Calling Pralana Calculator Users

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Rajsx
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Calling Pralana Calculator Users

Post by Rajsx »

I am retiring soon & am looking for a comprehensive Retirement Planner Calculator to plan my finances -

After hearing good things about Pralana Retirement Calculator, I downloaded the Bronze Free Version, I have the Excel 2010 on my laptop.
When I click on Pralana Widget - Message says "The File is Corrupt & cannot be opened".

I am stuck in my tract, I do not know how to proceed further, please help

Thanks in advance
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cork
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Re: Calling Pralana Calculator Users

Post by cork »

I am unfamiliar with the program, but I'll make a few suggestions. First a little clarification is needed.
Are you getting
"The File is Corrupt & cannot be opened".
when you try to open the Pralana Program? If so, since it's free, I would just uninstall the program, download, and reinstall again.
From the manual:
When you download PRC/Bronze and the computer asks you what you want to do with the downloaded file, tell it to Save and then Open. That will ensure it gets saved on your computer, and you’ll find the saved PRC2019.x.Bronze file in your Downloads folder. When the file opens, you can click the various buttons to explore PRC and modify the data fields as you like.
If it's happening when trying to open the Excel file, make sure you saved it properly:
When you’re ready to save the modified file, you have three options: 1) you can use the Excel shortcut (for Windows machines, push the Ctrl and the s buttons simultaneously, which we’ll call “ctrl-s”; for Macs, push the Cmd and the s buttons simultaneously, which we’ll call “cmd-s”) to save the file in the original location (your Downloads folder) and with the original name (PRC2021.x.Bronze), 2) you can click the PRC Save icon instead of using the shortcuts referenced in option 1, or 3) you can click the PRC SaveAs icon to do a “save as” operation, which then allows you to specify the folder and filename of your choice. When you’re finished working with the file, click the X icon to exit. Before the file is closed another save will be performed automatically.
Hope this helps
Tom_T
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Re: Calling Pralana Calculator Users

Post by Tom_T »

I get the same error. I believe there is a mismatch between the file extension they are assigning (.xlsx) and the actual format of the file. And I am using Office 2019, so I'm pretty up to date.

What worked for me was to rename the file with a simple .xls extension. Then, when I tried to open it, I got a warning, but it allowed me to proceed anyway, and I was able to open the file.

This is definitely an issue on their end, not on yours or mine.
mrb55
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Re: Calling Pralana Calculator Users

Post by mrb55 »

Reach out to the creator, Stuart Matthews. I'm sure he will be happy to answer any questions you may have.
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beernutz
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Re: Calling Pralana Calculator Users

Post by beernutz »

xlsm format indicates the spreadsheet contains macros. I paid for Pralana Gold and it is also .xlsm format and opens fine in Excel 365. I just downloaded PRC2021.2.Bronze-******.xlsm and it also opened right up in Excel 365 though I had to give explicit permissions to edit the file and for it to run its macros.

I suggest temporarily disabling Excel's protected view (Options->Trust Center->Trust Center Settings...->Protected View)
before trying to open the .xlsm file to see if that fixes the corrupt file message.

IMO Bronze gives you a glimpse of what Gold can do but it has nothing close to Gold's capabilities and flexibility.
Don't gamble; take all your savings and buy some good stock and hold it till it goes up, then sell it. If it don't go up, don't buy it. --Will Rogers
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TomatoTomahto
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Re: Calling Pralana Calculator Users

Post by TomatoTomahto »

New user here of Pralana Gold. Did you download it using Firefox? It works better if you download using Chrome.

ETA: really early days (i.e., day 1) but so far it looks good. I am dubious about some things, but will have to see. I put a large increase of income tax into my assumptions, and surprise surprise, it recommends a large Roth conversion. I will reset that assumption and see how it does.
I get the FI part but not the RE part of FIRE.
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Re: Calling Pralana Calculator Users

Post by Sahara »

The Chicago BH Chapter had a Zoom presentation with Stuart Matthews last week. It was very educational and he was able to showcase a variety of features. There was talk of distributing a video of the presentation, but I have not received further information. One issue that did come up with Pralana Bronze was related to the iteration function when using Pralana and also having another excel spreadsheet open.

Chapter events can be found on this calendar:
https://www.bogleheads.org/blog/calendar-of-events/
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Rajsx
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Re: Calling Pralana Calculator Users

Post by Rajsx »

mrb55 wrote: Tue Mar 23, 2021 1:50 pm Reach out to the creator, Stuart Matthews. I'm sure he will be happy to answer any questions you may have.
I did reach out, waiting for Stuart's reply.

In the mean time I am trying the above suggestions & tricks, thanks a lot
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Exchme
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Re: Calling Pralana Calculator Users

Post by Exchme »

I didn't bother with Bronze, just bought the Gold. The Gold files are .xlsm, macro enabled, I presume the Bronze should be too.

