://www.bogleheads.org/forum/viewtopic.php?f=2&t=195644
Last edited by Peter Foley on Wed Jan 18, 2017 10:37 pm, edited 1 time in total.

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Re: Anyone using i-orp as a guide for withdrawals?

Post by chuckb84 » Wed Jan 18, 2017 10:37 pm

I like the full i-orp (https://www.i-orp.com/ORPparms.html) because:

1. It is fairly simple to use.
2. It includes enough detail to be a realistic guide for withdrawals, while not becoming cumbersome to use.

That said, it surely isn't the ONLY thing I use. And the thing I like about it the most is that you can enter all your numbers and then easily play "what if" games: What if I delay SS for 3 years? What if stocks yield 2% more than I think, or 2% less? So I'd say that the main thing to do with ORP is to enter your best guess parameters for your retirement and then use it to do sensitivity analysis to see how much your retirement depends on everything going exactly as you plan.

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Re: Anyone using i-orp as a guide for withdrawals?

Post by smitcat » Thu Jan 19, 2017 8:36 am

"I like the full i-orp (https://www.i-orp.com/ORPparms.html) because:

1. It is fairly simple to use.
2. It includes enough detail to be a realistic guide for withdrawals, while not becoming cumbersome to use.

That said, it surely isn't the ONLY thing I use. And the thing I like about it the most is that you can enter all your numbers and then easily play "what if" games: What if I delay SS for 3 years? What if stocks yield 2% more than I think, or 2% less? So I'd say that the main thing to do with ORP is to enter your best guess parameters for your retirement and then use it to do sensitivity analysis to see how much your retirement depends on everything going exactly as you plan."

Chuckb84 - I have been utilizing the IORP similar to yourself attempting to do some modeling with 'what ifs' and timing on an upcoming retirement. Similar to yourself I find it very helpful by alternating inputs and choices to see what the potential outcomes might be. I vary between letting it run to 'max spend' and then limiting the yearly income to one of my best guess's for us in the future and so far it gives me some great ideas to kick around.
We are new to this as well as being relatively very new to Bogleheads so while we are trying to learn quickly some of the concepts and tools have implications that we still do not fully understand.

I find that any plans for retirement and also retirement income will need to change a bit each year as the actual numbers will absolutely be affected in large ways by real portfolio changes, tax changes and even life changes - so I see these tools as an overall guides that need to be updated and that are only as good as their latest inputs.

With that said many folks here say they use 'other sources as well' so what have you folks found that can augment these calculators given the your inputs will need to change each year and that there is no way to avoid that? What is your best overall planning strategy given the inevitable large changes in all of the various inputs?

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Re: Anyone using i-orp as a guide for withdrawals?

Post by JDCarpenter » Thu Jan 19, 2017 8:42 am

hawkfan55 wrote:...

Any thoughts on the Deferred to Roth withdrawals and using Roth as a holding account prior to bi-monthly or quarterly withdrawals to a checking account for spending?
Thanks again!


I'm missing something, as I don't see any reason to do this (not being facetious--there is always some reason, even if I disagree with it!). In my mind, Roth holdings are too valuable for long-term growth, avoidance of tax torpedo (and DW's highly-likely single taxpayer high marginal rates), and estate planning to give that space up without good reason. Once the money lands in there and conversion taxes paid, I'd be reluctant to bring it out of the high growth investments I'd want to put it in.

OTOH, if your tax/asset situation is such that you cannot reasonably convert anything to Roth in excess of what you are drawing out for that year's living expenses, it seems like you are just interposing an unnecessary extra step and additional paperwork to shelter money-market return on your yearly spending amount.

Like I said though, I am likely missing something.
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Peter Foley
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Re: Anyone using i-orp as a guide for withdrawals?

Post by Peter Foley » Thu Jan 19, 2017 12:16 pm

smitcat wrote:

With that said many folks here say they use 'other sources as well' so what have you folks found that can augment these calculators given the your inputs will need to change each year and that there is no way to avoid that? What is your best overall planning strategy given the inevitable large changes in all of the various inputs?


I have used both i-orp and the Retiree Portfolio Model to test Roth conversion scenarios. I use an Excel spreadsheet and a Word document as my guides for tax efficient, income leveling withdrawals. I've run my numbers through ESPlanner basic and FireCalc (among others) and have high confidence that we won't run out of money. That being said, one still needs a plan. The Word doc lays out a 5 year plan noting sources of income and tax consequences. It is essentially a guide for me and my wife. In year one do this, in year two do this, start SS in year 3, etc. The Excel spreadsheet is a multiyear tax planning document roughly based on the Turbo Tax 2 year comparison worksheet (I deleted a number of the non applicable rows).

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Re: Anyone using i-orp as a guide for withdrawals?

Post by SGM » Thu Jan 19, 2017 2:36 pm

I have used I-orp as one of several retirement calculators. I was a little more aggressive in converting to Roth IRAs than recommended by the program. I began converting while semi- retired at 9 hours a week of work, rather than waiting until I was completely retired. I like that the program has me taking out of the Roth only after exhausting the taxable account. Also the program confirms that I can withdraw more than I expect I will need to withdraw. Taxation predicted by the program is lower than I have experienced or expect in the future.

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Re: Anyone using i-orp as a guide for withdrawals?

Post by smitcat » Thu Jan 19, 2017 4:47 pm

Peter Foley - your entire answer is helpful , thank you.
Especially this line....
"The Excel spreadsheet is a multiyear tax planning document roughly based on the Turbo Tax 2 year comparison worksheet (I deleted a number of the non applicable rows)."

SGM - your answers are helpful as well. Please tell me why you think this is true?
"Taxation predicted by the program is lower than I have experienced or expect in the future"
Thank you

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Re: Anyone using i-orp as a guide for withdrawals?

