Roth Conversions as 1st class citizens!

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fedupforone
Posts: 3
Joined: Sat Mar 13, 2021 4:15 pm

Roth Conversions as 1st class citizens!

Post by fedupforone »

Roth Conversions have become very popular and I think they deserve to be treated as "first class citizens" in the data entry modeling.

Other threads in this forum are ended with the suggestion to model it with 3 line items in the advanced inputs.
  • - Tax Deferred
  • + Tax Free
  • + Other Expense (for taxes)
Also, noted are the problems with this.
  • The tax rate that should be used
  • running out of funds in Tax Deferred - causing the + Tax Free to overestimate the amount in savings.
:idea: I think another "Cashflow Type" of "Roth Conversion" would help a lot. It would use at least the start year, end year, and annual amount. Tax would be computed like any other expense, the tax rate would be like any other income, and the Roth Conversion would not happen if the Tax Deferred ran out of funds before the end year arrived.

I have had to spend considerable amounts of time trying to :roll: guess what these numbers should be to avoid the issues and get a reasonable level of conversions over a multi-year period. Especially when I change the retirement year, or change the amount of 401k contributions, this becomes very difficult to keep up to date.

This may not be a perfect, or even good, solution :? , better minds can chime in!
jimr
Posts: 725
Joined: Thu Feb 28, 2008 6:48 pm

Re: Roth Conversions as 1st class citizens!

Post by jimr »

Thanks for posting. This has been on my to-do list for a long time and I've been reluctant to add it because it needs to happen in the heart of the simulation logic, which I don't like to muck with since it's easy to break things in that code.

Anyhow, I took a shot at adding a "Roth Conversion" cash flow type and I've posted a beta version of the code for testing below. The change to the sim code turned out to be pretty limited and it wasn't as complicated/disruptive as I thought it might be. Still, this beta release has only seen limited testing and it'll be several months before i put it into production.

You can find the download links here:
viewtopic.php?f=7&t=1381

(NOTE: if you use this new version and later decide to back-rev, any .frp files you have that contain the new "Roth Conversion" cashflow type will not load with older versions of the planner. To fix this, you'd need to use the new version to delete the "Roth Conversion" cash flows, or you'd need to manually edit the .frp file to remove them (not recommended).
jimr
Posts: 725
Joined: Thu Feb 28, 2008 6:48 pm

Re: Roth Conversions as 1st class citizens!

Post by jimr »

I updated the download link to correct a possible install error in the last one. Should be all set now.
fedupforone
Posts: 3
Joined: Sat Mar 13, 2021 4:15 pm

Re: Roth Conversions as 1st class citizens!

Post by fedupforone »

Wow, great turnaround on a request! Initial testing looks very good. I really like it :D
jimr
Posts: 725
Joined: Thu Feb 28, 2008 6:48 pm

Re: Roth Conversions as 1st class citizens!

Post by jimr »

Glad to hear it. Thanks for posting the suggestion.
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