I bought about a month ago and feel like this is the first program I've seen that covers enough nuances of the tax code to give a shot at evaluating Roth conversions right, which was my big interest. Considering the amount of taxes involve if I do the wrong amount of those, the $99 price seemed cheap. It does a lot of other stuff too - evaluating the optimum SS claim date for your tax situation and return assumptions, historical and monte carlo simulations, sensitivity studies at the click of a button, lots of options for withdrawal choices. For my situation, I didn't use much of that, but it might be useful to others.

Takes some learning curve, but the manual is good and the customer service is responsive. Happy so far.
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Rajsx
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Re: Calling Pralana Calculator Users

Post by Rajsx »

I have heard a lot of good about Pralana Gold & I do intend to purchase that.
Having said that, if it is not user friendly & stops people from using it, what good is it.
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Rajsx
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Re: Calling Pralana Calculator Users

Post by Rajsx »

Rajsx wrote: Wed Mar 24, 2021 4:35 pm I have heard a lot of good about Pralana Gold & I do intend to purchase that.
Having said that, if it is not user friendly & stops people from using it, what good is it.
I am using chrome & yet cannot get into the program.
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Sahara
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Re: Calling Pralana Calculator Users

Post by Sahara »

Exchme wrote: Wed Mar 24, 2021 4:26 pm I didn't bother with Bronze, just bought the Gold. The Gold files are .xlsm, macro enabled, I presume the Bronze should be too.

I bought about a month ago and feel like this is the first program I've seen that covers enough nuances of the tax code to give a shot at evaluating Roth conversions right, which was my big interest. Considering the amount of taxes involved if I do the wrong amount of those, the $99 price seemed cheap. It does a lot of other stuff too - evaluating the optimum SS claim date for your tax situation and return assumptions, historical and monte carlo simulations, sensitivity studies at the click of a button, lots of options for withdrawal choices. For my situation, I didn't use much of that, but it might be useful to others.

Takes some learning curve, but the manual is good and the customer service is responsive. Happy so far.
One of the valuable aspects of Pralana Gold compared to other tools appears to be the ability to use differing asset allocations for different accounts. For example, you can model 100% VTSAX in Roth and 50/50 or another allocation in Tax-Deferred. I believe it has the ability to modify the overall AA if you want to model a glide path as well.
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Re: Calling Pralana Calculator Users

Post by Exchme »

Sahara wrote: Wed Mar 24, 2021 4:47 pm One of the valuable aspects of Pralana Gold compared to other tools appears to be the ability to use differing asset allocations for different accounts. For example, you can model 100% VTSAX in Roth and 50/50 or another allocation in Tax-Deferred. I believe it has the ability to modify the overall AA if you want to model a glide path as well.
Yes, you can make 4 changes in asset allocation over your lifetime, so you can put in a glide path. But for studying Roth conversions, just like all the tools (i-orp, RPM), you have to use the same asset allocation in each account. Otherwise the program simply favors putting more money into the account with the greatest stock percentage (and therefore the highest return). So in your example of 100% stock in Roth and some bonds in tax deferred, it will favor unrealistically high Roth conversions, simply chasing that extra return of holding a higher percentage stocks. This makes the program less useful than I hoped, but after thinking about what they could have done to make it more natural, I decided I didn't know either, so accepted that the current state of the art in modeling Roth conversions is that all accounts need the same allocation.
Sahara
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Re: Calling Pralana Calculator Users

Post by Sahara »

Aha. Thank you. I didn't completely follow that portion of last week's presentation. I'm wondering if Planvision or anyone else has a way to address this.
jacksprat
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Re: Calling Pralana Calculator Users

Post by jacksprat »

To the OP::
Here you go.. It's not really a problem on 'their end'... Certain browsers used for downloading the file change the extension.

If this doesn't work for you, post in that forum for a 'higher fidelity' answer ! :happy

https://pralanaretirementcalculator.com ... -in-excel/

AND please download and read the manual end to end... It's very detailed and helpful !
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Re: Calling Pralana Calculator Users

Post by ByThePond »

Exchme wrote: Wed Mar 24, 2021 7:08 pm But for studying Roth conversions, just like all the tools (i-orp, RPM), you have to use the same asset allocation in each account.
Exchme, this comment has me puzzled.

In RPM, I have set the AA of both our Roths to values different from our taxables and TIRAs (and seen the effect you describe, that of return chasing) .

What I don't get is why you say that all the accounts must have the same AA.

I set it up in RPM-SETUP-Return Rates and Allocation-Lines 91 to 96.

Is this what you're trying to do, or am I off base?
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Re: Calling Pralana Calculator Users

Post by Exchme »

If you are trying to study Roth conversions, then you want to keep other variables constant. But unless you input the same asset allocation for each account type, the program is not keeping your overall asset allocation constant and that change in asset allocation is driving the result, not the tax situation, which is what you intended to study.

