## Retiree Portfolio Model

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills
Rotwang
Posts: 11
Joined: Mon Apr 01, 2019 9:31 am

### Re: Retiree Portfolio Model

First off, like many others, I want to say thanks for creating and maintaining RPM. I think it's a great tool.
I'm using RPM V21.1a

I'm trying to compare the effects of various amounts of Roth conversions on final year totals and their after tax value to non-spouse heirs.
I see in the "Setup" tab the final year portfolio total (cell E13) and Base portfolio total (cell E20) but I don't think I can use these numbers to directly compare because totals don't seem to distinguish between the value of Taxable, IRA and Roth dollars.

I see in the "Results" tab, there is a Inherited Portfolio Impact section starting at row 179 and there are cells that calculate yearly taxes for the heir (L184, M184) but this seems to be only for the final year. I would assume, given the recent changes to Inherited IRAs, that the RMD factor (cell N181) for a non-spouse should be 10 (to reflect the 10 year rule for inherited IRAs). One could subtract 10 years of taxes off the totals in order to approximate the results but that doesn't seem very accurate.

The approach I have taken is to create a calculation similar to the ones in the Results tab cells D184 and E184 and apply multipliers to their inputs based on tax treatment.
The formula I modified from D184 is "=D180+(D181*(1-Tax_Est))+((D182+D183)*1.15)"
NOTE: 1.15 in the formula is just an estimated value ratio of a 10 year RMD Inherited Roth vs Taxable

Thoughts?
DebiT
Posts: 467
Joined: Sat Dec 28, 2013 1:45 pm

### Re: Retiree Portfolio Model

RyeBourbon wrote: Thu Jun 10, 2021 4:50 pm
DebiT wrote: Thu Jun 10, 2021 3:55 pm By withdrawal sequence do you mean the order of accounts? I will check and verify.

By spendable \$ I assume the best metric is the ending portfolio value, correct?
No, I mean the models project you withdrawing \$X each year (to spend after tax). That's what counts.

Do both models allow you the same spending money?
Thanks for clarifying. Yes, both models are using my budgeted amount of \$ needed, plus more when I’m very old just in case. I’m trying now to use RPM to optimize things, so as to pay taxes in such a way as to maximize the ability of the portfolio to grow more. It seems that spreading them out as evenly as possible makes the most sense, since we don’t know in what years the market is down vs up, etc
Age 63, life turned upside down 3/2/19, thanking God for what I've learned from this group
DebiT
Posts: 467
Joined: Sat Dec 28, 2013 1:45 pm

### Re: Retiree Portfolio Model

Exchme wrote: Thu Jun 10, 2021 5:17 pm The taxes on the Roth conversions are coming from the taxable account, which is mostly bonds. So you are ending up with more stocks after a Roth conversion than before and the program is liking that and so wants to do more conversions.

You need to keep the allocations in all accounts the same to prevent this.
Now I remember reading this before. So, regardless of my real life allocations, should I just set all accounts at my total portfolio allocation of 35/65?
Age 63, life turned upside down 3/2/19, thanking God for what I've learned from this group
Exchme
Posts: 525
Joined: Sun Sep 06, 2020 3:00 pm

### Re: Retiree Portfolio Model

DebiT wrote: Thu Jun 10, 2021 6:38 pm
Exchme wrote: Thu Jun 10, 2021 5:17 pm The taxes on the Roth conversions are coming from the taxable account, which is mostly bonds. So you are ending up with more stocks after a Roth conversion than before and the program is liking that and so wants to do more conversions.

You need to keep the allocations in all accounts the same to prevent this.
Now I remember reading this before. So, regardless of my real life allocations, should I just set all accounts at my total portfolio allocation of 35/65?
That's right. You may have to do several cases to bracket the answer. Since only the current year is actionable, the key is to get an idea of where you will be in the future and go to the whatever tax breakpoint makes sense in the current year that seems consistent.
sandramjet
Posts: 342
Joined: Thu Oct 23, 2014 11:28 pm

### Re: Retiree Portfolio Model

Exchme wrote: Thu Jun 10, 2021 5:17 pm The taxes on the Roth conversions are coming from the taxable account, which is mostly bonds. So you are ending up with more stocks after a Roth conversion than before and the program is liking that and so wants to do more conversions.

You need to keep the allocations in all accounts the same to prevent this.
This sounds like you are confusing this with i_Orp, which is an optimization tool, and does indeed prefer to do more conversions if the allocations are not the same. However, RPM does NOT do any optimization ... it converts whatever you tell it to convert, and the allocations are whatever you say they are.
Exchme
Posts: 525
Joined: Sun Sep 06, 2020 3:00 pm

### Re: Retiree Portfolio Model

sandramjet wrote: Thu Jun 10, 2021 10:02 pm
Exchme wrote: Thu Jun 10, 2021 5:17 pm The taxes on the Roth conversions are coming from the taxable account, which is mostly bonds. So you are ending up with more stocks after a Roth conversion than before and the program is liking that and so wants to do more conversions.

You need to keep the allocations in all accounts the same to prevent this.
This sounds like you are confusing this with i_Orp, which is an optimization tool, and does indeed prefer to do more conversions if the allocations are not the same. However, RPM does NOT do any optimization ... it converts whatever you tell it to convert, and the allocations are whatever you say they are.
I know it's manual in RPM, but math is math and whether the active agent responding to the math is the program or the user, the result is the same. To make a controlled "experiment" of the benefit of Roth conversions, you have to keep the allocations in all the accounts the same or the asset allocation to stocks will drift upward year by year and the benefit of Roth conversions will be mixed in with the benefit of holding higher stock allocations. This is true for i-orp and RPM or probably anything else in the free tier of programs. It's just too difficult for the programmer to have create something that keeps the overall stock allocation constant while adjusting allocations within the different accounts. Even if the programmer did dream up some method of doing that, I'm sure it wouldn't fit some users.
DebiT
Posts: 467
Joined: Sat Dec 28, 2013 1:45 pm

### Re: Retiree Portfolio Model

I may have found a bug in RPM. Hopefully not. I am a widow, age 63, collecting social security survivors benefits on my husband's record, until I collect my own higher benefit at age 70.

Therefore, RPM directs me in SetUp section 4, income, to enter my current SS benefits for myself beginning now, and then to enter the additional amount under spouse with a start age of 70. Fine.

In perusing the Tax Tables section, cell D38 and all of row 38 is computing my Medicare base premium for 2 people. This is not a giant amount of money, even over time and may not be avoidable, so may not be relevant.

However, wouldn't that mean my IRMAA charges where they appear are also getting doubled? And, is the same assumption of a spouse where actually there is none creating errors elsewhere?

EDIT: like I just now noticed that I am getting 2 standard deductions, for me and a spouse.