Post by hawkfan55 » Fri Jan 20, 2017 7:39 am

I'm missing something, as I don't see any reason to do this (not being facetious--there is always some reason, even if I disagree with it!). In my mind, Roth holdings are too valuable for long-term growth, avoidance of tax torpedo (and DW's highly-likely single taxpayer high marginal rates), and estate planning to give that space up without good reason. Once the money lands in there and conversion taxes paid, I'd be reluctant to bring it out of the high growth investments I'd want to put it in.

OTOH, if your tax/asset situation is such that you cannot reasonably convert anything to Roth in excess of what you are drawing out for that year's living expenses, it seems like you are just interposing an unnecessary extra step and additional paperwork to shelter money-market return on your yearly spending amount.

Like I said though, I am likely missing something.


JDCarpenter, thanks for your reply. This is my thinking. Instead of withdrawing from my Rollover IRA the amount needed to meet expenses (Living expenses-DW take home+taxes on deferred withdrawal=Withdrawal from Rollover IRA) and transferring the amount to an online savings account earning 1% less tax on earnings, instead transfer to Roth short term bond fund in Roth and withdraw every couple months. Your second scenario describes what I'm thinking of doing.

We will be withdrawing quite a bit in excess of 4% for the next eight years in order to wait on taking Social Security at ages 70(me) and 65(DW). Pensions will make up only about 35-40% of amount needed for expenses during most of this time.

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Re: Anyone using i-orp as a guide for withdrawals?

Post by jebmke » Fri Jan 20, 2017 7:56 am

Has been a while since I looked at iOrp - mainly to see what it might say about ROTH conversion. At the time, the tax calculations were fairly primitive so I didn't find it that helpful. Maybe they are better now.
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Re: Anyone using i-orp as a guide for withdrawals?

Post by afan » Fri Jan 20, 2017 10:30 am

I tried i-orp and found that its recommendations were useless. At first it was exciting to seem to get recommendations for optimizing withdrawal and Roth conversion strategy. but the details were very distressing. I-orp had me making massive Roth conversions into very high tax brackets.

As I varied the inputs, this continued, seemingly paying no attention the underlying economic scheme. Under the assumption that I would keep working until age 75, it had me doing NO Roth conversions before age 70. At age 70, when required minimum distributions and starting Social Security had me firmly in the top tax rate, THEN it started doing huge conversions- all taxed at the top rate. If conversions were appropriate, it would make far more sense to do them before SS and RMD's kicked in. That would at least give some space below the top tax rate. It made no sense.

Even if I told it I sought to spend at our current rate and preserve the rest for heirs, it had crazy spending and conversion schemes that were nowhere close to optimum.

Although it seemed to take estate taxes into account, the actual plan it recommended was hardly the best for passing money on to heirs.

I contacted the author to ask about the strange results. He checked the simulations and said that the calculations were correct, but that "the numbers are too high". He said that, although it did have an estate tax feature, he had not previously seen a simulation in which estate taxation came up. He agreed that it did not attempt to optimize the total passed on to heirs after considering estate and income taxes. But choosing a Roth conversion strategy definitely requires considering such taxation. He said that was beyond the scope of the program. He also agreed that i-orp assumed that people retired when they started collecting SS, even if one indicates that they will continue to have earned income.

What concerned me was that the program did return a plan, nonsensical as it may have been. If one did not look at it closely, it might seem to be worth following. In fact, doing what it said would have been a disaster.

It might be OK for some situations, but I don't have any confidence that there is a way to tell whether its results are correct for any particular set of circumstances. For that reason, I don't know how someone could conclude they should trust it.
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Peter Foley
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Re: Anyone using i-orp as a guide for withdrawals?

Post by Peter Foley » Fri Jan 20, 2017 10:52 am

afan

Regarding i-orp, I had similar results with the Roth conversion issue even after a number of tries. The program front loads the Roth conversions pushing one into a higher tax bracket than one might experience 15-20 years later with RMDs. It also does not optimize for heirs.

I did find it insightful with respect to early larger conversions (up to set maximums of course). I used that approach with the Retiree Portfolio Model (RPM) and came up with a reasonable scenario that takes into account desired spending, Roth conversions, federal taxes, and final net worth. My actual plan does not follow the RPM exactly, but it did modify my Roth conversion strategy somewhat.

Roth conversions are but one piece of a withdrawal plan, and may not be a significant factor for those who do not have a large percentage of their retirement savings in tax deferred accounts. i-orp might be a better guide for these individuals. I don't know as I have not run scenarios for situations other than my own.

Edit: I ran a scenario that called for modest, if any Roth conversions. I found the suggested withdrawal scenario to be a very tax efficient workable withdrawal strategy. It spent from the tax deferred account prior to receiving delayed SS benefits, and then in combination with the taxable account. The Roth was tapped only in the last few years.
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hawkfan55
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Re: Anyone using i-orp as a guide for withdrawals?

Post by hawkfan55 » Fri Jan 20, 2017 7:29 pm

My experience with I-orp has been positive. The program has continued to be improved and has worked well for me. We do not have a complicated retirement situation where we are planning on leaving a significant estate.

I've run numerous reports, changing inputs, and the results seem logical to me.

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Re: Anyone using i-orp as a guide for withdrawals?

Post by afan » Sat Jan 21, 2017 11:17 am

And that is my concern. If it can return results that seem plausible only to collapse on inspection, how does one know when to trust it? For me the problem was obvious on a careful look. What else was wrong that was not so obvious? In my case, the answer that "the number are too high" was not reassuring.
We don't know how to beat the market on a risk-adjusted basis, and we don't know anyone that does know either | --Swedroe | We assume that markets are efficient, that prices are right | --Fama

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Re: Anyone using i-orp as a guide for withdrawals?

Post by jebmke » Sat Jan 21, 2017 11:31 am

afan wrote:And that is my concern. If it can return results that seem plausible only to collapse on inspection, how does one know when to trust it? For me the problem was obvious on a careful look. What else was wrong that was not so obvious? In my case, the answer that "the number are too high" was not reassuring.