If, say, your Roth is 100% stock and your tax deferred is not, then with each conversion, your overall stock % is going higher and higher as the program moves money from tax deferred where the stock percentage was low to the Roth where it was high. Since stocks average larger returns than bonds, the program falls in love with that idea and favors huge Roth conversions. But it's not favoring them for tax reasons, it's favoring them because the program is increasing your stock percentage.

The only way to make the overall asset allocation remain constant when the relative sizes of the accounts change is to make the asset allocation in each account equal to each other.
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Re: Calling Pralana Calculator Users

Post by LadyGeek »

This thread is now in the Personal Finance (Not Investing) forum (retirement planning).
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ByThePond
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Re: Calling Pralana Calculator Users

Post by ByThePond »

Exchme:
I see. That's why I ran numerous scenarios to find my ultimate portfolio arrangement, including keeping the AAs constant across all account types.

You're correct in that a higher AA in Roth will act as a conversion bias, but even with the most extreme variations I inputted, the full Roth conversions always showed a higher final balance. Markedly so for the AA I will actually arrive at.

I believe the issue was less complicated in my case as I am no longer contributing and in 3 years will end up with all my investments in Roth IRAs. The validity of doing this was verified by using various AA combinations across all account types, and different conversion amounts and timing. A LOT of trials. As you know, RPM allows unlimited trials with different data, which I gather the Pralana calculator does not.

I agree that this approach would likely be unwieldy/unworkable if one were still contributing to their various accounts, however in my case I found it an acceptable workaround.
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Re: Calling Pralana Calculator Users

Post by Exchme »

ByThePond wrote: Thu Mar 25, 2021 8:00 pm Exchme:
I see. That's why I ran numerous scenarios to find my ultimate portfolio arrangement, including keeping the AAs constant across all account types.

You're correct in that a higher AA in Roth will act as a conversion bias, but even with the most extreme variations I inputted, the full Roth conversions always showed a higher final balance. Markedly so for the AA I will actually arrive at.

I believe the issue was less complicated in my case as I am no longer contributing and in 3 years will end up with all my investments in Roth IRAs. The validity of doing this was verified by using various AA combinations across all account types, and different conversion amounts and timing. A LOT of trials. As you know, RPM allows unlimited trials with different data, which I gather the Pralana calculator does not.

I agree that this approach would likely be unwieldy/unworkable if one were still contributing to their various accounts, however in my case I found it an acceptable workaround.
Glad you found a solution!

BTW, Pralana Gold ($99) allows you to do anything you want, it's just an Excel spreadsheet on your computer (you can save as many versions as you want, but it's well protected and anchored to your machine to prevent giving it to others). It theoretically has an Roth conversion optimizer, but for me it never found anything resembling the optimum I could find with manual iteration. The manual optimization procedure in Pralana Gold is a little different - select a tax bracket and IRMAA tier limit and then vary the total percentage converted - that still requires a lot of iteration. For me the answers were very different compared to RPM or i-orp, with Pralana Gold showing twice as much conversion as the optimum. Seemed like P-G was trying much harder to avoid single rate tax brackets that occur after one spouse passes. Since Pralana Gold has much more of the tax code programmed in it, I'm believing it vs. the other programs.
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Re: Calling Pralana Calculator Users

Post by LadyGeek »

Exchme wrote: Fri Mar 26, 2021 6:37 am For me the answers were very different compared to RPM or i-orp, with Pralana Gold showing twice as much conversion as the optimum.
Acronym decoder:

RPM = Retiree Portfolio Model (what I use)

Regardless if the program is free or paid, be aware that past performance may not predict future performance. Monte Carlo method is often used as a marketing term. It says little about the underlying model used for the analysis - historical performance and methodology.

Defining a model as "better" or "more accurate" should be taken with a grain of salt. Just be aware of what you are working with.

I'm comfortable working with a spreadsheet. Others may want a program to figure it out for them. That's fine.

==============
The Retiree Portfolio Model does not do statistical analysis. It's spreadsheet with precise formulas. How can you use it for modeling retirement? Just run different estimates - a "worst-case" number (something bad happens), a "nominal" (average) number, and a "best case" number (everything goes right).

The statistical models do the same thing - come up with an estimate and tell you if it will work or not.

Just be sure it can handle things such as selling a home, a spouse passing away, long-term care, QCDs, Roth conversions, IRMAA, Social Security, RMDs, federal and state taxes, etc. The Retiree Portfolio Model spreadsheet does all of this and more. It is somewhat difficult to understand, which may deter some users. However, it's very comprehensive. If you can't work with a spreadsheet, it's worth a look to double-check that you're planning for all of the possible scenarios.
Wiki To some, the glass is half full. To others, the glass is half empty. To an engineer, it's twice the size it needs to be.
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Re: Calling Pralana Calculator Users

Post by smitcat »

LadyGeek wrote: Fri Mar 26, 2021 7:02 am
Exchme wrote: Fri Mar 26, 2021 6:37 am For me the answers were very different compared to RPM or i-orp, with Pralana Gold showing twice as much conversion as the optimum.
Acronym decoder:

RPM = Retiree Portfolio Model (what I use)

Regardless if the program is free or paid, be aware that past performance may not predict future performance. Monte Carlo method is often used as a marketing term. It says little about the underlying model used for the analysis - historical performance and methodology.

