I've read the docs, I've fiddled for hours, but I just can't figure it out. Could someone please explain, in simple steps, how to determine if a Roth conversion makes sense?
I understand there's a "baseline" and an "active" scenario, and the "baseline" can be established by running a Monte Carlo simulation (?). But I want my baseline to be no Roth conversion, and it always shows up on the baseline tab with a conversion. And the Results tab never has a difference between active and baseline, no matter how I tweak the active row params. Thanks.
@gulchgoer You need to go to the Analyze > Roth Conversions page, disable Roth conversions, then go to the Analyze > Run Analysis page and run a Monte Carlo or historical analysis to establish the "No Roth Conversion" baseline. Then, go back to the Roth Conversions page and enable Roth conversions to explore the benefits of doing Roth conversions. At that point, you should see both a red and a blue line on the graph.
Stuart
@gulchgoer In addition to Stuart's comments, pay attention to those red and blue lines. When does the red (with Roth conversions) go above the blue and hence positive ROI? What's the actual benefit expressed in the numerical table below the graph? Those help make the decision, but there are non math reasons to do them such as seeing it as insurance against a spouse passing early and unexpectedly (leaving the survivor in the single taxpayer bracket), as a hedge against future higher tax rates, or to prepay taxes for an heir. Keep in mind if the markets/fixed income don't give good returns, it can mitigate the benefit of "tax free growth".