Thanks so much
Age 63, life turned upside down 3/2/19, thanking God for what I've learned from this group
DSBH
Posts: 255
Joined: Tue Jul 21, 2020 3:31 pm
Location: Texas

### Re: Retiree Portfolio Model

Deleted.
Last edited by DSBH on Tue Jun 15, 2021 10:47 am, edited 2 times in total.
John C. Bogle: "Never confuse genius with luck and a bull market".
Topic Author
BigFoot48
Posts: 2900
Joined: Tue Feb 20, 2007 10:47 am
Location: Arizona

### Re: Retiree Portfolio Model

DebiT wrote: Fri Jun 11, 2021 1:57 pm I may have found a bug in RPM. Hopefully not. I am a widow, age 63, collecting social security survivors benefits on my husband's record, until I collect my own higher benefit at age 70.
I'm on a trip without access to the model so I can't check this, but you should use only one SS benefit section, entering your husband's benefit as your current amount then the increase at age 70 reflecting your higher benefit. That will likely fix all the issues you are seeing. Thanks for the report.
Retired | Two-time in top-10 in Bogleheads S&P500 contest; 15-time loser
DebiT
Posts: 467
Joined: Sat Dec 28, 2013 1:45 pm

### Re: Retiree Portfolio Model

BigFoot48, thank you for replying while travelling. Please tell me if you want to table this until you return, and I can then just wait for a response.

Your reply above said to simply increase my SS amount, but the model then asks for an end date, not a beginning date, so I'm not sure that will work, unless I am missing something

I found the post below, and tried do that, which yielded a better result, in that my husband's part of the plan ends at age 70 rather than my end of plan age 99, so the double IRMAA is much reduced (at least that's what I think I'm seeing). In searching this thread for the term "survivor", I saw several posts asking how to enter their own and widow(er) survivor benefits, but none addressing what I think is the resulting IRMAA problem.

BigFoot48 wrote: Sat Dec 14, 2013 2:29 pm
Info_Hound wrote:1) I am currently collecting SS spousal death benefits (at age 62) and will change over to my own SS benefits (larger \$ amount) at age 70 1/2. So my SS benefits will increase at a specific age. I am considered single within the model so I am struggling with how to reflect spousal SS benefits currently being collected when there is no spouse.
2) I have 2 RMD ages I need to reflect - the normal 70 1/2 and a second one at age 78. Both accounts are tax deferred. The second RMD age is for a survivor beneficiary account. The \$ sums are different enough in the two accounts that lumping the accounts together as a lump sum entry seems to significantly alter the projections since the RMDs will kick in differently.
Thanks Info! Well, for your first item the model doesn't currently emphasis how to do spousal benefits, although I suspect it may be somewhat common, but it can be done. The second can be done also. I am currently updating it (a significant number of improvements) so I will review both of these to make sure I'm correct.

Updated after review.

You should be able to accomplish both of these items. 1) Insert your age in the Spouse's Age field. Show her benefit starting at the same age, and ending at 70. Start your benefit at 71. The warnings you get from selecting "Single" for taxes are just alerts, and the calculations should work just fine. [See my previous response on a similar question with graphic 2 on Aug 13 2013]. 2) Use the Lump Sum Event - Inherited IRA field B56 and show the age for it to start in Inherited IRA RMD field B12. (In the new version coming out the individual who inherited can be selected, although not applicable in your situation.)

Let me know if that works for you, and I'll continue to review both of them to see if I missed anything, or need to make the spousal benefit a little clearer.
Age 63, life turned upside down 3/2/19, thanking God for what I've learned from this group
Topic Author
BigFoot48
Posts: 2900
Joined: Tue Feb 20, 2007 10:47 am
Location: Arizona

### Re: Retiree Portfolio Model

DebiT wrote: Sat Jun 12, 2021 1:54 pm BigFoot48, thank you for replying while travelling. Please tell me if you want to table this until you return, and I can then just wait for a response.

Your reply above said to simply increase my SS amount, but the model then asks for an end date, not a beginning date, so I'm not sure that will work, unless I am missing something
Debi T, I will see if the model can accommodate your situation when I get home in a few days. I think it will but maybe not.

BTW, thanks to all the users helping others understand how the model works and how to use it.
Retired | Two-time in top-10 in Bogleheads S&P500 contest; 15-time loser
DebiT
Posts: 467
Joined: Sat Dec 28, 2013 1:45 pm

### Re: Retiree Portfolio Model

BigFoot48 wrote: Sat Jun 12, 2021 6:55 pm
DebiT wrote: Sat Jun 12, 2021 1:54 pm BigFoot48, thank you for replying while travelling. Please tell me if you want to table this until you return, and I can then just wait for a response.

Your reply above said to simply increase my SS amount, but the model then asks for an end date, not a beginning date, so I'm not sure that will work, unless I am missing something
Debi T, I will see if the model can accommodate your situation when I get home in a few days. I think it will but maybe not.

BTW, thanks to all the users helping others understand how the model works and how to use it.
BigFoot48, I finally had time to sit down this morning and test this out. I entered a spouse receiving what I now receive in SS survivors benefits from now until 70, and then started my own full benefit (as "you" naturally ) at age 71. I checked the IRMAA result with no Roth conversions, so very high RMD. Then, to test, I removed the spouse and removed that benefit, and the IRMAA remained the same. So I think it is accurate when IRMAA begins after the spouse "dies".

Then ran it with a very large Roth conversion, starting now age 63, at about \$180K MAGI. 2 years from now, with the spouse still "alive", my IRMAA is \$10K. My figures from the Medicare page show an IRMAA cost of 475-148.50=\$327 / month, therefore \$3924 annual per person. So I think the pseudo spouse is affecting IRMAA while still "alive"

My situation is likely not common: collecting survivor benefits, early retirement, collecting my own much higher benefit at age 70. For now, I will just make a note of the anomaly. It isn't the biggest factor by far in planning, since taxes etc swing much more. The key was changing the inputs to have my full survivor benefit listed as being the spouse's benefit, and having it and the spouse end when my benefit begins. That has minimized the error as much as I can see possible.