Defining a model as "better" or "more accurate" should be taken with a grain of salt. Just be aware of what you are working with.

I'm comfortable working with a spreadsheet. Others may want a program to figure it out for them. That's fine.

==============
The Retiree Portfolio Model does not do statistical analysis. It's spreadsheet with precise formulas. How can you use it for modeling retirement? Just run different estimates - a "worst-case" number (something bad happens), a "nominal" (average) number, and a "best case" number (everything goes right).

The statistical models do the same thing - come up with an estimate and tell you if it will work or not.

Just be sure it can handle things such as selling a home, a spouse passing away, long-term care, QCDs, Roth conversions, IRMAA, Social Security, RMDs, federal and state taxes, etc. The Retiree Portfolio Model spreadsheet does all of this and more. It is somewhat difficult to understand, which may deter some users. However, it's very comprehensive. If you can't work with a spreadsheet, it's worth a look to double-check that you're planning for all of the possible scenarios.
"The Retiree Portfolio Model spreadsheet does all of this and more. It is somewhat difficult to understand, which may deter some users. However, it's very comprehensive. If you can't work with a spreadsheet, it's worth a look to double-check that you're planning for all of the possible scenarios."
This has also been true in our case - we find the RPM extremely valuable.
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Re: Calling Pralana Calculator Users

Post by spammagnet »

From this information I surmise that Pralana must be saved as a macro-enabled file.

https://pralanaretirementcalculator.com/get-prc:

"... Note for Firefox users: Some versions of Firefox append a .xlsx extension to Pralana’s .xlsm files which Excel will reject. If you see this occurring following a download, you will need to manually delete the .xlsx extension from the filename prior to opening. ..."
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Re: Calling Pralana Calculator Users

Post by is50xenough »

Exchme wrote: Fri Mar 26, 2021 6:37 am
ByThePond wrote: Thu Mar 25, 2021 8:00 pm Exchme:
I see. That's why I ran numerous scenarios to find my ultimate portfolio arrangement, including keeping the AAs constant across all account types.

You're correct in that a higher AA in Roth will act as a conversion bias, but even with the most extreme variations I inputted, the full Roth conversions always showed a higher final balance. Markedly so for the AA I will actually arrive at.

I believe the issue was less complicated in my case as I am no longer contributing and in 3 years will end up with all my investments in Roth IRAs. The validity of doing this was verified by using various AA combinations across all account types, and different conversion amounts and timing. A LOT of trials. As you know, RPM allows unlimited trials with different data, which I gather the Pralana calculator does not.

I agree that this approach would likely be unwieldy/unworkable if one were still contributing to their various accounts, however in my case I found it an acceptable workaround.
Glad you found a solution!

BTW, Pralana Gold ($99) allows you to do anything you want, it's just an Excel spreadsheet on your computer (you can save as many versions as you want, but it's well protected and anchored to your machine to prevent giving it to others). It theoretically has an Roth conversion optimizer, but for me it never found anything resembling the optimum I could find with manual iteration. The manual optimization procedure in Pralana Gold is a little different - select a tax bracket and IRMAA tier limit and then vary the total percentage converted - that still requires a lot of iteration. For me the answers were very different compared to RPM or i-orp, with Pralana Gold showing twice as much conversion as the optimum. Seemed like P-G was trying much harder to avoid single rate tax brackets that occur after one spouse passes. Since Pralana Gold has much more of the tax code programmed in it, I'm believing it vs. the other programs.
Exchme been following your posts in reference to Roth conversions. What sort of tax brackets are you talking about when you compared programs on this issue above? Thx
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Re: Calling Pralana Calculator Users

Post by Exchme »

is50xenough wrote: Fri Mar 26, 2021 11:13 am Exchme been following your posts in reference to Roth conversions. What sort of tax brackets are you talking about when you compared programs on this issue above? Thx
Thanks, will update this thread when I learn more. My assessment is Pralana Gold does a better job during your lifetime in handling complexities (AMT, existing LTCG, after tax contributions to tax deferred, etc.) but I think I mostly worked through that by various manual tweaks to RPM. I think the big difference is the treatment at end of life and since these are not inheritance tax programs, looks like both are quite simplified. I've asked a few questions in the RPM thread to try to understand it a bit better and will poke the Pralana Gold people too. But every program has to stop somewhere, so I imagine the programs will mostly stay as they are, the key is to understand if the tool meets the need.
Last edited by Exchme on Fri Mar 26, 2021 3:33 pm, edited 1 time in total.
is50xenough
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Re: Calling Pralana Calculator Users

Post by is50xenough »

