Is there a way to model a Roth conversion two ways: one by withholding the tax from the conversion, and the other by paying the tax from a separate account? I know the latter is preferable, but I'm wondering if I can actually see the difference in Pralana.
You could use the scheduled withdrawal table Financial Assets-Management to take a withdrawal from the other account. While it would be tricky to exactly match the need, it should be easy to directionally see what's going on.
For instance, I find that doing a heavy drawdown on an inherited IRA in the year before I claim SS (and then no more Roth Conversions) comes out a little ahead of paying for the Roth conversion from taxable as using the inherited IRA avoids selling appreciated assets (and therefore avoids capital gains) and avoids RMDs from the inherited account in the time between claiming SS until IRA RMDs start-it projects we will still be in the range where taxes on SS benefits are being phased in, so the avoided marginal tax rate is quite high.
I have an HSA and get similar results from that - Pralana doesn't understand that the HSA will be taxed as income to heirs upon death, so it favors keeping it forever. But in the real world, we need to get rid of it sometime and using it to pay for the last year of Roth Conversions or as a source of cash in the time between SS claiming and IRA RMDs can be a small win.