That is what happened to me (albeit a few years ago). The numbers were obviously too high and upon inspection I discovered the tax calculations didn't make any sense. But that was a while ago, they may have worked on the tax part. It isn't easy though, you basically have to replicate tax software to do this right and have it work for a wide audience.
When you discover that you are riding a dead horse, the best strategy is to dismount.

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Re: Anyone using i-orp as a guide for withdrawals?

Post by sengsational » Tue Feb 14, 2017 6:45 pm

afan wrote:The numbers were obviously too high and upon inspection I discovered the tax calculations didn't make any sense. But that was a while ago, they may have worked on the tax part. It isn't easy though, you basically have to replicate tax software to do this right and have it work for a wide audience.

I have been using i-orp for a long time, but with eyes wide open with respect to it's limitations. The tax calculations for me are not the issue, and in fact for the RMD years, I trust it's probably doing a good enough job.

The reason (for me) that the spend number was "too high" was because in a single run of i-orp, there is zero chance of a "sequence of returns" disaster. This is because it presumes a nice smooth growth for equities and a nice smooth yield for bonds. So while your other back-test kinds of calculators are busy trying to keep you out of the ditch, should the market tank, i-orp is merrily ignorant of that aspect.

Until now :)

In this thread, I discuss and automated approach to the i-orp author's method to "back test" with historical rates of return (3-PEAT). In other words, you can now answer a question like "what would my spending pattern look like going forward if the markets behaved as they did starting in 1929?" or some other disastrous year for investors.

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Re: Anyone using i-orp as a guide for withdrawals?

Post by munemaker » Mon Aug 14, 2017 9:24 am

afan wrote:
Fri Jan 20, 2017 10:30 am
I tried i-orp and found that its recommendations were useless. At first it was exciting to seem to get recommendations for optimizing withdrawal and Roth conversion strategy. but the details were very distressing. I-orp had me making massive Roth conversions into very high tax brackets.
Like any tool, you have to understand how it works and how to use it. There is a setting that limits the tax bracket into which Roth conversions are made. In my situation, I set it to 25%. No Roth conversions are made that would take me into higher tax brackets.

It seems like such a great program to me. It must have taken the programmer an unbelievable amount of time to cover all the contingencies. I couldn't believe it actually includes ObamaCare, which is useful to me! I think a lot of the negative comments come from not understanding the fairly complex program.

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Re: Anyone using i-orp as a guide for withdrawals?

Post by munemaker » Mon Aug 14, 2017 9:26 am

sengsational wrote:
Tue Feb 14, 2017 6:45 pm

The reason (for me) that the spend number was "too high" was because in a single run of i-orp, there is zero chance of a "sequence of returns" disaster. This is because it presumes a nice smooth growth for equities and a nice smooth yield for bonds. So while your other back-test kinds of calculators are busy trying to keep you out of the ditch, should the market tank, i-orp is merrily ignorant of that aspect.

Until now :)

In this thread, I discuss and automated approach to the i-orp author's method to "back test" with historical rates of return (3-PEAT). In other words, you can now answer a question like "what would my spending pattern look like going forward if the markets behaved as they did starting in 1929?" or some other disastrous year for investors.
Note that i-ORP also includes Monte Carlo analysis capability.

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Re: Anyone using i-orp as a guide for withdrawals?

Post by Gatorbyter » Tue Sep 05, 2017 4:24 pm

While I love ORP and have been using it for years .... there is a fundamental problem with the withdrawal logic.

ORP uses the Common Rule (CR) for withdrawals which involves withdraw of taxable savings before tax-deferred savings, but this strategy can artificially inflate required minimum distributions (RMDs) and reduce tax efficiency and wealth. Conversely, Tax-Efficient (TE) withdrawal schemes can determine withdrawals that maximize the final total account balance over a retirement horizon. Studies such as https://www.onefpa.org/journal/Pages/Ta ... Model.aspx show that TE models can significantly outperform CR when taxable rate of return is greater than tax-deferred rate of returns, initial taxable wealth is greater than 10 percent of total retirement wealth, and itemized deductions are greater than the standard deduction.

Unfortunately, a byproduct of using the CR, can cause ORP to suggest Roth Conversions in excess of what is ideal (based on TE models), especially early in retirement. Every situation is different, but after emailing James S Welch back and forth, I realize that he is reluctant to change the withdrawal methodology.

Gatorbyter

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Re: Anyone using i-orp as a guide for withdrawals?

Post by munemaker » Tue Sep 05, 2017 10:01 pm

Gatorbyter wrote:
Tue Sep 05, 2017 4:24 pm
While I love ORP and have been using it for years .... there is a fundamental problem with the withdrawal logic.

ORP uses the Common Rule (CR) for withdrawals which involves withdraw of taxable savings before tax-deferred savings, but this strategy can artificially inflate required minimum distributions (RMDs) and reduce tax efficiency and wealth. Conversely, Tax-Efficient (TE) withdrawal schemes can determine withdrawals that maximize the final total account balance over a retirement horizon. Studies such as https://www.onefpa.org/journal/Pages/Ta ... Model.aspx show that TE models can significantly outperform CR when taxable rate of return is greater than tax-deferred rate of returns, initial taxable wealth is greater than 10 percent of total retirement wealth, and itemized deductions are greater than the standard deduction.

Gatorbyter
The referenced paper says: "Results show that TE models can significantly outperform CR when taxable ROR is greater than tax-deferred ROR, initial taxable wealth is greater than 10 percent of total retirement wealth, and itemized deductions are greater than the standard deduction."

In my case, I do not itemize and my taxable wealth is less than 10% of my total retirement wealth. Not sure without further investigation whether my taxable rate of return (ROR) is greater than tax deferred ROR. In any event, 2 of the 3 conditions do not apply so it would not appear that the author believes his TE model would be advantageous to me.

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Re: Anyone using i-orp as a guide for withdrawals?

