I use both Pralina and another similar product. My wife and I are both retired (66 & 65), and both products forecast high taxes due to RMDs. In its optimization routines, the other product I use includes the ability to automatically suggest IRA withdrawals prior to age 72 to reduce future RMDs. I can't seem to find a similar function in Pralana.
Is there any way to do this in Pralana?
Joe,
You can consider doing Roth conversions, which Pralana Gold does support. You'll find this function under the Analysis page.
Stuart Matthews
@jcabaleirogmail-com In many cases, it's better to do a Roth conversion, as Stuart alludes to. But let's step back a moment. If Pralana isn't showing those withdrawals coming out of your pre-tax IRA, it means that based on what you've told it, you don't need the money. Of course, you don't want those big RMDs and the tax bill, either.
So yes, it would be good to get it out of there to mitigate RMDs and higher taxes later. Do the Roth Optimizer in PRC, and pay careful attention to your tax brackets throughout the years. It may pay to just withdraw and stick the money in your brokerage, it just depends.
PRC is a long-range analysis/forecasting tool and it's excellent at that. But I always tell clients, come this time of year, every year, they should be using a precision tool to dial in tax moves for this year, based on what's happened since Jan 1. By now your tax situation is pretty set, and you can use paystubs, account statements, and even preliminary 4Q dividend statements such as those Vanguard releases to get a very close assessment of what your effective and marginal rates will be, and thus how much cap space you may have to leverage for Roth conversions, gain/loss harvesting, charitable contributions, etc.
I used to avoid tax planning, but now I do it, as most CPAs are only tax "preparers", laser focused on the past (this past year) not the future. They cost clients tons of money by poo-pooing Roth conversions, gain harvesting, and other moves that might increase taxes "this year" by a fraction, but result in a huge windfall down the line. I'm tired of that tug of war with CPAs, so I added in tax planning with an incredible tool (Holistplan) that does all this.
I went through it yesterday with a beta client and we imported his 2021 return, saw excellent analysis and some opportunities that were missed by the CPA (no QBI deduction taken, etc) that he'll get money back for due to amending. We then used that to project into this year, updating for 2022 income, LTCG, etc and got a very clear picture of where the sweet spots are for Roth conversions, gain harvesting, etc. It was awesome. Finally, a tax planning tool that's understandable.
You can do some of the tax projection part yourself by using tools like the below, or an early copy of Turbotax 2022, etc.
One more tip on this - if you're using a rudimentary tax calculator for these end of year moves, it could cost you. For example, you're striving to max out your 10%, 12% income tax bracket with Roth conversions. But, you don't realize that what you just did was bump yourself into additional taxation on things like Social Security benefits, or from the 0% to 15% long-term capital gains bracket.
It's why a good tool will integrate all those moving pieces for you, as PRC does for retirement/life planning and Holistiplan does for taxes.