Exchme wrote: Fri Mar 26, 2021 3:00 pm
is50xenough wrote: Fri Mar 26, 2021 11:13 am Exchme been following your posts in reference to Roth conversions. What sort of tax brackets are you talking about when you compared programs on this issue above? Thx
Thanks, will update this thread when I learn more. My assessment is Pralana Gold does a better job during your lifetime in handling complexities (AMT, existing LTCG, after tax contributions to tax deferred, but I think I mostly worked through that by various manual tweaks to RPM. I think the big difference is the treatment at end of life and since these are not inheritance tax programs, looks like both are quite simplified. I've asked a few questions in the RPM thread to try to understand it a bit better and will poke the Pralana Gold people too. But every program has to stop somewhere, so I imagine the programs will mostly stay as they are, the key is to understand if the tool meets the need.
Exchme it was specifically your comment that, "For me the answers were very different compared to RPM or i-orp, with Pralana Gold showing twice as much conversion as the optimum. Seemed like P-G was trying much harder to avoid single rate tax brackets that occur after one spouse passes. Since Pralana Gold has much more of the tax code programmed in it, I'm believing it vs. the other programs." Was curious what tax brackets for conversions in RPM, i-orp and Pralana Gold were for you? Meaning were you in the 24% range (at least for next few years, or more in range of optimizing say 12% bracket? Double the amount of conversion is huge difference. Also were these differences using same AA across the board or trying to do what you talked about with higher equity AA in Roth?
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Re: Calling Pralana Calculator Users

Post by Exchme »

is50xenough wrote: Fri Mar 26, 2021 3:05 pm
Exchme wrote: Fri Mar 26, 2021 3:00 pm
is50xenough wrote: Fri Mar 26, 2021 11:13 am Exchme been following your posts in reference to Roth conversions. What sort of tax brackets are you talking about when you compared programs on this issue above? Thx
Thanks, will update this thread when I learn more. My assessment is Pralana Gold does a better job during your lifetime in handling complexities (AMT, existing LTCG, after tax contributions to tax deferred, but I think I mostly worked through that by various manual tweaks to RPM. I think the big difference is the treatment at end of life and since these are not inheritance tax programs, looks like both are quite simplified. I've asked a few questions in the RPM thread to try to understand it a bit better and will poke the Pralana Gold people too. But every program has to stop somewhere, so I imagine the programs will mostly stay as they are, the key is to understand if the tool meets the need.
Exchme it was specifically your comment that, "For me the answers were very different compared to RPM or i-orp, with Pralana Gold showing twice as much conversion as the optimum. Seemed like P-G was trying much harder to avoid single rate tax brackets that occur after one spouse passes. Since Pralana Gold has much more of the tax code programmed in it, I'm believing it vs. the other programs." Was curious what tax brackets for conversions in RPM, i-orp and Pralana Gold were for you? Meaning were you in the 24% range (at least for next few years, or more in range of optimizing say 12% bracket? Double the amount of conversion is huge difference. Also were these differences using same AA across the board or trying to do what you talked about with higher equity AA in Roth?
In my case, all the programs agree on converting to the top of the 24% bracket for a couple of years and then they diverge. As practical matter, that's all I need to know now.

You are right I tried an experiment of using stock in Roth and bonds in tax deferred and found only a very small difference and one of the financial planner types on the forum convinced me that difference was an artifact - basically as bonds build up in tax deferred, they should only be counted towards the overall asset allocation at (1-tax rate), so in spite of a lot of effort to keep the overall allocation constant, the stock percentage overall was actually floating up bit. So I'm now using the same asset allocation in all accounts.

Reading the notes for the programs, none is an inheritance program and they are all making large generalizations so the different assumptions they make is part of the gap. But I'm learning the programs right in front of the world, so there's that. I will change the opinion I had in that quote (betting on Pralana Gold), I am now firmly in the camp of not knowing. Will update if I learn anything useful.
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Rajsx
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Re: Calling Pralana Calculator Users

Post by Rajsx »

I am happy, I could get in to Pralana Bronze.
Now to play with it some & decide about Pralana Gold.
Thanks everybody !
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is50xenough
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Re: Calling Pralana Calculator Users

Post by is50xenough »

Exchme wrote: Fri Mar 26, 2021 4:01 pm
is50xenough wrote: Fri Mar 26, 2021 3:05 pm
Exchme wrote: Fri Mar 26, 2021 3:00 pm
is50xenough wrote: Fri Mar 26, 2021 11:13 am Exchme been following your posts in reference to Roth conversions. What sort of tax brackets are you talking about when you compared programs on this issue above? Thx
Thanks, will update this thread when I learn more. My assessment is Pralana Gold does a better job during your lifetime in handling complexities (AMT, existing LTCG, after tax contributions to tax deferred, but I think I mostly worked through that by various manual tweaks to RPM. I think the big difference is the treatment at end of life and since these are not inheritance tax programs, looks like both are quite simplified. I've asked a few questions in the RPM thread to try to understand it a bit better and will poke the Pralana Gold people too. But every program has to stop somewhere, so I imagine the programs will mostly stay as they are, the key is to understand if the tool meets the need.
Exchme it was specifically your comment that, "For me the answers were very different compared to RPM or i-orp, with Pralana Gold showing twice as much conversion as the optimum. Seemed like P-G was trying much harder to avoid single rate tax brackets that occur after one spouse passes. Since Pralana Gold has much more of the tax code programmed in it, I'm believing it vs. the other programs." Was curious what tax brackets for conversions in RPM, i-orp and Pralana Gold were for you? Meaning were you in the 24% range (at least for next few years, or more in range of optimizing say 12% bracket? Double the amount of conversion is huge difference. Also were these differences using same AA across the board or trying to do what you talked about with higher equity AA in Roth?
In my case, all the programs agree on converting to the top of the 24% bracket for a couple of years and then they diverge. As practical matter, that's all I need to know now.