Thank you again for all your input, and please don't deal with this while you are travelling .
Age 63, life turned upside down 3/2/19, thanking God for what I've learned from this group
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### Re: Retiree Portfolio Model

I should mention that someone has customized the spreadsheet for Roth conversions vs. inherited IRA heirs. See: Re: Calling Pralana Calculator Users and the subsequent posts.
To some, the glass is half full. To others, the glass is half empty. To an engineer, it's twice the size it needs to be.
DebiT
Posts: 467
Joined: Sat Dec 28, 2013 1:45 pm

### Re: Retiree Portfolio Model

I have a question regarding the Annual Withdrawal Rate as noted on the Results page, row 20

I see that it is an estimate of total portfolio withdrawal rate, including income taxes. Am I correct in thinking that as long as my true living expenses are within "safe withdrawal rate" range, and as long as my portfolio has a very healthy balance at the end, that these numbers aren't really reflective of a "safe withdrawal rate"? I'm not even sure how they are calculated, since I end up with some years of 10% withdrawals on this tool, yet with a high 6 or very low 7 figure portfolio at the end (age 100).
Age 63, life turned upside down 3/2/19, thanking God for what I've learned from this group
Barsoom
Posts: 489
Joined: Thu Dec 06, 2018 9:40 am

### Re: Retiree Portfolio Model

DebiT wrote: Sun Jun 13, 2021 4:35 pm Am I correct in thinking that as long as my true living expenses are within "safe withdrawal rate" range, and as long as my portfolio has a very healthy balance at the end, that these numbers aren't really reflective of a "safe withdrawal rate"? I'm not even sure how they are calculated, since I end up with some years of 10% withdrawals on this tool, yet with a high 6 or very low 7 figure portfolio at the end (age 100).
If you are Excel savvy, I made a Monte Carlo variant of the RPM model. This will stress test your portfolio against 1,000 randomized future cash flows. Each scenario has 40 separate annual factors for inflation, MM growth, bond growth, and stock growth. It produces an S-curve and histogram of the outcomes, as well as the probability of running out of money.

Here is the link to the variant: viewtopic.php?p=5801064#p5801064

This may not contain the most recent one-off maintenance change for a special case.

-B
Topic Author
BigFoot48
Posts: 2900
Joined: Tue Feb 20, 2007 10:47 am
Location: Arizona

### Re: Retiree Portfolio Model

DebiT wrote: Sun Jun 13, 2021 1:59 pm BigFoot48, I finally had time to sit down this morning and test this out. I entered a spouse receiving what I now receive in SS survivors benefits from now until 70, and then started my own full benefit (as "you" naturally ) at age 71. I checked the IRMAA result with no Roth conversions, so very high RMD. Then, to test, I removed the spouse and removed that benefit, and the IRMAA remained the same. So I think it is accurate when IRMAA begins after the spouse "dies".

Then ran it with a very large Roth conversion, starting now age 63, at about \$180K MAGI. 2 years from now, with the spouse still "alive", my IRMAA is \$10K. My figures from the Medicare page show an IRMAA cost of 475-148.50=\$327 / month, therefore \$3924 annual per person. So I think the pseudo spouse is affecting IRMAA while still "alive"

My situation is likely not common: collecting survivor benefits, early retirement, collecting my own much higher benefit at age 70. For now, I will just make a note of the anomaly. It isn't the biggest factor by far in planning, since taxes etc swing much more. The key was changing the inputs to have my full survivor benefit listed as being the spouse's benefit, and having it and the spouse end when my benefit begins. That has minimized the error as much as I can see possible.

Thank you again for all your input, and please don't deal with this while you are travelling .
I'm back with access to RPM. To enter your current SS spousal benefit use the Social Security Benefits "Addition Benefits: You" section, with the appropriate starting and ending ages, e.g. 63 and 69. Then enter your age 70 benefit amount in the "You" line. "Benefits have started" should be "n". Your tax filing status should be "s". These settings should result in a single IRMAA surcharge.

Let me know if that works.
Last edited by BigFoot48 on Tue Jun 15, 2021 9:29 am, edited 1 time in total.
Retired | Two-time in top-10 in Bogleheads S&P500 contest; 15-time loser
Topic Author
BigFoot48
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Location: Arizona

### Re: Retiree Portfolio Model

DebiT wrote: Sun Jun 13, 2021 4:35 pm I have a question regarding the Annual Withdrawal Rate as noted on the Results page, row 20

I see that it is an estimate of total portfolio withdrawal rate, including income taxes. Am I correct in thinking that as long as my true living expenses are within "safe withdrawal rate" range, and as long as my portfolio has a very healthy balance at the end, that these numbers aren't really reflective of a "safe withdrawal rate"? I'm not even sure how they are calculated, since I end up with some years of 10% withdrawals on this tool, yet with a high 6 or very low 7 figure portfolio at the end (age 100).
Here's the cell comment on this feature included in the title:
"An estimate of the portfolio withdrawal rate. Use for seeing how it compares to the 4% portfolio withdrawal rate recommendation.

Comprised of living expenses and taxes less income that would offset all or a portion of those, thus reducing portfolio withdrawals. Income is the taxable portion of the Taxable Account earnings plus income from pensions, wages, etc.

Inheritances and special income and expenses are not included."
Retired | Two-time in top-10 in Bogleheads S&P500 contest; 15-time loser
Topic Author
BigFoot48
Posts: 2900
Joined: Tue Feb 20, 2007 10:47 am
Location: Arizona

### Re: Retiree Portfolio Model

Rotwang wrote: Thu Jun 10, 2021 6:17 pm First off, like many others, I want to say thanks for creating and maintaining RPM. I think it's a great tool.
I'm using RPM V21.1a

I'm trying to compare the effects of various amounts of Roth conversions on final year totals and their after tax value to non-spouse heirs.
I see in the "Setup" tab the final year portfolio total (cell E13) and Base portfolio total (cell E20) but I don't think I can use these numbers to directly compare because totals don't seem to distinguish between the value of Taxable, IRA and Roth dollars.

I see in the "Results" tab, there is a Inherited Portfolio Impact section starting at row 179 and there are cells that calculate yearly taxes for the heir (L184, M184) but this seems to be only for the final year. I would assume, given the recent changes to Inherited IRAs, that the RMD factor (cell N181) for a non-spouse should be 10 (to reflect the 10 year rule for inherited IRAs). One could subtract 10 years of taxes off the totals in order to approximate the results but that doesn't seem very accurate.

The approach I have taken is to create a calculation similar to the ones in the Results tab cells D184 and E184 and apply multipliers to their inputs based on tax treatment.
The formula I modified from D184 is "=D180+(D181*(1-Tax_Est))+((D182+D183)*1.15)"
NOTE: 1.15 in the formula is just an estimated value ratio of a 10 year RMD Inherited Roth vs Taxable

Thoughts?
I'm not too interested in refining those heir estimates. It's just a general forecast of likely decades of estimates that will not be accurate, thus it has somewhat limited value and is mainly to get users to think about the possible outcome of conversions on heirs. But glad that you are making refinements for your own use!
Retired | Two-time in top-10 in Bogleheads S&P500 contest; 15-time loser
DebiT
Posts: 467
Joined: Sat Dec 28, 2013 1:45 pm

### Re: Retiree Portfolio Model

BigFoot48 wrote: Tue Jun 15, 2021 9:18 am
DebiT wrote: Sun Jun 13, 2021 1:59 pm BigFoot48, I finally had time to sit down this morning and test this out. I entered a spouse receiving what I now receive in SS survivors benefits from now until 70, and then started my own full benefit (as "you" naturally ) at age 71. I checked the IRMAA result with no Roth conversions, so very high RMD. Then, to test, I removed the spouse and removed that benefit, and the IRMAA remained the same. So I think it is accurate when IRMAA begins after the spouse "dies".