Post by smitcat » Wed Sep 06, 2017 6:43 am

Gatorbyter wrote:
Tue Sep 05, 2017 4:24 pm
While I love ORP and have been using it for years .... there is a fundamental problem with the withdrawal logic.

ORP uses the Common Rule (CR) for withdrawals which involves withdraw of taxable savings before tax-deferred savings, but this strategy can artificially inflate required minimum distributions (RMDs) and reduce tax efficiency and wealth. Conversely, Tax-Efficient (TE) withdrawal schemes can determine withdrawals that maximize the final total account balance over a retirement horizon. Studies such as https://www.onefpa.org/journal/Pages/Ta ... Model.aspx show that TE models can significantly outperform CR when taxable rate of return is greater than tax-deferred rate of returns, initial taxable wealth is greater than 10 percent of total retirement wealth, and itemized deductions are greater than the standard deduction.

Unfortunately, a byproduct of using the CR, can cause ORP to suggest Roth Conversions in excess of what is ideal (based on TE models), especially early in retirement. Every situation is different, but after emailing James S Welch back and forth, I realize that he is reluctant to change the withdrawal methodology.

Gatorbyter

Where do you get a calculator that can simulate the TE model approach?

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Re: Anyone using i-orp as a guide for withdrawals?

Post by Gatorbyter » Wed Sep 06, 2017 7:22 am

smitcat wrote:
Wed Sep 06, 2017 6:43 am

Where do you get a calculator that can simulate the TE model approach?
I've never seen a "canned" calculator that utilizes a TE withdrawal strategy. I've created a spreadsheet that works for me.

The TE approach basically involves taking simultaneous withdrawals from taxable, tax-deferred, and possibly tax exempt accounts as required to stay within a given tax bracket (hopefully 15%). The objective is to monitor the source of your withdrawals so that you can understand the effect of the withdrawals on your tax rate and avoid a move into a higher tax bracket. See Strategy #2 from Fidelity: https://www.fidelity.com/viewpoints/ret ... ithdrawals. The flaw with blindly depleting your taxable accounts first (i.e., the CR approach) is that you might be foregoing an opportunity to pull money out of your tax-deferred accounts at lower marginal tax rates.

Regarding the TE approach .... many people are not aware of some of the nuances created by the current tax code. The TE approach attempts to exploit those to your advantage. Let's assume your TE approach is to take your income up to the 15% taxable income ceiling (quite common). Why? Because breaching the 15% tax bracket is particularly painful and will result in higher than expected marginal rates for some portion of the income. This is because the tax-advantages of qualified dividends and long-term capital gains are lost at the same time as additional income is being added, i.e., a double-whammy! More specifically, to the degree you breach the 15% tax bracket, you will make tax-advantaged income of qualified dividends and long-term capital gains taxable @ 15% (they were previously tax exempt) AND simultaneously you pay 15% tax on that extra dollar of income itself. Hence, you effectively pay 30% on each extra dollar of income until ALL the previously tax exempt sources of qualified dividends and long-term capital gains are fully consumed. <---- 99% of even knowledgeable investors don't know this or can't explain it.

Thus, serious consideration should be given to being a lot smarter by taking simultaneous withdrawals from taxable, tax-deferred, and eventually tax-exempt accounts as required to stay within a target tax bracket (often the 15% tax bracket).

Another important consideration for withdrawal source/sequence could be the potential for eventually relocating to a state (later in retirement) with no income tax, in which case, delaying or reducing the amount taken early in retirement from sources which will be taxed (i.e., tax-deferred accounts) could make sense in the big scheme of things.

Additionally, ORP estimates of taxes appears to be financially conservative (i.e., estimates are typically higher than actual). This is primarily because ORP cannot properly account for 1) tax-free income (e.g., Muni bonds), and 2) has no way to handle large itemized deductions such as those that occur with mortgages and real-estate taxes. In my specific case, ORP estimated taxes for 2016 were about $5K higher than actual taxes paid, as I have mortgage deductions, real estate deductions, and lots of Muni income.

I still find ORP to be an amazing tool ...... but don't blindly follow the withdrawal strategy or Roth Conversion recommendations without understanding ORP's limitations!! I am NOT saying ORP is an "ugly baby" .... it's free and useful, but not the "end-all" tax-mitigation product.

P.S. If you read some of the comments (in this link and others) you will see that many peeps have stumbled onto these limitations without necessarily understanding why they occur. Hopefully this helps!

Gatorbyter

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Re: Anyone using i-orp as a guide for withdrawals?

Post by smitcat » Wed Sep 06, 2017 8:39 am

Gatorbyter wrote:
Wed Sep 06, 2017 7:22 am
smitcat wrote:
Wed Sep 06, 2017 6:43 am

Where do you get a calculator that can simulate the TE model approach?
I've never seen a "canned" calculator that utilizes a TE withdrawal strategy. I've created a spreadsheet that works for me.

The TE approach basically involves taking simultaneous withdrawals from taxable, tax-deferred, and possibly tax exempt accounts as required to stay within a given tax bracket (hopefully 15%). The objective is to monitor the source of your withdrawals so that you can understand the effect of the withdrawals on your tax rate and avoid a move into a higher tax bracket. See Strategy #2 from Fidelity: https://www.fidelity.com/viewpoints/ret ... ithdrawals. The flaw with blindly depleting your taxable accounts first (i.e., the CR approach) is that you might be foregoing an opportunity to pull money out of your tax-deferred accounts at lower marginal tax rates.

