I thought that the limits would cause the optimizer to stop attempting Roth conversions once it hit the limit. So even though I have 90K headroom, it is changing my limit from 24% to 35% and then modeling much larger Roth conversions. Only the LTCG limit seems to constrain the amount of conversion.
@njsteveicloud-com The Roth optimizer doesn't use the marginal tax bracket limits you specify; rather, it seeks to find the tax brackets that yield the highest effective savings at the end of the modeling period. In then course of doing that, it DOES honor the other limits you specify, such as LTCG and IRMAA brackets. With that said, you can override the marginal brackets suggested by the optimizer and tell it which brackets to use and they will be honored.
Stuart
Does the Roth optimizer consider the impact of progressive State tax brackets? (CA in my case)
Yes. When evaluating final effective savings from the hundreds of bracket/year permutations considered, Pralana does a full scenario recalculation for every scenario year, including Fed state and local taxes (iteratively), just as it would using your specified conversion parameters.
An easy way to see this is to find a year with a large R/C amount and go to the Tax Forms page, select that year, then select State Generic Tax Form Page 2 and click on the number in line 14. The Metric MRI will show you how the tax due is calculated using the state's tax brackets.
Then, disable Roth conversions and check the tax calc on line 14 again. The tax due should be appropriately lower without the R/C.
