I'm enjoying Pralana Gold and am not seeing this addressed elsewhere. We have lots of tax-deferred but no Roth IRA assets. I am not interested in Roth conversion optimization to maximize my net worth since it is almost invariably disadvantageous for me. But, with an eye toward getting some Roth assets into heirs' hands, I would like to manually model Roth conversions (e.g., 100K/year) for an upcoming low-income interval. Is there a way for me to do this? (I can do my own mental math on tax-bracket ceilings, etc.) Thank you!
@sleestax Definitely! You can manually adjust the Roth conversion parameters on the Analysis > Roth Conversions page without doing any optimization. You just have to click the button that enables the conversions, set the start year, and then adjust the various limiting controls via the pull-down menus. You can limit the annual conversion amount by either marginal tax bracket, LTCG bracket, IRMAA bracket, or FPL multiple. As you do this, the table on the right side of the page will be updated in real time to show you the effect each change is having on your conversions.
Stuart
@smatthews51 OK, thank you -- that's great! Sounds like I am not able to model a straight fixed-dollar-amount annual Roth conversion over a decade (e.g., 10K or 100K per year x 10 years). I know this is "dumber" math than Pralana delivers but the driver here is complete conversion of a tax-deferred account into Roth over a known time-frame.
@sleestax That's correct, there's no mechanism to specify fixed-dollar conversions.
Stuart
@sleestax It is my understanding that Pralana Online will eventually have this functionality. In the mean time I believe there is a hack that can be used to specify an exact dollar amount for a Roth Conversion (R/C) for a particular year. The idea for this came from @hines202. I've only tested it to a small degree, but it seems to work as intended. It involves multiple steps and is probably only viable for the Online tool.
Lets say you use the Roth Optimization tool and it develops a ladder of conversions over various years. You decide that for a particular year you want to convert an exact dollar amount that doesn't match up with a tax bracket or IRMAA or any of the other knobs you can turn in the Optimizer tool. For that year set the R/C Optimizer to "No conversion."
Next, under Build>Financial Assets>Scheduled Withdrawals assign a withdraw from your tax deferred account in the amount you wish to convert.
Next, under the Build>Income>Employment Income add an employment income stream for the year of your conversion. Input "0" under the "annual gross income" and input your conversion amount (equal to the scheduled withdrawal) in for $ Personal Contribution to Roth Accounts.
Perhaps @smatthews51 can comment on whether this is a valid method of performing an exact conversion amount or if it is flawed in some way.
I did a bit more testing on the above suggested method for inputting an exact Roth Conversion number. I have two caveats to the above methodology.
First, under the Build>Income>Employment Income when entering the $ Personal Contribution to Roth Accounts, you must enter the intended conversion amount in Future Dollars of the year of the intended conversion. There is a Today's to Future Dollar Converter Tool on several pages in Pralana that you can use for this purpose. One of them is on the Pension income page.
Second, under the Build>Financial Assets>Scheduled Withdrawals when entering the desired Roth conversion amount, if you are scheduling a withdrawal during a year when RMDs are due, you must add the RMD value to the desired conversion amount. You can find RMDs for a particular year in Today's Dollars on the Review>Tabular Projections>Account Statements page. The Conversion amount plus the RMD should be entered in Today's Dollars.
I would be interested if others could test this method and let me know if it seems to work for them.
The part about having to add the RMD to the specified withdrawal from tax deferred is actually a bug in Online. With the spreadsheet, it added specified withdrawals to RMD. Also, even Online adds specified withdrawals to the RMD for inherited accounts. I just made a bug report so hopefully this will get fixed.
Excellent testing, that's how the product gets better for all!
Charlie was very responsive and fixed the issue in Online, so now IRA withdrawals on the Scheduled Withdrawal table are in addition to the RMD, the same as ePRC.
@lmolino It sounds to me like this roundabout method will work to accomplish the objective of converting a specific amount in a given year.
Stuart
@ricke The Online Pralana still has the following note on the Scheduled Withdrawals page.
"Note: Scheduled withdrawals from tax-deferred accounts (but not inherited accounts) will count toward the year's RMD, if applicable."
That doesn't seem consistent with the "fix" you had described. Maybe I'm not understanding something.
Thanks
I presume the notes haven't caught up to Charlie's fix. I tested it and a scheduled withdrawal from the traditional IRA is now in addition to the RMD.
I presume the notes haven't caught up to Charlie's fix. I tested it and a scheduled withdrawal from the traditional IRA is now in addition to the RMD.
How is that logically better?
I prefer "Scheduled withdrawals from tax-deferred accounts (but not inherited accounts) will count toward the year's RMD, if applicable."
If my RMD is $X and I schedule a withdrawal greater than $X then I don't want Pralana withdrawing an additional $X that I don't need.
@ricke I am modeling a scheduled withdrawal series from a TIPS Ladder in my IRA. I had an email with Stuart about this in 2023:
It’s interesting that in 10 years this has never come up until now. The design is that RMDs and the scheduled withdrawals specified on the FA > Mgmt page are independent; however, I can definitely see your point of view and we’ll seriously consider a change in the web version due out in January. In the meantime you can specify that the $25K of scheduled withdrawals cease when you turn 75.
Stuart
Sent from my iPhone
On Sep 12, 2023, at 8:08 PM, wrote:
Hmm, I guess it depends on one's interpretation. Mine is:
If my RMD for that year is $35,516 and I withdraw $25,000 then that is part of the RMD so the column should be 35,516. It could be more if I needed more income to meet expenses and the IRA was the account that was first in line for withdrawals. The way it works now, it is having me take out more than I need.
Maybe add a toggle option to have it work either way?