Then ran it with a very large Roth conversion, starting now age 63, at about \$180K MAGI. 2 years from now, with the spouse still "alive", my IRMAA is \$10K. My figures from the Medicare page show an IRMAA cost of 475-148.50=\$327 / month, therefore \$3924 annual per person. So I think the pseudo spouse is affecting IRMAA while still "alive"

My situation is likely not common: collecting survivor benefits, early retirement, collecting my own much higher benefit at age 70. For now, I will just make a note of the anomaly. It isn't the biggest factor by far in planning, since taxes etc swing much more. The key was changing the inputs to have my full survivor benefit listed as being the spouse's benefit, and having it and the spouse end when my benefit begins. That has minimized the error as much as I can see possible.

Thank you again for all your input, and please don't deal with this while you are travelling .
I'm back with access to RPM. To enter your current SS spousal benefit use the Social Security Benefits "Addition Benefits: You" section, with the appropriate starting and ending ages, e.g. 63 and 69. Then enter your age 70 benefit amount in the "You" line. "Benefits have started" should be "n". Your tax filing status should be "s". These settings should result in a single IRMAA surcharge.

Let me know if that works.
Yes, this is definitely the fix. Seems so logical once you wrote it, but I didn't figure it out properly for myself. May I suggest that you add a mention of "widow(er) survivor benefits" in the comment box attached to Additional Benefits? That would likely help others to notice this differently. Thank you again for your help, and for this great tool.
Age 63, life turned upside down 3/2/19, thanking God for what I've learned from this group
DebiT
Posts: 467
Joined: Sat Dec 28, 2013 1:45 pm

### Re: Retiree Portfolio Model

In trying to understand my ending account balances in RPM 35 years from now, I'm realizing that of course the numbers are in "future" dollars, which I believe means "real" dollars, vs "nominal", which my brain wants to call "now". For some reason I have a mental block here in learning these terms, but I will overcome it.

Meanwhile, is there a way to "convert" the ending balances into today's dollars? On the setup page, Living Expenses / Inflation (F173) I have entered 2.6% the highest figure suggested based on a 30 year retirement. However, I probably need a slightly higher number, since I am modelling living to 100, therefore 37 year retirement.

Is there then a factor or divisor to change my end of plan "inflated" balances back to today's value (not in the spreadsheet but just for my knowledge)? For all I know, I end my plan with \$2.00 in today's dollars (nominal?) and am at great risk of cat food for dinner after all!

I should add I'm mostly using RPM right now to figure out optimal Roth conversions, and will next be looking at suggestions to see what amounts of money are in Roth vs 401K at end of life. There won't be anything in taxable. That's another question.
Age 63, life turned upside down 3/2/19, thanking God for what I've learned from this group
DebiT
Posts: 467
Joined: Sat Dec 28, 2013 1:45 pm

### Re: Retiree Portfolio Model

BigFoot48 wrote: Tue Jun 15, 2021 9:27 am
DebiT wrote: Sun Jun 13, 2021 4:35 pm I have a question regarding the Annual Withdrawal Rate as noted on the Results page, row 20

I see that it is an estimate of total portfolio withdrawal rate, including income taxes. Am I correct in thinking that as long as my true living expenses are within "safe withdrawal rate" range, and as long as my portfolio has a very healthy balance at the end, that these numbers aren't really reflective of a "safe withdrawal rate"? I'm not even sure how they are calculated, since I end up with some years of 10% withdrawals on this tool, yet with a high 6 or very low 7 figure portfolio at the end (age 100).
Here's the cell comment on this feature included in the title:
"An estimate of the portfolio withdrawal rate. Use for seeing how it compares to the 4% portfolio withdrawal rate recommendation.

Comprised of living expenses and taxes less income that would offset all or a portion of those, thus reducing portfolio withdrawals. Income is the taxable portion of the Taxable Account earnings plus income from pensions, wages, etc.

Inheritances and special income and expenses are not included."
In writing this, I think I am answering my question. Does it make sense that, if I am not trying to preserve the portfolio, my withdrawal rate as a %age would increase in my very later years? I think the answer must be yes, which would make sense. After all, if I "died broke" or nearly so, my last couple of years would be nearly 100%. So to see an increasing percentages after 90 into 10-15% might not be surprising.

I also noticed that I modelled selling my house at 92, since that is also what I do in Otar Retirement Calculator in case of "unlucky" market returns. But the amount it gains me is in today's \$\$, not future \$\$. So it is likely much too low a \$\$ amount.

Lots of moving parts to this stuff. Learning a lot! Thank you!
Age 63, life turned upside down 3/2/19, thanking God for what I've learned from this group
Topic Author
BigFoot48
Posts: 2900
Joined: Tue Feb 20, 2007 10:47 am
Location: Arizona

### Re: Retiree Portfolio Model

DebiT wrote: Tue Jun 15, 2021 1:21 pm In trying to understand my ending account balances in RPM 35 years from now, I'm realizing that of course the numbers are in "future" dollars, which I believe means "real" dollars, vs "nominal", which my brain wants to call "now". For some reason I have a mental block here in learning these terms, but I will overcome it.

Meanwhile, is there a way to "convert" the ending balances into today's dollars? On the setup page, Living Expenses / Inflation (F173) I have entered 2.6% the highest figure suggested based on a 30 year retirement. However, I probably need a slightly higher number, since I am modelling living to 100, therefore 37 year retirement.

Is there then a factor or divisor to change my end of plan "inflated" balances back to today's value (not in the spreadsheet but just for my knowledge)? For all I know, I end my plan with \$2.00 in today's dollars (nominal?) and am at great risk of cat food for dinner after all!
There's no single factor to change to convert the model to nominal dollars, but changing the inflation factor to 0% and deducting the inflation factor from other escalation amounts, such as expense and income escalators will get close. And the Social Security factor escalation should be set to zero. Then there's the annual increase in tax brackets that the IRS has - should they be less? I don't know but can be adjusted on the tax page.

Some other users have wanted nominal results and you might do a search in the thread to see if anyone left a comment on how they did it. I prefer reality - which is inflation. Good luck!
May I suggest that you add a mention of "widow(er) survivor benefits" in the comment box attached to Additional Benefits?
A use that never occurred to me. I will add it. Thanks.
Retired | Two-time in top-10 in Bogleheads S&P500 contest; 15-time loser
DebiT
Posts: 467
Joined: Sat Dec 28, 2013 1:45 pm

### Re: Retiree Portfolio Model

BigFoot48 wrote: Tue Jun 15, 2021 5:54 pm
DebiT wrote: Tue Jun 15, 2021 1:21 pm In trying to understand my ending account balances in RPM 35 years from now, I'm realizing that of course the numbers are in "future" dollars, which I believe means "real" dollars, vs "nominal", which my brain wants to call "now". For some reason I have a mental block here in learning these terms, but I will overcome it.

