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Roth results - chart lines and conversion changes

 

NC Cpl
(@nc-cpl)
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Joined: 3 months ago
Posts: 37
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Two things I've noticed when testing out conversions...the Fixed Rate chart only shows the baseline (blue) but not a "what if" line...why would this be? Don't both the Tax bracket and Fixed Rate options compare their results to a "no conversion" situation?

Second - using "tax bracket"...if I set it to 95% to convert and optimize it stays at 95%. But then if I set up a second scenario and set it to convert 75%, and use optimize, it changes the 75% to 50%. Whats the logic behind this?


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Stuart Matthews
(@smatthews51)
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Joined: 9 months ago
Posts: 146
 

1. When you say "Fixed Rate chart", I assume you're referring to use of the fixed-duration mode of doing Roth conversions (because the Fixed Rate comparison page simply doesn't do what-if's). The what-if results using both the "tax bracket restricted" and the "fixed duration" modes do get compared and graphed alongside the saved baseline; not necessarily the "no conversion" results. The baseline is saved whenever you run an analysis. If the fixed-duration mode was selected at the time of the most recent analysis and you did not subsequently change any of the conversion parameters (such as % of account to be converted or the duration), then the what-if line would be perfectly overlaid by the baseline and, therefore, not be visible.

2. I think it is just a coincidence that the % did not change in the first instance. When you run an optimized Roth conversion, PRC ignores all of your settings except for starting year and then determines which "% of account to be converted" and which tax bracket yields the best long-term result and then overwrites those input fields when it's done.


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NC Cpl
(@nc-cpl)
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Joined: 3 months ago
Posts: 37
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Thanks. #1 - I see that now so all is good. #2 - Using Optimize, scenario one at 95% stays at 95% no matter how many times I re-run it optimized. For Scenario 3, which is set at 50% to convert, it stays at 50% no matter how many times I run it, and if I change the % to convert to any other number, it still reverts back to 50% (even after 5 or 6 runs optimized). Interestingly, if I optimize scenario 2 (which is configured for Fixed Duration), it also changes to Tax Bracket restricted at the 95% converted percentage, same as scenario 1.

I'm certain all the other settings entered for Scenario 1 and 3 are identical (income, assets, expenses).

This post was modified 4 days ago by NC Cpl

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NC Cpl
(@nc-cpl)
Eminent Member
Joined: 3 months ago
Posts: 37
Topic starter  

Could have been on odd number residing in the property table of expenses. Made sure to copy S2 and S3 to match S1 and reran Roth conversion on Scenario 3 - it now matches 1 and 2 at 95% converted and 35% bracket.

So this leads me to what may be an obvious conclusion, which is, if the optimization feature is designed to formulate a "best case" plan, why wouldn't most everyone default to that first, and then maybe toy with percentages to convert, or years, or see how a Fixed Rate plans compares against the best case?

This post was modified 4 days ago by NC Cpl

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NC Cpl
(@nc-cpl)
Eminent Member
Joined: 3 months ago
Posts: 37
Topic starter  

and... if one is trying to compare a Fixed Duration strategy against an optimized Tax Bracket strategy, is the only way to "optimize" the Fixed Duration outcome to tweak the amounts being converted and the number of years of conversions?


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