Hi all,
I'm new here.
Can I set a strategy for the optimizer to get the most cumulative spending?
Or the most after tax wealth, that counts all my sources after tax?
Where it has to accommodate a few relocations, so State taxes have to be appropriately counted.
And to see a trade off between lover future taxes vs higher IRMAA, also accommodate NIIT for Roth Conversions.
Can this optimizer run all those combinations to find and provide the most optimal to know how much to convert and in which years?
Thanks
[Can I set a strategy for the optimizer to get] the most after tax wealth, that counts all my sources after tax?
And to see a trade off between lover future taxes vs higher IRMAA, also accommodate NIIT for Roth Conversions.
Can this optimizer run all those combinations to find and provide the most optimal to know how much to convert and in which years?
Welcome to the forum. .
I believe this is exactly what the Pralana Roth optimizer does: it weighs the trade offs, including taxation like IRMAA, and offers specific years and amounts to convert.
Where it has to accommodate a few relocations, so State taxes have to be appropriately counted.
I don't believe the roth optimizer takes state taxes in account.
Can I set a strategy for the optimizer to get the most cumulative spending?
Pralana is not consumption oriented, in its optimizers or its analyses. (An exception is consumption smoothing withdrawal method, which you might explore.) I have argued in previous posts that users care not only about end of life value but total consumption along the way, and total consumption (especially discretionary spending above essentials) can be highlighted in a number of ways. (I personally would love a total consumption total on the monte carlo, historical, and optimizers, in addition to a "lifetime balance sheet".) At the moment if you want to see how the roth conversions affect consumption you need to download the results (conversion and no conversion) into excel and then add up the expenses columns and look for yourself. Or iterate between the roth conversions and consumption smoothing.
If you really want to focus on consumption-based roth conversions, i recommend Maxifi, one of Pralana's competitors, which does exactly that.
@jkandell thank you for the reply.
Does Pralana calculate State Tax?
If it does than I expect to see State Tax savings in addition to Fed Tax savings for Roth Conversion IMHO
Would you clarify this? please.
Pralana has a Spending Strategy called Consumption Smoothing that shows you the maximum you can spend each year with your assumed rate of returns. It also has a Roth Optimizer that tests all the federal ordinary tax brackets in each year to see how much you should convert each year. The two optimizers don't know anything about each other however, so you have to iterate. Use the Consumption Smoothing routine, then the Roth Optimizer, then repeat the Consumption Smoother and the Roth Optimizer. A total of 2 or 3 iterations is enough to converge. I tend to fiddle with my plan, so iterating between two optimizers, both of which take time to run as they are recalculating all your taxes and cash flows each years many times would take time, but remember it's doing an amazing amount of math.
Pralana allows you to specify several relocations to different states and takes a shot at state taxes, but some states are quite complex and Pralana isn't Turbotax, so you have to review those carefully and may have to make manual adjustments. For instance, Pralana wouldn't know what to do if you pay part-year or non-resident taxes on some of your income to a certain state.
State taxes are not tested in the Roth Conversion module, but their effect is included, along with NIIT, IRMAA, ACA premium credits, AMT, the new over 65 deduction and its phase-out, SS benefit taxation, LTCG taxation, the new SALT deduction phase-out, etc. If you don't like the automated plan or think you can beat it, Pralana lets you select common trigger points like LTCG phase in, FPL for ACA IRMAA tiers or just enter a $ amount to convert for each year.
From what I can tell, it beats the doors off the competition in its capabilities.
thank you for the reply.
I bit more context about my related path.
I looked at Pralana 2 years ago, but didn't try it due to 400 pages manual that scared me.
I've use MS Money and later Quicken to track and budget for my past 20 years, but Quicken can't help me with strategic finance planning.
I started looking for what software can help with strategic finance and retirement planning and I tried a few services.
I subscribed to Boldin, but after a few weeks hit many limitations.
Other services like RightCapital, Income Lab, eMoney are more powerful, while also comes with limitations for a simple Client like me and I had to ask a lot from an Advisor, this is very time consuming for me.
I try to understand if Pralana will address my requirements before I invest my time to read 200 pages for online Gold?
I think that Pralana takes the most time to setup and learn how to use it across all other solutions, but looks like the most flexible and adaptive with all required details for review.
I hope I don't need to be a CPA to use it, while I understand many related things and ChatGPT is good helper as needed.
Thank you for your guidance and opinions.
I think that Pralana takes the most time to setup and learn how to use it across all other solutions, but looks like the most flexible and adaptive with all required details for review.
I hope I don't need to be a CPA to use it, while I understand many related things and ChatGPT is good helper as needed.
Because the forum attracts "super users", you'll tend to get people saying it's easy to use. My personal opinion is it is not "easy". Indeed it "takes time to setup and learn" compared to some other products; but neither is it "CPA" level. Things are not always intuitive or at all where you'd expect to find them. (I end up doing "control F" (find) in the online manual a lot cause I can't remember where the answer is located.)
The good news is you will get a reply quickly from the forum for any question you might have, big or small.
It's hard to say from your question if we think it would be worth it to you to invest the time for the 200 page manual 🙂 If you outline more of the specific things you are looking for from Pralana (the big picture), we might be able to give a more accurate opinion.
Does Pralana calculate State Tax?
If it does than I expect to see State Tax savings in addition to Fed Tax savings for Roth Conversion IMHO
Would you clarify this? please.
Pralana does calculate state tax, albeit crudely. (Look under review/tabular projections/taxation to see it. In online you also have mock state and federal tax forms.)
However, Pralana does not utilize state tax in doing its roth optimization. Nor should it IMO. The purpose of the roth optimizer is to help with the "big" decisions about whether Roth conversions are worth it at all, and roughly what years they might happen and whether they'll be large or small. For this grand purpose one doesn't want to get too much into the weeds; we want to focus on the large influencers. For most people the federal tax (which includes IRMAA) and ACA are the big influencers on whether Roth is worth it, not the state tax. (There might be exceptions for CA and NY.) In that same vein, you can't use the Roth optimizer to give you specific detailed conversion figures for a given year, as it's not designed to do that like a CPA would do for you.
That being said, after having run and enabled the roth optimizer, you can then go look under tabular/taxation and see the state tax for every year of your plan having incorporated pralana's recommended roth conversion amounts!
I agree with your assessment that it takes time to set up, but this is because the tax code is complex Pralana is the most comprehensive of the available tools so has to approximate the complexity of taxes. Once set up, Pralana has some awesome analysis tools and abilities you won't find elsewhere. Folks on the forum can help you figure it out, or if you get completely lost or just want a professional's help, there is a list of some advisors in the Online Resource screen that can be hired to set up a plan for you. Getting a good plan can save you five or six figures, so getting it right is worth it.