Regarding the TE approach .... many people are not aware of some of the nuances created by the current tax code. The TE approach attempts to exploit those to your advantage. Let's assume your TE approach is to take your income up to the 15% taxable income ceiling (quite common). Why? Because breaching the 15% tax bracket is particularly painful and will result in higher than expected marginal rates for some portion of the income. This is because the tax-advantages of qualified dividends and long-term capital gains are lost at the same time as additional income is being added, i.e., a double-whammy! More specifically, to the degree you breach the 15% tax bracket, you will make tax-advantaged income of qualified dividends and long-term capital gains taxable @ 15% (they were previously tax exempt) AND simultaneously you pay 15% tax on that extra dollar of income itself. Hence, you effectively pay 30% on each extra dollar of income until ALL the previously tax exempt sources of qualified dividends and long-term capital gains are fully consumed. <---- 99% of even knowledgeable investors don't know this or can't explain it.

Thus, serious consideration should be given to being a lot smarter by taking simultaneous withdrawals from taxable, tax-deferred, and eventually tax-exempt accounts as required to stay within a target tax bracket (often the 15% tax bracket).

Another important consideration for withdrawal source/sequence could be the potential for eventually relocating to a state (later in retirement) with no income tax, in which case, delaying or reducing the amount taken early in retirement from sources which will be taxed (i.e., tax-deferred accounts) could make sense in the big scheme of things.

Additionally, ORP estimates of taxes appears to be financially conservative (i.e., estimates are typically higher than actual). This is primarily because ORP cannot properly account for 1) tax-free income (e.g., Muni bonds), and 2) has no way to handle large itemized deductions such as those that occur with mortgages and real-estate taxes. In my specific case, ORP estimated taxes for 2016 were about $5K higher than actual taxes paid, as I have mortgage deductions, real estate deductions, and lots of Muni income.

I still find ORP to be an amazing tool ...... but don't blindly follow the withdrawal strategy or Roth Conversion recommendations without understanding ORP's limitations!! I am NOT saying ORP is an "ugly baby" .... it's free and useful, but not the "end-all" tax-mitigation product.

P.S. If you read some of the comments (in this link and others) you will see that many peeps have stumbled onto these limitations without necessarily understanding why they occur. Hopefully this helps!

Gatorbyter

Thank you for taking the time for a complete answer - it is very helpful. I have followed some of this thru the articles by KItces ....

https://www.kitces.com/blog/tax-efficie ... ing-needs/

And will hopefully utilize that strategy in the near future as we get into these years. Still will utilize the IORP to get me 'close' to the overall plan and check it with along the way (RPM and others) before utilizing these to minimize taxes.
Thank you again

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Re: Anyone using i-orp as a guide for withdrawals?

Post by Gatorbyter » Wed Sep 06, 2017 9:11 am

smitcat wrote:
Wed Sep 06, 2017 8:39 am

Thank you for taking the time for a complete answer - it is very helpful. I have followed some of this thru the articles by KItces ....

https://www.kitces.com/blog/tax-efficie ... ing-needs/

And will hopefully utilize that strategy in the near future as we get into these years. Still will utilize the IORP to get me 'close' to the overall plan and check it with along the way (RPM and others) before utilizing these to minimize taxes.

Thank you again
No problem. The article you linked is excellent. I had seen it before and basically it echos what I had written above! I really wish a TE approach could be made a part of ORP, but I certainly understand the amount of work that would require and don't fault the James Welch for using a CR approach since it works sufficiently for many peeps. Perhaps though ..... he could post something on his website about the limitations such that they are better known?

Gatorbyter

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Re: Anyone using i-orp as a guide for withdrawals?

Post by Peter Foley » Wed Sep 06, 2017 7:10 pm

Regarding the TE approach and a possible calculator:

You might want to try the Retiree Portfolio Model by Bigfoot. It is an excel spreadsheet you can download. You can run scenarios and save them with different names and compare the results. I think the results are more difficult to interpret than i-orp initially, but if you pay close attention to the estimated taxes, break even point in terms of years, and final value of the estate it provides a lot of insight.

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Re: Anyone using i-orp as a guide for withdrawals?

Post by munemaker » Thu Sep 07, 2017 5:13 pm

smitcat wrote:
Wed Sep 06, 2017 6:43 am
Gatorbyter wrote:
Tue Sep 05, 2017 4:24 pm
While I love ORP and have been using it for years .... there is a fundamental problem with the withdrawal logic.

ORP uses the Common Rule (CR) for withdrawals which involves withdraw of taxable savings before tax-deferred savings, but this strategy can artificially inflate required minimum distributions (RMDs) and reduce tax efficiency and wealth. Conversely, Tax-Efficient (TE) withdrawal schemes can determine withdrawals that maximize the final total account balance over a retirement horizon. Studies such as https://www.onefpa.org/journal/Pages/Ta ... Model.aspx show that TE models can significantly outperform CR when taxable rate of return is greater than tax-deferred rate of returns, initial taxable wealth is greater than 10 percent of total retirement wealth, and itemized deductions are greater than the standard deduction.

Gatorbyter

Where do you get a calculator that can simulate the TE model approach?
Are you SURE that i-ORP does not use the TE method?

I loaded the scenario described in the referenced paper "Tax Efficient Retirement Withdrawal Planning Using a Linear Programming Model" into i-ORP, except I did not include SS. I set it for NO PARTIAL ROTH CONVERSIONS. The results are very similar to the withdrawal pattern of the TE plan described in the paper:
- Paper says from ages 66 through 72, TE withdraws only from tax deferred savings to satisfy total required expenses. The model of i-ORP I ran only withdraws from tax deferred savings from ages 66 through 75.
- Paper says from ages 66 through 72, TE withdraws additional amounts at year-end from tax deferred savings, then transferred to taxable savings to provide tax efficiency over the longer horizon. The model of i-ORP I ran withdraws additional amounts from tax deferred savings and transfers to taxable savings from ages 66 to 74.
- Paper says from ages 70 through 78, tax-deferred withdrawals exceed RMDs. The model of i-ORP I ran shows that tax-deferred withdrawals exceed RMDs from ages 70 through 81.

I did not include SS in my model, which they did in the paper, so it was not exact. However it is close enough that it would appear that i-ORP does use the TE method, or something approximating it.