You are right I tried an experiment of using stock in Roth and bonds in tax deferred and found only a very small difference and one of the financial planner types on the forum convinced me that difference was an artifact - basically as bonds build up in tax deferred, they should only be counted towards the overall asset allocation at (1-tax rate), so in spite of a lot of effort to keep the overall allocation constant, the stock percentage overall was actually floating up bit. So I'm now using the same asset allocation in all accounts.

Reading the notes for the programs, none is an inheritance program and they are all making large generalizations so the different assumptions they make is part of the gap. But I'm learning the programs right in front of the world, so there's that. I will change the opinion I had in that quote (betting on Pralana Gold), I am now firmly in the camp of not knowing. Will update if I learn anything useful.
Thx!
Exchme
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Re: Calling Pralana Calculator Users

Post by Exchme »

is50xenough wrote: Sat Mar 27, 2021 12:27 pm Reading the notes for the programs, none is an inheritance program and they are all making large generalizations so the different assumptions they make is part of the gap. But I'm learning the programs right in front of the world, so there's that. I will change the opinion I had in that quote (betting on Pralana Gold), I am now firmly in the camp of not knowing. Will update if I learn anything useful.
Thx!
Here's what I see so far:
Pralana Gold

Pralana Gold is better at smoothly handling special situations in life like AMT, initial unrealized capital gains, pre-existing after tax contributions to tax deferred IRA (and when to convert them), special parts of the tax code like deduction phaseouts, lapse of the TCJA tax cuts, spend down of an H.S.A, ACA cliff, and much more.

Pralana Gold has an automatic optimizer, but oddly I can find larger benefits manually.

For the heir benefit of Roth conversions, Pralana Gold calculates both and "absolute" and "effective" dollars in tax deferred when doing Roth conversions. Where "effective" means reducing the value of tax deferred by your average marginal tax rate. I would prefer being able to input a tax rate for the heirs instead, but the "effective" dollar idea is some attempt to de-rate tax deferred for taxes owed. If you think your heirs' marginal rate when making withdrawals after inheriting your tax deferred will be a lot different from your average marginal rate, then the "effective" dollar idea will not work well and will guide you to convert too much or too little. Since the sheet is protected and locked, no modifications are allowed so you can't set the heir tax rate yourself.

RPM

In RPM, if you read the embedded notes, the "heir tax benefit" (Setup!i337) is for the first year only, but inherited IRA withdrawals and associated extra taxes can go on for up to 10 years, so the "heir tax benefit" shown is far less than the total benefit. In thinking about getting the total benefit, I think an answer is to enter 1 for the RMD factor in Results!n181, so it becomes like the "effective" concept from Pralana Gold. When I do this, the heir benefit is several times larger than the difference in Portfolio Ending Balance. So people doing calculations only by looking at the Portfolio Ending Balance or the sum of that plus the first year heir benefit (and who did not set the RMD factor to 1) are aiming at conversions that are far too small!

If I set my heirs' tax rate close to my the typical marginal rate, then the optimum Roth conversions found in RPM are close to those in Pralana Gold. Since I have to make several approximations in RPM to get the RPM cash flow near the Pralana Gold cash flow, I would say the optimized Roth conversions are fairly comparable.

In RPM, you only get one tax rate for your heirs in both the conversion and no conversion case (Results!n179), even though the actual tax rates could be much different. I contacted the author and he is going to leave the program as-is. With only one rate, I don't know how to analyze the benefit of doing enough conversions to lower your heirs' tax rates (admittedly someone else's tax rate is very hard to estimate and Pralana Gold doesn't let you set this, let alone change it from case to case). But one of the cool parts of RPM is you can modify it yourself, so I modified my copy so I could put in different heir tax rates for the conversion vs. non-conversion cases.

Conclusion

If you have both programs, Pralana Gold will be easier to set up, handles more situations and will give answers more easily, but it is a commercial program. If you think your heirs will have a much different marginal tax rate on the withdrawals from inheriting your remaining tax deferred than you had in your retirement, then the Pralana Gold answers may not be reasonable and you may have to switch to RPM and accept its simplifications in order to be able to set the heir tax rate. In most cases this would not be easy to know since you are forecasting someone else's income and behavior when they receive your bequest, so the Pralana Gold approach is probably reasonable for most cases.