Meanwhile, is there a way to "convert" the ending balances into today's dollars? On the setup page, Living Expenses / Inflation (F173) I have entered 2.6% the highest figure suggested based on a 30 year retirement. However, I probably need a slightly higher number, since I am modelling living to 100, therefore 37 year retirement.

Is there then a factor or divisor to change my end of plan "inflated" balances back to today's value (not in the spreadsheet but just for my knowledge)? For all I know, I end my plan with \$2.00 in today's dollars (nominal?) and am at great risk of cat food for dinner after all!
There's no single factor to change to convert the model to nominal dollars, but changing the inflation factor to 0% and deducting the inflation factor from other escalation amounts, such as expense and income escalators will get close. And the Social Security factor escalation should be set to zero. Then there's the annual increase in tax brackets that the IRS has - should they be less? I don't know but can be adjusted on the tax page.

Some other users have wanted nominal results and you might do a search in the thread to see if anyone left a comment on how they did it. I prefer reality - which is inflation. Good luck!
May I suggest that you add a mention of "widow(er) survivor benefits" in the comment box attached to Additional Benefits?
A use that never occurred to me. I will add it. Thanks.
Thank you, Bigfoot. I will search for that term. I just want to understand in today’s dollars how I end up. Other tools , like ORC, show me to be in pretty good shape, and additional validation will be good. I think I’ve figured out my best Roth strategy thanks to RPM. Now I’ll compare those results with a couple of other tools as well. Thank you

Meanwhile, can you suggest a figure to use for inflation for a project 37 year retirement? As I mentioned, I’m using your suggestion for a 30 year retirement of 2.6% . I don’t know how much higher I should go. Thank you.
Age 63, life turned upside down 3/2/19, thanking God for what I've learned from this group
Topic Author
BigFoot48
Posts: 2900
Joined: Tue Feb 20, 2007 10:47 am
Location: Arizona

### Re: Retiree Portfolio Model

DebiT wrote: Tue Jun 15, 2021 7:58 pm
Thank you, Bigfoot. I will search for that term. I just want to understand in today’s dollars how I end up. Other tools , like ORC, show me to be in pretty good shape, and additional validation will be good. I think I’ve figured out my best Roth strategy thanks to RPM. Now I’ll compare those results with a couple of other tools as well. Thank you

Meanwhile, can you suggest a figure to use for inflation for a project 37 year retirement? As I mentioned, I’m using your suggestion for a 30 year retirement of 2.6% . I don’t know how much higher I should go. Thank you.
I don't have an opinion on what inflation will be in the future, as it could be a wide yearly range. I use 2.0% in the model and users can choose an alternative. The latest averages of CPI-U as of the end of 2019 are: 30 years 2.5%, 20 years 2.2% and 10 years 1.8%. This calculation is at X390 of the Tax Tables page.

I suspect over 37 years its going to fluctuate a lot but hopefully we won't have too many at 13.6% like it was in 1980. Good luck!
Retired | Two-time in top-10 in Bogleheads S&P500 contest; 15-time loser
Barsoom
Posts: 489
Joined: Thu Dec 06, 2018 9:40 am

### Re: Retiree Portfolio Model

I am announcing a mid-year update of the Monte Carlo variant to the Retiree Portfolio Model.

This update contains the minor enhancements to the base model from March-present. It also includes one minor bug fix (thanks DebiT).

Also, I'm reposting some tips for interpreting Monte Carlo results that I made in other threads.
When interpreting Monte Carlo results, it is important to know what the tails are saying, but to also not discard the approach because of extreme high-side tails. On the low side, the tail shows the failure rate, that is, the probability of running out of money. I think the cumulate distribution curve should cross the zero line no higher than at 5%, but it should also cross very close to the bend in the curve (the point where the angle of the tail begins to move away from the flat portion). The bend in the curve is where the extreme cases emerge. The low end of the tail will hopefully be contained, because the point of running out of money will likely be very near the end of the planning horizion.

On the high side, the tail can appear to run away. This should happen no lower than the 92%-95% point in the curve, and shouldn't have too much drag on the expected value (the probability-weighted average of all the results). We're really interested in the 90% of the curve between the 5% and 95% points. The key numbers to see are the mode (the "likely" result, or the result that occurs most often) and the mean (the expected value or probability-weighted average). My model breaks the probability distribution into a histogram of 21 "buckets" and identifies the "likely" result as the mid-point of the bucket with the most results in it). The portfolio should be expected to fall somewhere between the mode and the mean.
As always, feel free to PM me or post questions or comments here.

-B
sjahoo
Posts: 5
Joined: Wed Jun 16, 2021 8:27 pm

### Re: Retiree Portfolio Model

New to this forum . . . and I can already tell I'm going to be busy. I started building my own analysis tool for deciding whether to convert to a Roth or not, and you guys are going to save me a TON of time. Can't wait to start playing with these tools. Thanks!
ManiakMan
Posts: 5
Joined: Fri Dec 07, 2018 9:49 pm

### Re: Retiree Portfolio Model

Wow, just wow.

I had RPM on my "ToDo" list ever since joining the forum and finally had some time to spend with it.
Honestly, it was a bit overwhelming at first but spending some time studying the "Details" and "Base" tabs after making my first pass at the "Settings" helped putting things into perspective, especially when trying to figure out how to best bridge the time between early retirement and 65.

After spending a few hours with RPM and SSA estimators I consider having a "big picture" idea of our retirement timeline.
I assume the more familiar one gets with RPM... the easier it is to be more accurate.

Thanks to all that made this happen and also to those that keep it going!

ManiakMan
ManiakMan
Posts: 5
Joined: Fri Dec 07, 2018 9:49 pm

### Re: Retiree Portfolio Model

BigFoot48 wrote: Tue Jun 15, 2021 5:54 pm
Some other users have wanted nominal results and you might do a search in the thread to see if anyone left a comment on how they did it. I prefer reality - which is inflation. Good luck!
Searched through this thread a bit to see if this was ever discussed (sorry if I missed):

Could there perhaps be an optional additional reference "savings account" that earns 0.0% interest and has a token initial value (perhaps 10 times the rounding number)?
It would get the same inflation treatment as Taxable and one would get an idea how the various yearly "inflated" values compare against the starting nominal.

ManiakMan
Barsoom
Posts: 489
Joined: Thu Dec 06, 2018 9:40 am

### Re: Retiree Portfolio Model

It looks like the bug fix I made that DebiT reported didn't stick. The Dropbox file has been update with the correction to the circular reference error. Please download again if you are using IRMAA surcharges.

