## Modeling Roth conversions

### Re: Modeling Roth conversions

Hmmm... when I launch the beta (frp-standalone-04-04-01-beta2) and go to Help | About it still states v.04.03.04 built 01-05-2021.

Also, there doesn't seem to be a new cash flow type of Roth available (the example shows 2 entries, one for negative qualified investment and another for net tax-free investment.)

Also, there doesn't seem to be a new cash flow type of Roth available (the example shows 2 entries, one for negative qualified investment and another for net tax-free investment.)

### Re: Modeling Roth conversions

To clarify, the prior post refers to the Mac version. The windows version seems to launch and show the expected beta version.

### Re: Modeling Roth conversions

I should have warned you about this, but my guess is you used the .jnlp file to launch the program and that launch method automatically fetches the latest official version from the website to run.

Instead, look in manual-install folder and manually launch frp.jar.

Instead, look in manual-install folder and manually launch frp.jar.

### Re: Modeling Roth conversions

Thanks Jim. I am loving the beta! There is a situation I'm modeling with a few years in the 10% marginal bracket and the Roth Conversion feature supports large conversions while accurately (at least with today's tax brackets) reflecting progressive taxes on the 12% portion and 22% portion as separate cash flows -- very cool.

### Re: Modeling Roth conversions

I'm glad to hear it's working for you, but I'm afraid I don't understand what you mean by "12% portion and 22% portion as separate cash flows."

Do you have multiple Roth Conversion cash flow entries? If so, do they overlap or are they covering different ranges of years?

thx.

### Re: Modeling Roth conversions

Ok, I understand the tax rates entered into FRP are generally assumed to be effective rates, not marginal rates, and I think that is the confusion here. I'm trying to model the long term effects of various extents of Roth Conversions up to the top of multiple marginal brackets, and I'm entering multiple Roth Conversion cash flows per year to assess the differences.

So, I think modeling marginal rates for marginal activity is a better approach since tax rates are progressive (10% up to $19,900, then 12% up to $81,050, then 22% up to $172,500, etc.). So, one can enter multiple Roth Conversion cash flows for the same year to more easily reflect the actual tax burden rather than entering the result of outside calculations to determine the net

For example, assuming pre-Roth conversion taxable income of $19,900 (at 10%), and one wanted to convert as much as possible up to the top of the 12% bracket (namely $81,050 - $19,900 = $61,160), that conversion income would be taxed at 12%. Converting additional amounts up to the top of the 22% bracket (an additional $91,700) would actually be taxed at 22%.

Does this seem like a rational approach?

So, I think modeling marginal rates for marginal activity is a better approach since tax rates are progressive (10% up to $19,900, then 12% up to $81,050, then 22% up to $172,500, etc.). So, one can enter multiple Roth Conversion cash flows for the same year to more easily reflect the actual tax burden rather than entering the result of outside calculations to determine the net

*effective*tax rate.For example, assuming pre-Roth conversion taxable income of $19,900 (at 10%), and one wanted to convert as much as possible up to the top of the 12% bracket (namely $81,050 - $19,900 = $61,160), that conversion income would be taxed at 12%. Converting additional amounts up to the top of the 22% bracket (an additional $91,700) would actually be taxed at 22%.

Does this seem like a rational approach?

### Re: Modeling Roth conversions

What taxable percents are you using for the cash flows? Are they different for each entry?

As I think about this, there could be a bug if you have multiple roth conversion cash flows for the same year with different taxable percents. It might be using the taxable percent for the last entry for all entries. I'll need to check that in the code.

As I think about this, there could be a bug if you have multiple roth conversion cash flows for the same year with different taxable percents. It might be using the taxable percent for the last entry for all entries. I'll need to check that in the code.

### Re: Modeling Roth conversions

Yes, I'm using Roth Conversion entries with 12% tax and one with 22% tax in the same year, and repeating with different amounts in subsequent years as base income assumptions vary.

### Re: Modeling Roth conversions

The taxable percent isn't a tax rate, but rather it's the percent of the conversion amount that's taxable. It works the same way as the "income " cash flows.

### Re: Modeling Roth conversions

Oh, that makes sense. So then additional input entries for tax rates need to be net effective rates then?

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