I feel like a broken record sometimes, but still see people continue to push I-ORP for this purpose.smitcat wrote: ↑Tue Jul 20, 2021 9:24 ammarcopolo wrote: ↑Tue Jul 20, 2021 2:30 amAll that accomplishes is I-ORP pushing dollars from the low return account to the higher return account, either through spending or Roth Conversions. That is what it is designed to do. It is trying to maximize spending. It does so by capturing the highest returns. Unfortunately, it does not care about your overall AA, so happily takes on more risk to achieve those higher returns. In many cases, the improved spending people see, and attribute to Roth Conversions, actually comes from taking on more risk by transferring dollars from fixed income in TDA to equities in Roth, and increasing their overall equity allocation.Free to Choose wrote: ↑Mon Jul 19, 2021 9:57 pmi-ORP does provide different rate of returns for each account. Isn't that the same as asset allocation for you? I think so.NancyABQ wrote: ↑Mon Jul 19, 2021 9:42 pmI did play with I-ORP, but I did not find it very useful for my case. Amongst other things, the inability to accurately reflect the AA in TIRA vs. Taxable/Roth matters a lot. I think I-ORP told me I could be spending about $160K instead of my current target of $100K.
I can easily increase my spending in the spreadsheet by increasing the amount withdrawn from the taxable account (or possibly inherited IRA) in the pre-RMD years. My playing around so far seems to confirm that I don't spend enough relative to my portfolio size, but I've never been big on budgets -- maybe I spend more than I think I do
I was thinking of refining the spreadsheet to differentiate between spendable money and taxable income, but so far I have just been eyeballing that.
I would also feel a little uneasy spending so much more money than what I think is reasonable or comfortable. I would consider looking at the VPW spreadsheet and some others sources for withdrawal values. If my essential living expenses were covered by guaranteed income (Social Security, Pension, Annuity, etc) and less than 2% of my investment portfolio, I would be more comfortable spending at the higher of the withdrawals values.
"All that accomplishes is I-ORP pushing dollars from the low return account to the higher return account, either through spending or Roth Conversions. That is what it is designed to do"
You have described this IORP issue well in many posts so hopefully folks start to understand this issue better.
The work around has also been described but it has many limits - In IORP just set each account to the same AA and leave it that way to run the Roth conversion analysis.
We have a better track record using the RPM tool and Pralana for evaluating Roth's - but if the IORP is contrained to the exact same fixed AA's in all acoounts and still comes out ahead it is likely a good sign that pursuing more anyalsis is well worth the time.
That work around improves things somewhat, but still greatly overstates the case for Roth Conversions. if one is 60/40 AA, that will make the TDA appear to grow significantly faster than it really would at 100% FI, making larger Roth Conversion appear appropriate when they aren't.