Trying to map out some Roth conversions, but only up to a specific year, after which I'd like to use the remaining assets for QCD's. But when I run Optimize, the algorithm seem to target converting the entire TIRA within the specified timeframe, leaving nothing for QCD's in subsequent years. Is there any way to adjust for this? Basically tell PRC to only convert X amount of dollars across a specific number of years and then have a "target" balance?
You can't directly limit the portion of the tax-deferred account to convert but you can specify the years in which Roth conversions are to be performed and can limit the amount converted in each of those years via the other controls, such as maximum tax bracket.
Stuart
OK so two levers to manage conversions, years and tax brackets. And if you happen to be in one bracket, and want to convert less that year, and select a lower bracket, what are you actually telling PRC? I assume if you choose a higher bracket you're telling PRC you're willing to pay more in taxes to convert more, but what about going the opposite direction?
I've also been reading that in RMD years, its critical for QCDs to be done PRIOR to the RMD being taken (or it won't qualify as a QCD). Does PRC recognize this necessary sequence?.
@nc-cpl There are actually five levers to manage conversions: years, tax brackets, IRMAA brackets, ACA FPL limits and prioritization of the husband's account vs the wife's account. In any case, if you're in one bracket and specify that Roth conversions are to be limited by a lower bracket, you're telling it not to do any conversions in that year. If you tell it to use the bracket you're in without doing any conversions, then it'll convert as much as it can without exceeding your current bracket. It sort of sounds like you'd like the ability to specify the exact amount to convert each year, but IMHO there's a huge problem with that option and that's why that option isn't available: PRC is not a money manager but rather a long-term projection tool that assists you in making financial decisions that affect the long term. To do this, it uses not only fixed rate analysis but also Monte Carlo and historical analysis methods wherein volatile market returns are modeled. The best Roth conversion amounts for fixed rate projections will likely not be the best in volatile markets. Therefore, the PRC design bases the annual Roth conversion amount on an algorithm rather than using fixed annual amounts.
Yes, PRC will always do QCD's prior to RMD's.
Thanks for confirming and the explanation. Always helps to understand the "why" behind the function.