If you are happy with RPM, I recommend setting the RMD factor to 1 and the tax rate to your guess of your heirs marginal rate. Then use the sum of the difference in the Portfolio Ending Balance and the heir tax benefit to judge the optimal size of Roth conversions.
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Rotwang
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Re: Calling Pralana Calculator Users

Post by Rotwang »

Exchme wrote: Sat Mar 27, 2021 2:14 pm
In RPM, if you read the embedded notes, the "heir tax benefit" (Setup!i337) is for the first year only, but inherited IRA withdrawals and associated extra taxes can go on for up to 10 years, so the "heir tax benefit" shown is far less than the total benefit. In thinking about getting the total benefit, I think an answer is to enter 1 for the RMD factor in Results!n181, so it becomes like the "effective" concept from Pralana Gold
I realize this is an old thread but perhaps it will help others who find it via the search function.

I too was trying to evaluate the heir value of the Roth vs Base in RPM and came up with a different solution.

I found that setting the RMD Factor (in Results!n181) to a value of 1 resulted in pushing both portfolios RMDs into the same (and much larger) tax bracket and so it did not give an accurate comparison to what they would be if spread out over 10 years.

Instead, I created a new cell formula to replace Results!D184 (and Results!D185) with a version that scaled their inputs based on heir tax treatment for each account type.
The formula I modified from D184 is
=D180+(D181*(1-Tax_Est))+((D182+D183)*1.15)
NOTE: 1.15 in the formula is just an estimated value ratio of a 10 year RMD Inherited Roth vs Taxable

Hope this helps.
Exchme
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Re: Calling Pralana Calculator Users

Post by Exchme »

Rotwang wrote: Fri Jun 11, 2021 5:14 pm I too was trying to evaluate the heir value of the Roth vs Base in RPM and came up with a different solution.

I found that setting the RMD Factor (in Results!n181) to a value of 1 resulted in pushing both portfolios RMDs into the same (and much larger) tax bracket and so it did not give an accurate comparison to what they would be if spread out over 10 years.

Instead, I created a new cell formula to replace Results!D184 (and Results!D185) with a version that scaled their inputs based on heir tax treatment for each account type.
The formula I modified from D184 is
=D180+(D181*(1-Tax_Est))+((D182+D183)*1.15)
NOTE: 1.15 in the formula is just an estimated value ratio of a 10 year RMD Inherited Roth vs Taxable
For reference, there are no formal tax calculations or tax brackets in the Inherited Portfolio Impact section of RPM, so you are not seeing tax brackets, you are seeing the entire inheritance being taxed at the input tax rate. The program is taking the IRA balances, dividing by the RMD factor (number of years to withdraw, located in cell Results!N181) and multiplying by the tax rate you input (Results!N179) to get the first year’s tax savings. It reports that as the Heir Tax Benefit on the Setup sheet. While there is an embedded note explaining it, I suspect some users don’t realize that the Heir Tax Benefit is just the first year.

For the case I'm looking at, your suggested formula is dominated by the 1.15 factor valuing Roths more highly than anything else. That suggests that $1 in taxable is worth $0.87 in Roth, I don’t see why such a big discount. It also affects the relative value of IRAs by also discounting them by another 15% in addition to the tax bracket. My own numbers are about 0.2-0.3%/year tax drag in taxable. Even over 10 years, that would add up to only 2-3%.

My initial thought to enter 1 in Results!N181 uses all 10 years of taxes on the inherited IRA, but uses only the first year difference in taxes in the taxable account. But since the taxable account size and therefore the tax drag of not doing Roth conversions keeps growing every year, both due to compounding and the conversion of a larger inherited IRA in the No-Roth case to taxable, a better (but still low) estimate would be to at least multiply that 1st year tax drag by 10 (the number of years we are making inherited IRA conversions).

To properly analyze the full benefit, we would have to do a whole year-by-year analysis for our heir's entire lives (and their heir's, and...) and then do a present value calculation to get it back to the date of our death. I agree with the RPM programmer's decision not to go overboard on complexity, especially since that future would be completely unpredictable to us.

But we can imagine looking at our heir’s lives for the first 10 years while the inherited IRA is coming out. For my case, I re-examined the situation doing this more “rigorous” analysis with synthetic cases where our heir's assets, income, spending, etc. at their start looked exactly like ours did upon our death and then did the year by year analysis of them withdrawing the inherited IRA. Then I discounted that back to the date of death (otherwise it's unfair as everything has grown for 10 years). Then I compared that to just using 10 times the 1st year heir benefit that RPM would have calculated on its own. I did not explore the whole universe, but tried a couple sensitivities and found that for my case, that simple comparison was reasonable.