Why do you believe i-ORP does not use the TE approach?

smitcat
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Re: Anyone using i-orp as a guide for withdrawals?

Post by smitcat » Fri Sep 08, 2017 8:47 am

munemaker wrote:
Thu Sep 07, 2017 5:13 pm
smitcat wrote:
Wed Sep 06, 2017 6:43 am
Gatorbyter wrote:
Tue Sep 05, 2017 4:24 pm
While I love ORP and have been using it for years .... there is a fundamental problem with the withdrawal logic.

ORP uses the Common Rule (CR) for withdrawals which involves withdraw of taxable savings before tax-deferred savings, but this strategy can artificially inflate required minimum distributions (RMDs) and reduce tax efficiency and wealth. Conversely, Tax-Efficient (TE) withdrawal schemes can determine withdrawals that maximize the final total account balance over a retirement horizon. Studies such as https://www.onefpa.org/journal/Pages/Ta ... Model.aspx show that TE models can significantly outperform CR when taxable rate of return is greater than tax-deferred rate of returns, initial taxable wealth is greater than 10 percent of total retirement wealth, and itemized deductions are greater than the standard deduction.

Gatorbyter

Where do you get a calculator that can simulate the TE model approach?
Are you SURE that i-ORP does not use the TE method?

I loaded the scenario described in the referenced paper "Tax Efficient Retirement Withdrawal Planning Using a Linear Programming Model" into i-ORP, except I did not include SS. I set it for NO PARTIAL ROTH CONVERSIONS. The results are very similar to the withdrawal pattern of the TE plan described in the paper:
- Paper says from ages 66 through 72, TE withdraws only from tax deferred savings to satisfy total required expenses. The model of i-ORP I ran only withdraws from tax deferred savings from ages 66 through 75.
- Paper says from ages 66 through 72, TE withdraws additional amounts at year-end from tax deferred savings, then transferred to taxable savings to provide tax efficiency over the longer horizon. The model of i-ORP I ran withdraws additional amounts from tax deferred savings and transfers to taxable savings from ages 66 to 74.
- Paper says from ages 70 through 78, tax-deferred withdrawals exceed RMDs. The model of i-ORP I ran shows that tax-deferred withdrawals exceed RMDs from ages 70 through 81.

I did not include SS in my model, which they did in the paper, so it was not exact. However it is close enough that it would appear that i-ORP does use the TE method, or something approximating it.

Why do you believe i-ORP does not use the TE approach?

Hello munemaker - I do not know for sure if IORP uses a TE approach or not. We have had good results utilizing the IORP and also check it with a few other tools and mentioned prior. Neither am I sure if we can 'tweak' it better than what is already outputted for our purposes.
Gatorbyter raised the question of a potential 'better' TE approach - not sure what exactly he believe the IORP in fact does.
In any case I will take some time and check our IORP printed outputs over the weekend and likely find that they agree with your assessments.
Thank you

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Re: Anyone using i-orp as a guide for withdrawals?

Post by munemaker » Fri Sep 08, 2017 10:02 am

smitcat wrote:
Fri Sep 08, 2017 8:47 am
Gatorbyter raised the question of a potential 'better' TE approach - not sure what exactly he believe the IORP in fact does.
I hope Gatorbyter responds. I would like to hear his perspective on this (i.e. why he believes i-Orp does not follow the TE approach).

DrGoogle2017
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Re: Anyone using i-orp as a guide for withdrawals?

Post by DrGoogle2017 » Fri Sep 08, 2017 11:41 am

I glanced again at my I-orp results from multiple scenarios I ran a few days ago. If I read that right, the tax amount I will be paying is in the ridiculous category. My husband and I didn't pay that much tax when we were working, not the previous 5 years anyway. Something is odd with the results. So my take is I'm going to stick to 15 % tax bracket for my Roth Conversion. If we don't use it, we can leave it to our kids. I don't know if they can still stretch the IRA anymore.

munemaker
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Re: Anyone using i-orp as a guide for withdrawals?

Post by munemaker » Fri Sep 08, 2017 8:08 pm

Gatorbyter wrote:
Wed Sep 06, 2017 9:11 am
I really wish a TE approach could be made a part of ORP

Gatorbyter
Refer to the attachment: "Validating the Optimal Retirement Planner," page 5. It compares the TE approach with i-ORP's approach and concludes they are not identical, but similar. "The striking aspect about both graphs is that not only are they similar but they are both running counter to conventional practice."

link: https://www.i-orp.com/ModelDescription/validation.pdf

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Re: Anyone using i-orp as a guide for withdrawals?

Post by sophie1 » Sat Sep 09, 2017 8:07 am

Gatorbyter wrote:
Wed Sep 06, 2017 7:22 am
Let's assume your TE approach is to take your income up to the 15% taxable income ceiling (quite common). Why? Because breaching the 15% tax bracket is particularly painful and will result in higher than expected marginal rates for some portion of the income. This is because the tax-advantages of qualified dividends and long-term capital gains are lost at the same time as additional income is being added, i.e., a double-whammy!
...
Thus, serious consideration should be given to being a lot smarter by taking simultaneous withdrawals from taxable, tax-deferred, and eventually tax-exempt accounts as required to stay within a target tax bracket (often the 15% tax bracket).
+1

I'm not at retirement yet but starting to think about tax management. I played with the i-ORP tool and it is indeed useful, though it doesn't (and can't) account for many of the nuances that will affect my financial decisions. The big jump from 15% to 25% tax brackets described above is one, but there are also things like generous income-limited property tax rebates for seniors and extra income sources that kick in at different times.

I agree about the limited value of backtesting, but it is useful as a "stress test" for portfolio withdrawal schemes under different economic conditions. After running a few simulations, I think the broad outlines of my strategy are going to be:

- Getting tax-deferred accounts down to ~30% of total savings early in retirement and before taking Social Security, if possible. If necessary, I might use an "alternate year" strategy where I convert a large chunk in one year accepting the 25% tax rate, then arrange to stay under income limits the next year and use that time for things like tax gain harvesting and qualifying for local senior benefits. I might also redirect tax-deferred savings to a Roth 401K or to simply to taxable in the last few years before retirement.