Sorry for the inconvenience.

-B
DebiT
Posts: 467
Joined: Sat Dec 28, 2013 1:45 pm

### Re: Retiree Portfolio Model

BigFoot48 wrote: Tue Jun 15, 2021 9:18 am
DebiT wrote: Sun Jun 13, 2021 1:59 pm BigFoot48, I finally had time to sit down this morning and test this out. I entered a spouse receiving what I now receive in SS survivors benefits from now until 70, and then started my own full benefit (as "you" naturally ) at age 71. I checked the IRMAA result with no Roth conversions, so very high RMD. Then, to test, I removed the spouse and removed that benefit, and the IRMAA remained the same. So I think it is accurate when IRMAA begins after the spouse "dies".

Then ran it with a very large Roth conversion, starting now age 63, at about \$180K MAGI. 2 years from now, with the spouse still "alive", my IRMAA is \$10K. My figures from the Medicare page show an IRMAA cost of 475-148.50=\$327 / month, therefore \$3924 annual per person. So I think the pseudo spouse is affecting IRMAA while still "alive"

My situation is likely not common: collecting survivor benefits, early retirement, collecting my own much higher benefit at age 70. For now, I will just make a note of the anomaly. It isn't the biggest factor by far in planning, since taxes etc swing much more. The key was changing the inputs to have my full survivor benefit listed as being the spouse's benefit, and having it and the spouse end when my benefit begins. That has minimized the error as much as I can see possible.

Thank you again for all your input, and please don't deal with this while you are travelling .
I'm back with access to RPM. To enter your current SS spousal benefit use the Social Security Benefits "Addition Benefits: You" section, with the appropriate starting and ending ages, e.g. 63 and 69. Then enter your age 70 benefit amount in the "You" line. "Benefits have started" should be "n". Your tax filing status should be "s". These settings should result in a single IRMAA surcharge.

Let me know if that works.
I'm sorry, but I spoke too soon when I said that this fix worked for my situation of currently collecting widow survivors benefits on my husband's account.

If I do this fix as noted above, IRMAA works in that it is not doubled. However, on the details page regarding Taxable SS benefits, nothing is reported even with very high Roth conversion amounts. In other words, it is not picking up that Additional Benefit as a Social Security benefit taxable at up to 85%.

If I don't do the fix, but do it the old way of entering a spousal benefit from now until age 69, then switch to my own, the SS income gets taxed appropriately, but I do end up with double IRMAA charges through age 69, rather than just for myself.
Age 63, life turned upside down 3/2/19, thanking God for what I've learned from this group
Topic Author
BigFoot48
Posts: 2900
Joined: Tue Feb 20, 2007 10:47 am
Location: Arizona

### Re: Retiree Portfolio Model

DebiT wrote: Fri Jun 25, 2021 2:42 pm
I'm sorry, but I spoke too soon when I said that this fix worked for my situation of currently collecting widow survivors benefits on my husband's account.

If I do this fix as noted above, IRMAA works in that it is not doubled. However, on the details page regarding Taxable SS benefits, nothing is reported even with very high Roth conversion amounts. In other words, it is not picking up that Additional Benefit as a Social Security benefit taxable at up to 85%.

If I don't do the fix, but do it the old way of entering a spousal benefit from now until age 69, then switch to my own, the SS income gets taxed appropriately, but I do end up with double IRMAA charges through age 69, rather than just for myself.
Try putting the additional early benefits in the You line. That seems to work to get it taxed.
Retired | Two-time in top-10 in Bogleheads S&P500 contest; 15-time loser
DebiT
Posts: 467
Joined: Sat Dec 28, 2013 1:45 pm

### Re: Retiree Portfolio Model

BigFoot48 wrote: Fri Jun 25, 2021 3:33 pm
DebiT wrote: Fri Jun 25, 2021 2:42 pm
I'm sorry, but I spoke too soon when I said that this fix worked for my situation of currently collecting widow survivors benefits on my husband's account.

If I do this fix as noted above, IRMAA works in that it is not doubled. However, on the details page regarding Taxable SS benefits, nothing is reported even with very high Roth conversion amounts. In other words, it is not picking up that Additional Benefit as a Social Security benefit taxable at up to 85%.

If I don't do the fix, but do it the old way of entering a spousal benefit from now until age 69, then switch to my own, the SS income gets taxed appropriately, but I do end up with double IRMAA charges through age 69, rather than just for myself.
Try putting the additional early benefits in the You line. That seems to work to get it taxed.
That fixed it. To summarize, to do widow currently living on husband's survivor benefit, on set-up page I entered myself with no spouse, my future SS benefit to start at age 70, and an additional benefit, entered as "you", for what I'm receiving now, starting now, ending age 69. Thank you!
Age 63, life turned upside down 3/2/19, thanking God for what I've learned from this group
Barsoom
Posts: 489
Joined: Thu Dec 06, 2018 9:40 am

### Re: Retiree Portfolio Model

Users of the Monte Carlo Variant:

I am releasing a feature update. This version adds the ability to lock the Monte Carlo variables to your retirement date so that the same random numbers stay with their year throughout the life of retirement. To enable this, just add the Retirement Year on the Monte Carlo Setup tab. After that, each year that you refresh the model with the annual tax changes, the Monte Carlo model will use the same uncertainties for the same years as before.

https://www.dropbox.com/s/7hr8bwyazft83 ... .xlsm?dl=0

-B
mkc
Posts: 710
Joined: Wed Apr 17, 2013 2:59 pm

### Re: Retiree Portfolio Model

BigFoot48 wrote: Thu Feb 13, 2020 11:48 am
Joe3zz wrote: Tue Feb 11, 2020 1:07 pm Thank you Bigfoot for your work on this tool!

Hoping someone can help/clarify. I entered our data in the current version of the Retiree Portfolio Model. My wife and I are essentially retired and have a 50/50 portfolio., age 63, no social security yet.

Our taxable portfolio is essentially stock mutual funds and our IRAs are bond funds.

If I model our expenditures without withdrawals from our IRAs, it calculates our Federal Taxes as 0 for a couple of years, then calculates them off SS and some other factors when those kick in.

I see that the instructions say "It cannot calculate the taxes on withdrawal of funds containing unrealized capital gains in the taxable account. As a result, taxes will be understated on such gains included in the starting taxable account balance or earned over the years."

In our case, the the capital gains taxes on sales in our taxable account are a significant factor to consider. Is there some way to include/calculate some estimate of what they will be, so that the model considers accurate numbers? How are others addressing this when they use the model?
The Taxable Account Adjustment section in the Setup "8 Income Tax" section includes a method of having distributed dividends and capital gains taxed at the marginal rate.

