Copiliot says the objective function of Roth Conversion in Pralana is "It’s not just minimizing taxes in one year — it’s minimizing lifetime taxes and maximizing lifetime after‑tax wealth." subject to the following constraints:
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federal income taxes
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state income taxes
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IRMAA surcharges
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RMD‑driven taxes
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taxes your heirs will pay on inherited IRAs
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the time value of money (discounting)
Pralana also seems to eschew using IRA to pay Roth Conversion taxes though I do not know if this is a constraint or a consequence.
It would be helpful to get Pralana to confirm the accuracy of this. (I am also curious to know whether Pralana optimizes by trial-and-error, or uses something akin to linear regression.)
However, I also need to optimize Roth Conversions to account for the possbility of LTC rainy days.
I tried adding a self-funded LTC in 2025 dollars of 75k per year per us both for six years each when we are 92 and 93 with 3% inflation, 1% bond real ROR, 3.5% stock real ROR, 60/40 stock bond mix.
Without LTC we have a dirty nuke tax time bomb in our 80s and 90s.
With the aforementioned LTC, Pralana peeked into the future and decided against significant Roth Conversions in the 4 years we have left until RMDs. So, we pay for 3/4 of a dirty nuke tax time bomb.
Perhaps there is nothing Pralana can do, except tell me this truth - Self-funding LTC is incredibly expensive and risky and is a massive elephant in the room of Roth Conversions.
I am tempted to start a discussion of alternative LTC solutions, but that is for other message boards.
So, am I missing anything here wrt Pralana when modelling self-funded LTC?
Thanks.
Your raise a lot of interesting questions. But I'll say this about the bullet points: Copilot seems to be giving a generic answer that doesn't fit what Pralana does! At least the last two bullet points are incorrect. Pralana does show what happens to the final wealth reduced by the user's "effective tax rate", which can be used to take into account heirs' estimated future tax bracket. But to say the obvious: it would take a more complicated program to include the multiple ten year RMDs of your heirs after you die within the optimization. With regard to "time value of money", despite what copilot says, Pralana doesn't do this nor is there is any need for Pralana to do this: Pralana is a closed system, and any dollar not spent on conversions stays in the tax-deferred, earning compounded growth into the future, which then gets rebalanced into the appropriate account, rinse and repeat. In other words, Pralana implicitly accounts for the "time value of money" without needing to do anything extra like "discounting". Also, users can look at the graphs and make their own (subjective) decisions about the utility of future $ vs present $, without the program itself calculating it for you.
