The current process as I understand it, does a baseline no conversion followed by turning the conversions on a cycling through all tax bracket limits. The latter is done with whatever the user specified IRMAA Limit (or no limit). In reality, the actually optimized result could be a combination of a particular tax bracket limit in certain years and IRMAA limit in other years. It would be useful for PRC to toggle the IRMAA entries and find the best optimized combinations without the user needing to do this manually.
I like to run the Roth Optimized with "no holds barred" as a starting point, to see what it comes up with in the optimal case. This is a good starting point to discussions with clients.
Sometimes, PRC will show big six figure conversions in a given year. That's scary to people. They say "We don't want to pay all that tax." Well, then we look at the difference in *paying tax* over the long haul of 30 years or so if you *don't* do the conversion. You pay more tax, and paying lots of tax when you're old and with no earned income can suck.
Sometimes PRC will recommend converting up into the 24%/25% bracket. That sounds like a lot of tax to pay, 1/4!! We go over the progressive tax system and remind them that they're only paying that on their last dollars in (yeah, the conversion) but not their entire income for the year. We show that by not taking a 24% hit now and ripping the band-aid off, they may be in the 24/25% bracket for years to come.
Sometimes PRC will also recommend converting such that ACA premium tax credits, Medicare IRMAA are affected, so health care premiums cost more. That upsets them, we all like lower premiums. But is paying another $100-200/month for your entire family acceptable, given it will save you thousands a year in years to come?
In any case, if the optimized result is too rich for their blood, we then dial it down by changing the top tax bracket desired, or FPL/ACA or IRMAA multiples in the upper left to make it more digestible.
I usually see this with clients who are converting for the first time. They're not familiar with the process and concept. After that first year, they see it as regular/routine housekeeping for the year-end process.