So going forward, at least for my case, I will set the RMD factor in Results!N181 to 10 and then use 10 times the reported first year Heir Benefit (Setup!i337) as a guide to the total heir benefit, so I changed Setup!i337 to be:

=10 * Heir_benefit

Again, this is a larger benefit for doing Roths than the suggestion I made previously, as this makes a bit better (but I believe still low) estimate of the tax drag for your heirs in taxable of not doing conversions.
DSBH
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Re: Calling Pralana Calculator Users

Post by DSBH »

Rotwang wrote: Fri Jun 11, 2021 5:14 pm I too was trying to evaluate the heir value of the Roth vs Base in RPM and came up with a different solution.

I found that setting the RMD Factor (in Results!n181) to a value of 1 resulted in pushing both portfolios RMDs into the same (and much larger) tax bracket and so it did not give an accurate comparison to what they would be if spread out over 10 years.

Instead, I created a new cell formula to replace Results!D184 (and Results!D185) with a version that scaled their inputs based on heir tax treatment for each account type.
The formula I modified from D184 is
=D180+(D181*(1-Tax_Est))+((D182+D183)*1.15)
NOTE: 1.15 in the formula is just an estimated value ratio of a 10 year RMD Inherited Roth vs Taxable
Exchme wrote: Sun Jun 13, 2021 9:19 am To properly analyze the full benefit, we would have to do a whole year-by-year analysis for our heir's entire lives (and their heir's, and...) and then do a present value calculation to get it back to the date of our death. I agree with the RPM programmer's decision not to go overboard on complexity, especially since that future would be completely unpredictable to us.

But we can imagine looking at our heir’s lives for the first 10 years while the inherited IRA is coming out. For my case, I re-examined the situation doing this more “rigorous” analysis with synthetic cases where our heir's assets, income, spending, etc. at their start looked exactly like ours did upon our death and then did the year by year analysis of them withdrawing the inherited IRA. Then I discounted that back to the date of death (otherwise it's unfair as everything has grown for 10 years). Then I compared that to just using 10 times the 1st year heir benefit that RPM would have calculated on its own. I did not explore the whole universe, but tried a couple sensitivities and found that for my case, that simple comparison was reasonable.

So going forward, at least for my case, I will set the RMD factor in Results!N181 to 10 and then use 10 times the reported first year Heir Benefit (Setup!i337) as a guide to the total heir benefit, so I changed Setup!i337 to be:

=10 * Heir_benefit

Again, this is a larger benefit for doing Roths than the suggestion I made previously, as this makes a bit better (but I believe still low) estimate of the tax drag for your heirs in taxable of not doing conversions.
Thanks to this thread I learned about entries in Results!N179 and Results!N181.

FWIW I extend my RPM model by 10 years, and simulate the 10-year inherited IRA withdrawals by heirs by entering 10, 9, 8, 7, 6, 5, 4, 3, 2, 1 as RMD divisors for those last 10 years in the sheet "Tax Tables" column D (last row is D401), then I compared the ending portfolio (with no more tax-deferred) values between the 2 With and Without Conversion cases.
John C. Bogle: "Never confuse genius with luck and a bull market".
Exchme
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Re: Calling Pralana Calculator Users

Post by Exchme »

DSBH wrote: Wed Jul 21, 2021 9:27 am FWIW I extend my RPM model by 10 years, and simulate the 10-year inherited IRA withdrawals by heirs by entering 10, 9, 8, 7, 6, 5, 4, 3, 2, 1 as RMD divisors for those last 10 years in the sheet "Tax Tables" column D (last row is D401), then I compared the ending portfolio (with no more tax-deferred) values between the 2 With and Without Conversion cases.
Yes, the other assumption when you extend your own timeline is your heirs will be your financial clones, but in my case it's probably reasonable, the kids are in jobs with meh pay, so they do OK, but are not going to be in top tax brackets.
DSBH
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Re: Calling Pralana Calculator Users

Post by DSBH »

Exchme wrote: Wed Jul 21, 2021 12:29 pm
DSBH wrote: Wed Jul 21, 2021 9:27 am FWIW I extend my RPM model by 10 years, and simulate the 10-year inherited IRA withdrawals by heirs by entering 10, 9, 8, 7, 6, 5, 4, 3, 2, 1 as RMD divisors for those last 10 years in the sheet "Tax Tables" column D (last row is D401), then I compared the ending portfolio (with no more tax-deferred) values between the 2 With and Without Conversion cases.
Yes, the other assumption when you extend your own timeline is your heirs will be your financial clones, but in my case it's probably reasonable, the kids are in jobs with meh pay, so they do OK, but are not going to be in top tax brackets.
Yes, I assume that in 30 more years my heirs will retire as MFJ, have no income other than Capital Gain and Ordinary Dividend and SS @ 70, that the inherited IRA will be the remainder after 30 years of Roth conversions and/or RMDs, and that tax rates remain the same for the next 40 years etc. Who knows how many of these assumptions will be anywhere close to reality, but I assume (again) that with the same assumptions with both cases, that the delta between the 2 case portfolio ending values is "good enough" for my comparison purpose.
John C. Bogle: "Never confuse genius with luck and a bull market".
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