i noticed something that I can't figure out after I updated my data for the end of the year.
I made changes including updating social security, beginning account balances, medical insurance and I set the plan to begin in 2026.
While reviewing the new results I noticed my tier 3 IRMAA surcharge in 2027 is no longer showing.
I can not figure out how to show my 2027 IRMAA surcharge in the Roth conversion tool or the taxes review.
i noticed something that I can't figure out after I updated my data for the end of the year.
I made changes including updating social security, beginning account balances, medical insurance and I set the plan to begin in 2026.
While reviewing the new results I noticed my tier 3 IRMAA surcharge in 2027 is no longer showing.
I can not figure out how to show my 2027 IRMAA surcharge in the Roth conversion tool or the taxes review.
Also are todays dollars vs future dollars based on 2025 or 2026?
I noticed my medical expenses showed it based on 2025 and I corrected it to 2026.
My medical inflation for last year was set to make my 2026 the correct amount.
Was this correct, should I have done something different or should I have left it alone.
Under Build>Expenses>Healthcare>Healthcare Settings - there are boxes to put your MAGI for last year and for 2 years ago. If you're working on a new plan that starts in 2026, you should put in your current medical expenses for this year. The inflation would be for the following years. I can't speak to today's dollars vs future.
@kkrupka thank you, I did update my heath care cost. I just wanted to make sure I wasn't missing something. I will go in and take care of the MAGI now.
Do you need to adjust your fixed spending percentage year to year to maintain the same withdrawal amount in todays dollars? I just noticed that it increased in todays dollars compared to last year. I am assuming it applied last years percentage to my updated higher starting account balances. My equities real return was higher than what I entered in my plan.
@redvudu If you entered an inflation number under Build>Scenario Assumptions>Inflation Rates - then your expenses will be increased by that percentage each year as well as your returns when you view it under future dollars. So if you put in a return rate for stocks of say 5% and a general inflation rate of 3%, the return would be 8%. For expenses, if you check the box to adjust for inflation then it will maintain that spending rate throughout the plan. Then, if you look at it in todays dollars it will show the same each year but when you switch to future dollars it will increase it with the inflation rate you had set. If you add an additional inflation rate under expenses it will add that onto the general rate. If you enter it here, it will show up as an increase each year in todays dollars because you're saying you think your expenses are going to increase by that amount each year irrespective of inflation. I like to run the plan without inflation to start until I have everything set the way I want it and then I go back and add a general inflation rate to see what that does. It's also easier to find a mistake if you made one without the inflation rate. I hope I answered your question..
@kkrupka Updating Medicare MAGI for the 2 years prior to plan start is a good 'to-do' I forgot about that. There is a separate thread about how what to review and update when starting a new year, and I will add updating those MAGI #s. Also, the user manual now contains, in Appendix #1, the same info and I will update that as well and probably list it under More > Tools > FAQ as well. And maybe add tab on the My Family or other page with this info. It should be somewhere obvious or people will never see it. Suggestions?
Here is the separate thread on this topic:
https://pralanaretirementcalculator.com/community/postid/6218/
Since @redvudu has an Online subscription and not a PRC Gold/Bronze Excel subscription, I am moving this to the Pralana Online forum.
@cstone Haha, I'm always posting in the wrong forum. Yes, I think My Family or Scenario Assumptions since you would need to go to both of those pages to update the naming of your new plan and year. Honestly though there are so many things that can change over the course of a year, it's good practice to go through every tab even if you didn't use it the year before.
@kkrupka At this point I have not set up my plan to include any other expenses. I am using it to give me a reality check on my desired withdrawal rate. The only expenses I have entered in my plan are medical. I have them setup for inflation for our last year before Medicare kicks in. My question was about spending strategy.
I am using a constant spending as my spending strategy
2025 I set it at 4.5% which gave me $129,681
2026 adjusted for 3.5% inflation that I used gave me $134,220
After the end of year update it increased to $138,495
It increased to 4.5% of my updated initial account balances.
So it would appear if I want to maintain a constant spending rate I need to adjust the percentage each year to offset the changes in my initial account balances.
If I leave it the same the constant spend strategy drifts up and down with my account balance update.
Would this not throw off any Roth conversion calculations due to the off set being compounded over the years?
My solution was to lower my fixed spending percentage to get as close to 2026 adjusted amount as possible.
4.4% gave me $135,417 and 4.3% gave me $132,339.
Am I overthinking this since I rerun the Roth conversion each year and compare it to the previous year to help me determine how much to convert in the new year..
@redvudu I see what you're saying. I guess because it's based off of your account balances as of 12/31 the year prior. I don't use that myself, I do a separate budget for the year outside of pralana and then just enter that number under the expense tabs and unless we anticipate an added expense in a specific year, that's the way it stays.
Do you need to adjust your fixed spending percentage year to year to maintain the same withdrawal amount in todays dollars?
Yes - the same percentage applied to new balances (e.g., start of 2026 vs. 2025) will likely produce a different amount. If you really want a fixed withdrawal amount, I'd suggest using the deterministic Consumption Smoothing spending strategy.
That said, I'll admit that I'm not completely sure I understand what you're trying to do.
[Edit: Sorry, I think I did misunderstand. The Constant Spending strategy sets non-essential spending to be constant; essential spending is unchanged and, if variable, will cause overall spending to vary. Perhaps that's what you're seeing.]
When I retired I initially made the decision to use a fixed rate spending strategy. After my account balance updates I realized if I wanted to maintain that strategy I would need to adjust my withdrawal each year.
I am using the Roth conversion tool to help with planning the current year and see if what I plan on converting makes sense. I realize the longer term results are a high level guess at best so I just look them over to see if my assumptions are heading me in a direction I am happy with. I was just concerned that if I didn't adjust the rate, the change would compound due to inflation and throw off the conversion results.
I do try different spending strategies to compare the results and I have a fairly conservative plan once social security kicks in at age 70.
My Monte Carlo results are in the high 90's with correlated ROR's selected and Historical are 100% in the worst sequence of years.
I probably should be spending a little more and converting a little less but I am hesitant with the way the market looks right now.
I am thinking that I am over thinking the differences, since each years Roth conversion is pretty much dictated by tax brackets and how muck IRMAA surcharges I want to pay.