- Keeping at least 15% and up to 25% of retirement savings in cash, rebalancing as necessary. This strategy beat the pants off a pure stock/bond portfolio in backtesting, because it protects you from having to sell assets that have dropped in value. It also provides enough cash reserve to get safely through even prolonged market downturns (e.g. the 1970s). Note that if savings are about at the level of a 4% SWR, having 25% of savings in cash amounts to about 6 years of expenses, which is not too different from the 5 years expenses that I've seen recommended for cash savings in retirement. It helps to take it one step further and make it a fixed allocation within the overall portfolio.

- Keeping things SIMPLE. Aging is no fun (though the alternative is worse :-) and a complex financial life could end up costing way more than the perceived benefits of highly tuned optimization.

I'm not sure how to divide withdrawals between taxable and Roth, but in the 15% tax bracket it perhaps doesn't matter much as long as most of the interest-bearing investments can camp out in the Roth.

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Re: Anyone using i-orp as a guide for withdrawals?

Post by SGM » Sat Sep 09, 2017 9:13 am

I-orp suggested large conversions over several years. This was just an additional confirmation of what I was already prepared to do. I completed the conversions a little faster than suggested by I-orp.

I felt that the tax predictions were lower than I expected. Also withdrawals are more than I need to spend. Social security predicted growth in payments were higher than I anticipate. I expect SS payments to grow somewhat less than the inflation rate. I haven't run I-orp for a while and don't anticipate using it as a guidance for withdrawals.

DrGoogle2017
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Re: Anyone using i-orp as a guide for withdrawals?

Post by DrGoogle2017 » Sat Sep 09, 2017 11:00 am

You can still do Roth conversion while taking RMD, as long as your RMD is not big. That's my plan. I just want to reduce as much as I can before taking RMD.

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Re: Anyone using i-orp as a guide for withdrawals?

Post by munemaker » Tue Sep 12, 2017 6:49 pm

DrGoogle2017 wrote:
Fri Sep 08, 2017 11:41 am
I glanced again at my I-orp results from multiple scenarios I ran a few days ago. If I read that right, the tax amount I will be paying is in the ridiculous category. My husband and I didn't pay that much tax when we were working, not the previous 5 years anyway. Something is odd with the results. So my take is I'm going to stick to 15 % tax bracket for my Roth Conversion. If we don't use it, we can leave it to our kids. I don't know if they can still stretch the IRA anymore.
Rather than dismissing the results as ridiculous after a glance, I would try to understand why the recommendations are as they are. It is not uncommon for people to pay more income tax in retirement. Sometimes it is a lot better to pay less now rather than pay more later. Your kids can still stretch inherited IRAs but may not always be able to do so.

DrGoogle2017
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Re: Anyone using i-orp as a guide for withdrawals?

Post by DrGoogle2017 » Wed Sep 13, 2017 9:36 am

munemaker wrote:
Tue Sep 12, 2017 6:49 pm
DrGoogle2017 wrote:
Fri Sep 08, 2017 11:41 am
I glanced again at my I-orp results from multiple scenarios I ran a few days ago. If I read that right, the tax amount I will be paying is in the ridiculous category. My husband and I didn't pay that much tax when we were working, not the previous 5 years anyway. Something is odd with the results. So my take is I'm going to stick to 15 % tax bracket for my Roth Conversion. If we don't use it, we can leave it to our kids. I don't know if they can still stretch the IRA anymore.
Rather than dismissing the results as ridiculous after a glance, I would try to understand why the recommendations are as they are. It is not uncommon for people to pay more income tax in retirement. Sometimes it is a lot better to pay less now rather than pay more later. Your kids can still stretch inherited IRAs but may not always be able to do so.
I think I know why. They don't really have knowledge of our tax situation.

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Re: Anyone using i-orp as a guide for withdrawals?

Post by smitcat » Wed Sep 13, 2017 9:57 am

DrGoogle2017 wrote:
Wed Sep 13, 2017 9:36 am
munemaker wrote:
Tue Sep 12, 2017 6:49 pm
DrGoogle2017 wrote:
Fri Sep 08, 2017 11:41 am
I glanced again at my I-orp results from multiple scenarios I ran a few days ago. If I read that right, the tax amount I will be paying is in the ridiculous category. My husband and I didn't pay that much tax when we were working, not the previous 5 years anyway. Something is odd with the results. So my take is I'm going to stick to 15 % tax bracket for my Roth Conversion. If we don't use it, we can leave it to our kids. I don't know if they can still stretch the IRA anymore.
Rather than dismissing the results as ridiculous after a glance, I would try to understand why the recommendations are as they are. It is not uncommon for people to pay more income tax in retirement. Sometimes it is a lot better to pay less now rather than pay more later. Your kids can still stretch inherited IRAs but may not always be able to do so.
I think I know why. They don't really have knowledge of our tax situation.
Not only has the IORP helped a bunch in the future planning and comparison but so has the RPM model from Bigfoot. And once they were both set up correctly (not so easy for the first few runs) they also mostly agree with the full tax software we use to confirm the runs.
Perhaps check that 'free' Bogle spreadsheet/calculator and compare it to your IORP and future (not past) modeled tax runs.
In our case it was a big help in choosing a path that will give us much more "spendable" dollars.
Please not that paying tax now can often lead to more $$$ that can actually be spent in the future , easier to see this with the RPM.

DrGoogle2017
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Re: Anyone using i-orp as a guide for withdrawals?

