Roth Conversion

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I know this has come up over and over, but I must be doing something wrong.
Created a "special withdrawal" and a corresponding "ROTH contribution". It computes the taxes and such, but the resulting "discretionary spending" (having chosen "economic based planning", with or without Monte Carlo) is anything but "smoothed". Seems to start out low, and increase (at random intervals?) to about 50% more than it started by the end of the projection. It was flat before I started playing with the Roth conversion. Any suggestions?

Comments

This link may help explain what is happening:

https://www.esplanner.com/question/living-standard-not-constant

The short version is that ESPlanner does try to smooth your living standard per adult, however this is subject to your specific profile's constraints. If you are constrained at various points (and this typically shows up in the reports where you see $0 for regular assets), you will see different levels for your living standard per adult.

There are many levers and choices you can make that can adjust (and smooth) this. If you still have questions after going through the link and comments, let me know.

Best,
Brian

I do see what's happening, i.e. assets go to zero at some point and the standard of living changes. What I don't understand is why. If I withdraw X dollars from non-Roth retirement, and put something smaller into Roth, the difference (- taxes) does not go into Regular Assets, it seems to just disappear as "spending" ? What else should I be doing?

It's hard to say for certain when I can't see the database. The challenge is that everyone is different and even seemingly "small" changes to a profile can lead to very different outcomes, in some cases. Don't think of the calculations as linear to start.

If there is a way to shift some assets to earlier in life (before you hit $0 in regular assets), this should ease your constraints somewhat. The link I provided above has several ideas on how to do this.

To see the effect, try a test profile where you take a "special withdrawal" of a large amount (say $50,000) to before you hit $0. Then take a look at the results. You may still be constrained, but it should be less severe. I'm not suggesting that this is the best way to go, but if you see that it works, then you can try more appropriate adjustments to work around the constraint.

If you are still stuck after experimenting with this and looking through other forum posts, you may want to try ESPlanner's one-on-one support where they look directly at your database and work with you.

Best,
Brian

dan royer's picture

I wonder if what is happening has something to do with the order of withdrawal: ROTH first or last in the sequence? Also, look at the impact on taxes and see if that explains anything.

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