Hi. This is in reference to the Roth Optimization feature. I want to ensure that between 59.5 and 65 my AGI stays under the 2.5 FPL. To accomplish this, I have a big pile of cash in both the taxable and the Roth to draw from. No matter what I do, though, the Roth Conversion feature doesn't seem to want to take from these cash piles and, instead, it says my income is too high for ACA. I am using specified expenses and the withdrawal method. Any way to force this? I did do scheduled withdrawals from the Roth and that seemed to help, but are there other ways?
To add to my post above, when I say other ways, for example, is there a way to do scheduled withdrawals from cash in the taxable account to cover my expenses past the 2.5 FPL ? That scenario would suit me better because I would rather not keep cash in my Roth.
Presumably, you set the cash at Build-Financial Assets-Management- Account Initial Balances - Taxable accounts, the box that says Cash accounts. You may have accidentally set a floor under the amount of cash to hold that was so high that you told Pralana not to spend it. You set the floor under Build - Management -Cash Floor and Ceiling.
If you want it to use your Roth account for spending once cash is depleted, then you should set that under Build-Financial Assets-Withdrawal Priority so it spends Roth first. Once you no longer need ACA, you should change the withdrawal priority back to taxable first.
If you only want to use a little bit of Roth and the rest from taxable, you can do that manually by setting the withdrawal priority to use taxable first and then using the Build-Financial Assets-Scheduled Withdrawal and setting an amount to withdraw from the Roth.
Thanks Richard. My floor was 10K and the ceiling was 15K. I was just following along Bill's book. That got me thinking though, because, with a 15K ceiling, it was moving all my cash to the taxable account. So I raised the ceiling to keep the cash in place. So I am a little further along! I think I will have to disregard the optimize function for this particular scenario. Seems to me there is no way to "fix" the MAGI so that my healthcare costs remain minimal and use Optimize at the same time. I may just turn off Roth Conversions from 59.5 to 65 since the amounts I will be able to convert are trivial (filing single). Appreciate the feedback. I need to pay better attention to the Cash Floor/Ceiling settings.
Yes, set a cash ceiling high enough that it won't move your cash to taxable in the first year and a floor low enough that you would be willing to live with it in real life without worrying about bouncing a check. Then it will spend from your cash.
The Roth Optimizer tests ordinary income tax brackets only, so it may skip past the FPL multiple you want to use as the limit. You can force the optimizer to respect your choice of 2.5x FPL by manually setting the "Max FPL Multiple". Then the Roth Optimizer can still do its thing, but just won't do anything to the ACA year. One note about that is if your income before Roth Conversion exceeds the FPL level you set, it will ignore your limit completely and do whatever it wants.
Another thing to keep in mind is that if you tax deferred account is large enough, ACA premium credits may not be the way to go, for some people the best answer is to have lots of years for Roth Conversions, so it's still a good idea to remove all constraints for the Optimizer and let it do it's thing to make sure you are on the right path. From there, you can limit the FPL multiple and run it again or make other manual tweaks to respect ACA limits, LTCG tax phase in or IRMAA tiers
Thanks Richard. Regarding this statement "One note about that is if your income before Roth Conversion exceeds the FPL level you set, it will ignore your limit completely and do whatever it wants. ". This is precisely the part I am struggling with.
for example..
It says "if your income before Roth conversions exceeds the FPL". So, to test this, I turn off Roth Conversions for a given year. I then see my income drops well below the 2.5 FPL.
I turn on Roth Conversions again, and it says "not ACA Eligible".
I go to look at the tax form to see where the new income is coming from that bumps me over, and the part that is bumping me over is, you guessed it, a Roth Conversion!
Note: I'll keep experimenting as I assume I am missing something. I do appreciate your feedback.
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Using this tool, I am trying to model both low/no cost ACA versus pay the premium and do Roth Conversions. For me, ACA is the biggest constraint/impediment to doing large Roth Conversions, followed by IRMAA. This is exactly what I am trying to build with Scenario 1 vs Scenario 2.
-Chris
Good News... I think I fixed it! It now says the limiting factor is FPL Multiple!!! It had to do with the "set ACA if eligible" checkbox. I had unchecked it at some point and neglected to turn it back on again.
I kind of figured it was an ID10T error on my part.
I will keep at it. Thanks again Richard.
