All Pralana sees is in each account is the start of the year valuation, the growth rate for the assets and the asset allocation. Holding a TIPS ladder and you choosing to make the maturing TIPS part of the RMD vs using something else for the RMD is more detail than Pralana tracks. I don't think the program is doing anything with the extra information you are trying to give it.
If you are preferentially holding bonds/TIPS in tax deferred (as you should for tax efficiency), then use Asset Allocation Mode 2 (Build-Advanced Portfolio Modeling-Asset Allocation/Location). Then set the overall asset allocation and order of which account should have the most stocks vs. the least. If using the maturing TIPS means you are reducing your bond holdings over time, you can approximate that by changing your overall asset allocation up to 4 times.
I know this topic is a bit dated and I see that the functionality to specifying a exact conversion amount in a particular year has been implemented. Sorry, I don't know exactly when this happened. After trying the functionality, I realized it would be great to be able to still run the optimization for the years other than when the exact conversion amount is specified. Otherwise, when optimization is run, the specified amount for a particular year is ignored. If there is a workaround for this, other than the one I explained earlier in this topic, I'd love to know what it is.
@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.
This is a subtle process. I think perhaps adding a sentence or two into the manual that summarizes that might be helpful? I'll add that suggestion using the "feedback" button. (I notice there is already a bullet in the online instructions for scheduled withdrawals to use the roth optimizer for IRA>Roth transfers.)
Relooking at the manual, I do see it in there. But maybe it needs a FAQ or highlight of some kind? (One's first instinct as a user is to go to the Scheduled Withdrawal page, not the Optimize page if you're not going to optimize.)
Follow-up question: what happens to these manual inputs when the Roth optimizer is run? Are they saved to baseline? Are they erased?
Online has the ability to specify conversion amounts now. It also has the ability to select common thresholds like the start of LTCG taxes, ACA FPL limits, tax brackets and IRMAA tiers. I recommend starting with the optimizer though to get a feel for how aggressive you may want to be and how much money could be on the table. If you have heirs you care about, then use the Effective Tax Rate (which assigns a tax rate your heirs will have to pay when they withdraw any residual from the IRA within the allowed 10 years).
If you are getting answers that say Roth conversions are universally terrific, I wonder if you are modeling them correctly - there should be a tax rate where you don't want to do them. A common issue that gives misleading results is if you try to model different asset allocations in different types of accounts.
For instance, it's often recommended to put your bonds preferentially in tax deferred so that the taxation of the primary source of returns (bond dividends taxed as ordinary income) matches that of the account. That leaves equities for taxable and most of their taxes will be at long term capital gains rates. However, if you try to model that with most tools, the tool sees the low returns of the tax deferred account (because of those bonds) and the higher returns of taxable and Roth and so seeks to quickly move money out of tax deferred. But that is a totally wrong answer, just dumping bonds in favor of stocks, overwhelming the effect Roth Conversions.
On some retirement sites, I have read folks bragging about their huge Roth Conversions and realize they have been fooled by bad modeling. Unique among the consumer tools, Pralana has a way to fix the problem. You specify Advanced Portfolio Modeling and select Mode 2. In Mode 2, you set the order of preference of what investments go where and the overall asset allocation you want to maintain and the program will keep your asset allocation constant.
@jason-blattyprotonmail-com As far as I can tell, they are erased. I think this is a bit counter-intuitive. Just as you can set limits for optimization such as IRMAA and the optimizer honors these limits, if you set a hard conversion amount, the optimizer should honor that. But, alas, I does not seem to.