Post by DrGoogle2017 » Wed Sep 13, 2017 10:15 am

smitcat wrote:
Wed Sep 13, 2017 9:57 am
DrGoogle2017 wrote:
Wed Sep 13, 2017 9:36 am
munemaker wrote:
Tue Sep 12, 2017 6:49 pm
DrGoogle2017 wrote:
Fri Sep 08, 2017 11:41 am
I glanced again at my I-orp results from multiple scenarios I ran a few days ago. If I read that right, the tax amount I will be paying is in the ridiculous category. My husband and I didn't pay that much tax when we were working, not the previous 5 years anyway. Something is odd with the results. So my take is I'm going to stick to 15 % tax bracket for my Roth Conversion. If we don't use it, we can leave it to our kids. I don't know if they can still stretch the IRA anymore.
Rather than dismissing the results as ridiculous after a glance, I would try to understand why the recommendations are as they are. It is not uncommon for people to pay more income tax in retirement. Sometimes it is a lot better to pay less now rather than pay more later. Your kids can still stretch inherited IRAs but may not always be able to do so.
I think I know why. They don't really have knowledge of our tax situation.
Not only has the IORP helped a bunch in the future planning and comparison but so has the RPM model from Bigfoot. And once they were both set up correctly (not so easy for the first few runs) they also mostly agree with the full tax software we use to confirm the runs.
Perhaps check that 'free' Bogle spreadsheet/calculator and compare it to your IORP and future (not past) modeled tax runs.
In our case it was a big help in choosing a path that will give us much more "spendable" dollars.
Please not that paying tax now can often lead to more $$$ that can actually be spent in the future , easier to see this with the RPM.
Where do I find the RPM? I did put a ridiculous amount to leave my kids in today's money, which maybe constraint the tool too much. I definitely will look into this tool later.

smitcat
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Re: Anyone using i-orp as a guide for withdrawals?

Post by smitcat » Wed Sep 13, 2017 11:45 am

DrGoogle2017 wrote:
Wed Sep 13, 2017 10:15 am
smitcat wrote:
Wed Sep 13, 2017 9:57 am
DrGoogle2017 wrote:
Wed Sep 13, 2017 9:36 am
munemaker wrote:
Tue Sep 12, 2017 6:49 pm
DrGoogle2017 wrote:
Fri Sep 08, 2017 11:41 am
I glanced again at my I-orp results from multiple scenarios I ran a few days ago. If I read that right, the tax amount I will be paying is in the ridiculous category. My husband and I didn't pay that much tax when we were working, not the previous 5 years anyway. Something is odd with the results. So my take is I'm going to stick to 15 % tax bracket for my Roth Conversion. If we don't use it, we can leave it to our kids. I don't know if they can still stretch the IRA anymore.
Rather than dismissing the results as ridiculous after a glance, I would try to understand why the recommendations are as they are. It is not uncommon for people to pay more income tax in retirement. Sometimes it is a lot better to pay less now rather than pay more later. Your kids can still stretch inherited IRAs but may not always be able to do so.
I think I know why. They don't really have knowledge of our tax situation.
Not only has the IORP helped a bunch in the future planning and comparison but so has the RPM model from Bigfoot. And once they were both set up correctly (not so easy for the first few runs) they also mostly agree with the full tax software we use to confirm the runs.
Perhaps check that 'free' Bogle spreadsheet/calculator and compare it to your IORP and future (not past) modeled tax runs.
In our case it was a big help in choosing a path that will give us much more "spendable" dollars.
Please not that paying tax now can often lead to more $$$ that can actually be spent in the future , easier to see this with the RPM.
Where do I find the RPM? I did put a ridiculous amount to leave my kids in today's money, which maybe constraint the tool too much. I definitely will look into this tool later.
RPM...
https://www.bogleheads.org/wiki/Retiree_Portfolio_Model

Perhaps try and set IORP for a fixed amount of money each year and then pay with that number to see what is left for the 'kids'.

munemaker
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Re: Anyone using i-orp as a guide for withdrawals?

Post by munemaker » Wed Sep 13, 2017 8:33 pm

I got tripped up on something by not thoroughly reading the i-ORP documentation.

When looking through the "Federal Tax Bracket Report," I noticed that some lower brackets had zeros while higher brackets had entries, and wondered about entries in the 99-Max column. Reading through the documentation, I found this indicates an invalid run. Resolution is to raise your spending or make other changes to get rid of these symptoms. In my case, making these changes resulted in much lower results, which are Intuitively more realistic. Here is the wording from the i-ORP documentation:
WARNING A normal Tax Report will contain a cascade of values to the left and empty space to the right. If your Tax Report contains a scattering of numbers throughout the report and in particular non zero values in the 99-Max column then you have created an economically infeasible model. Most likely you achieved this by specifying too low of a Maximum Spending value. For more on this topic see the FAQ Spending vs Estate entry.
If you are using i-ORP, you should really check this out.

smitcat
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Re: Anyone using i-orp as a guide for withdrawals?

Post by smitcat » Thu Sep 14, 2017 10:15 am

munemaker wrote:
Wed Sep 13, 2017 8:33 pm
I got tripped up on something by not thoroughly reading the i-ORP documentation.

When looking through the "Federal Tax Bracket Report," I noticed that some lower brackets had zeros while higher brackets had entries, and wondered about entries in the 99-Max column. Reading through the documentation, I found this indicates an invalid run. Resolution is to raise your spending or make other changes to get rid of these symptoms. In my case, making these changes resulted in much lower results, which are Intuitively more realistic. Here is the wording from the i-ORP documentation:
WARNING A normal Tax Report will contain a cascade of values to the left and empty space to the right. If your Tax Report contains a scattering of numbers throughout the report and in particular non zero values in the 99-Max column then you have created an economically infeasible model. Most likely you achieved this by specifying too low of a Maximum Spending value. For more on this topic see the FAQ Spending vs Estate entry.
If you are using i-ORP, you should really check this out.
Yes - a very good point. That was one of a half dozen errors I was making about a year ago when I began to use IORP for modeling.
Once I got the input errors figured out (thanks to folks here mostly) the runs became very useful.

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