Use this setting to enter a capital gains amount that will result in an approximate capital gain tax amount being calculated after applying the bracket marginal rate.
I found this comment in a search - glad to discover this workaround as I was trying to reconcile i-ORPs Roth conversion suggestions (no room) with RPMs (trying to stay in the 12% bracket, but most of our income is LTCG as qualified dividends and cap gains distributions).

I had to change this amount for scenarios with and without Roth conversions since the conversion would move us into 15% LTCG territory. It's not exact, but it did then correlate to what i-ORP was saying.

RPM is a great tool! Perhaps a future version might take the LTCG brackets/jump into consideration similar to how the marginal rates are done? That would help greatly for Roth conversion modeling.
rmichaelsm
Posts: 2
Joined: Wed Jul 07, 2021 12:07 pm

### Re: Retiree Portfolio Model

Can someone explain to me why the Roth Conversion taxes are paid from the IRA-1 account. I was always told it was better to pay for it out of your already taxed money. I would think taking it from the Taxable Account would be in line with this. I am digging in to see where the taxes get paid and may set mine to have option to select account.
Topic Author
BigFoot48
Posts: 2900
Joined: Tue Feb 20, 2007 10:47 am
Location: Arizona

### Re: Retiree Portfolio Model

mkc wrote: Wed Jul 07, 2021 11:21 am
I found this comment in a search - glad to discover this workaround as I was trying to reconcile i-ORPs Roth conversion suggestions (no room) with RPMs (trying to stay in the 12% bracket, but most of our income is LTCG as qualified dividends and cap gains distributions).

I had to change this amount for scenarios with and without Roth conversions since the conversion would move us into 15% LTCG territory. It's not exact, but it did then correlate to what i-ORP was saying.

RPM is a great tool! Perhaps a future version might take the LTCG brackets/jump into consideration similar to how the marginal rates are done? That would help greatly for Roth conversion modeling.
Thanks, as many BH's have contributed to it. I consider capital gains as being extremely difficult to forecast with any accuracy, but will see if the 0%, 15% and 20% brackets can be accommodated in a future release. Thanks for the suggestion.
Retired | Two-time in top-10 in Bogleheads S&P500 contest; 15-time loser
Topic Author
BigFoot48
Posts: 2900
Joined: Tue Feb 20, 2007 10:47 am
Location: Arizona

### Re: Retiree Portfolio Model

rmichaelsm wrote: Wed Jul 07, 2021 12:24 pm Can someone explain to me why the Roth Conversion taxes are paid from the IRA-1 account. I was always told it was better to pay for it out of your already taxed money. I would think taking it from the Taxable Account would be in line with this. I am digging in to see where the taxes get paid and may set mine to have option to select account.
All expenses including income taxes are paid out of the Taxable account whose balance must be maintained via income, IRA withdrawals and other cash inflows. Roth conversions are made from IRA-1 but do not include the taxes that result from the IRA withdrawal.
Retired | Two-time in top-10 in Bogleheads S&P500 contest; 15-time loser
rmichaelsm
Posts: 2
Joined: Wed Jul 07, 2021 12:07 pm

### Re: Retiree Portfolio Model

BigFoot48 wrote: Wed Jul 07, 2021 1:03 pm
rmichaelsm wrote: Wed Jul 07, 2021 12:24 pm Can someone explain to me why the Roth Conversion taxes are paid from the IRA-1 account. I was always told it was better to pay for it out of your already taxed money. I would think taking it from the Taxable Account would be in line with this. I am digging in to see where the taxes get paid and may set mine to have option to select account.
All expenses including income taxes are paid out of the Taxable account whose balance must be maintained via income, IRA withdrawals and other cash inflows. Roth conversions are made from IRA-1 but do not include the taxes that result from the IRA withdrawal.
Oooo, excellent! Thanks! This is a GREAT tool! I have been looking for exactly this for a long time!
mkc
Posts: 710
Joined: Wed Apr 17, 2013 2:59 pm

### Re: Retiree Portfolio Model

BigFoot48 wrote: Wed Jul 07, 2021 12:59 pm
mkc wrote: Wed Jul 07, 2021 11:21 am
I found this comment in a search - glad to discover this workaround as I was trying to reconcile i-ORPs Roth conversion suggestions (no room) with RPMs (trying to stay in the 12% bracket, but most of our income is LTCG as qualified dividends and cap gains distributions).

I had to change this amount for scenarios with and without Roth conversions since the conversion would move us into 15% LTCG territory. It's not exact, but it did then correlate to what i-ORP was saying.

RPM is a great tool! Perhaps a future version might take the LTCG brackets/jump into consideration similar to how the marginal rates are done? That would help greatly for Roth conversion modeling.
Thanks, as many BH's have contributed to it. I consider capital gains as being extremely difficult to forecast with any accuracy, but will see if the 0%, 15% and 20% brackets can be accommodated in a future release. Thanks for the suggestion.
That would be fantastic! The tool currently makes it very easy to set up "entered" Roth conversion amounts and dial them in to stay within a specific marginal bracket as long as there aren't LTCG taxes to worry about. There are intricacies in tying the LTCG to the AGI so I'm sure this wouldn't be a trivial feature to add, especially the tax hits. What I'm having to do is year by year scroll quite a ways down to the AGI/Taxable income/etc. section to see how much "room" is left in the 0% LTCG bracket, then going back up, entering the Roth amount that "fits", and scrolling back down to make sure I didn't dork things up, then move to the next year.

I've since been exploring the SS age modeling and really like that feature! One can definitely dial in the "sweet spot" using RPM and opensocialsecurity.com. We decided 95% on opensocialsecurity was an acceptable target; RPM's calculations showed that in our case, the resulting ages actually corresponded to the maximum value-add to the overall portfolio.
Barsoom
Posts: 489
Joined: Thu Dec 06, 2018 9:40 am

### Re: Retiree Portfolio Model

mkc wrote: Wed Jul 07, 2021 5:17 pm What I'm having to do is year by year scroll quite a ways down to the AGI/Taxable income/etc. section to see how much "room" is left in the 0% LTCG bracket, then going back up, entering the Roth amount that "fits", and scrolling back down to make sure I didn't dork things up, then move to the next year.
Try using the Split feature in Excel.

Go to View, then click on Split in the Window section. You can split the screen in half and have both parts of the sheet visible at the same time.

Enter values in the top half and see the changes in the bottom half.

-B
mkc
Posts: 710
Joined: Wed Apr 17, 2013 2:59 pm

### Re: Retiree Portfolio Model

Barsoom wrote: Wed Jul 07, 2021 5:23 pm
mkc wrote: Wed Jul 07, 2021 5:17 pm What I'm having to do is year by year scroll quite a ways down to the AGI/Taxable income/etc. section to see how much "room" is left in the 0% LTCG bracket, then going back up, entering the Roth amount that "fits", and scrolling back down to make sure I didn't dork things up, then move to the next year.
Try using the Split feature in Excel.

Go to View, then click on Split in the Window section. You can split the screen in half and have both parts of the sheet visible at the same time.

Enter values in the top half and see the changes in the bottom half.

-B
Thanks - I'm using LibreOffice, not Excel, so I'll have to see if it has a Split feature.
Cara
Posts: 51
Joined: Wed Feb 28, 2018 2:02 pm

### Re: Retiree Portfolio Model

I may be missing something, but I'm confused as to why my Tax return filing status in the IRMAA forecast section in the Tax Tables sheet shows "1" for all the years in my plan, though I have my filing status set as MFJ. Here's my ages table:

Starting year = 2021
Ending year = 2060
Years to forecast = 40
My age 60, My End Age 100, Model End 99
Spouse age 74, Spouse End Age blank, Model End 113
Topic Author
BigFoot48
Posts: 2900
Joined: Tue Feb 20, 2007 10:47 am
Location: Arizona

### Re: Retiree Portfolio Model

Cara wrote: Wed Jul 14, 2021 6:45 pm I may be missing something, but I'm confused as to why my Tax return filing status in the IRMAA forecast section in the Tax Tables sheet shows "1" for all the years in my plan, though I have my filing status set as MFJ. Here's my ages table:

Starting year = 2021
Ending year = 2060
Years to forecast = 40
My age 60, My End Age 100, Model End 99
Spouse age 74, Spouse End Age blank, Model End 113
Your End Age should be less than the Model End age or just leave blank. I believe that may be triggering the Single Rate Starts factor in Setup Taxes to be immediate triggering the Single setting. Check these.
Retired | Two-time in top-10 in Bogleheads S&P500 contest; 15-time loser
Cara
Posts: 51
Joined: Wed Feb 28, 2018 2:02 pm

### Re: Retiree Portfolio Model

Thanks. The only way, it seems, to get it to show MFJ for us is to have NO end ages. Unfortunately, it doesn't make the switch to Single filing at any point, for the model where I outlive him.

Here's how the tax setup looks now, for the relevant values, and my status stays MFJ.
filing status Factors
Filing status m
Year single rate starts 18
Override single rate start year 18

If I don't override, I still get MFJ all the way across, in the IRMAA section.
Topic Author
BigFoot48
Posts: 2900
Joined: Tue Feb 20, 2007 10:47 am
Location: Arizona

### Re: Retiree Portfolio Model

You should be able to put in an end age for spouse of 82, for example, and have MFJ up until that year when it switches to Single. No You end age. I just tested it with the sample data and that works. No need to use the override section, leave that blank.
Retired | Two-time in top-10 in Bogleheads S&P500 contest; 15-time loser
Cara
Posts: 51
Joined: Wed Feb 28, 2018 2:02 pm

### Re: Retiree Portfolio Model

Thanks for your patience. It was my bad. I put year as year NUMBER (e.g., 18), not calendar year (2038).

It's working now. Appreciate your work!
Cara
Posts: 51
Joined: Wed Feb 28, 2018 2:02 pm

### Re: Retiree Portfolio Model

What's the right way to enter an inherited IRA received a number of years BEFORE the model begins?

I started taking RMDs in about 2018, so there's not a full 10 years on the RMD period.
FiveK
Posts: 11787
Joined: Sun Mar 16, 2014 2:43 pm

### Re: Retiree Portfolio Model

Cara wrote: Tue Jul 20, 2021 9:57 pm What's the right way to enter an inherited IRA received a number of years BEFORE the model begins?

I started taking RMDs in about 2018, so there's not a full 10 years on the RMD period.
The 10 year distribution period may not apply to you - are you sure it does?
Topic Author
BigFoot48
Posts: 2900
Joined: Tue Feb 20, 2007 10:47 am
Location: Arizona

### Re: Retiree Portfolio Model

A new version of RPM is available - 21.2 Alloc Beta. This version adds a feature that will keep the designated portfolio asset allocations from changing as each account balance changes over the years. This has been an interest of users for many years. BH DSBH started working on this last year and after much delay by me has finished it.

This is being designated as a beta test as there may be many comments, questions and suggestions. For example, if using this feature, which is selected in the Return Rates & Allocation section, it is required the Tax Exempt and Money Market allocations be set to 0% as the recalculation programming doesn't use them. This may be an issue.

The existing allocation method can still be used which is the default setting when opening the file. DSBH will answer questions on the programming and operation of the new feature.

Retired | Two-time in top-10 in Bogleheads S&P500 contest; 15-time loser
DSBH
Posts: 255
Joined: Tue Jul 21, 2020 3:31 pm
Location: Texas

### Re: Retiree Portfolio Model

Many thanks to BH BigFoot48 who has been very gracious to offer the integration of this feature in RPM, and who has been very patient in working with me to get it to a beta version - instead of a potential user-unfriendly "research grade" version.

This feature attempts to maintain on an annual basis a user-specified portfolio Asset Allocation while trying to respect as much as possible user-specified individual account Asset Allocations by rebalancing assets in individual accounts.

For instance if users wanted to model (1) as much stock as possible in their Roth IRA account e.g. 100% stock/0% bond, (2) as much stock as possible in their Taxable account e.g. 100% stock/0% bond, (3) as much bond as possible in their Trad-IRA account e.g. 0% stock/100% bond, yet (4) wanted to maintain a portfolio Asset Allocation e.g. 60% stock /40% bond to reflect their risk preference, users need to enter 100% stock/0% bond for the Taxable and Roth IRA accounts, 0% stock/100% bond for the Trad-IRA accounts, and 60% stock /40% bond for the portfolio AA, and this feature will calculate amounts of stock and bond investments they should have in each account to come as close as possible to their desired portfolio and individual account asset allocation targets.

Users have the option to select which account has priority to receive stock allocation first - "t-r" for Taxable account first or "r-t" for Roth account(s) first. The program first priority is to maintain the overall portfolio AA. In doing so the program will try to satisfy the desired stock allocation target for the Taxable account first assuming that users selected the "t-r" option, the desired stock allocation for the Roth IRA account(s) next, and will assign the remaining stock allocation (required to maintain the portfolio AA requirement) to the T-IRA account(s) last. Bonds will be allocated next for individual accounts as the remainder of the account balance after stock allocation.

The current implementation has 2 key limitations:

1. Only stock and bond. The sum of the stock and bond allocations must be equal to 100%, both Tax Exempt and Money Market must be 0%.
2. The AA rebalancing costs in the Taxable account are not calculated.

Note that if every individual account AA and the portfolio AA are set to the same value (e.g. 60/40 for every account AA AND the portfolio AA), the results are the same no matter which option - this feature or existing RPM allocation - users may select.