I'm not sure exactly what you mean, but I think it just assumes the taxes are paid from a taxable account without going into detail about which types of income or investments to use. But I may not have examined the output or options closely enough.
I strongly recommend using sophisticated planning software to help analyze your situation. The various considerations, such as IRMAA, interact, and it's impossible to model it accurately on your own. I use Maxifi with its Roth Conversion optimizer, and recommend it. Its default assumptions can be adjusted so you can see what would happen if, e.g., inflation is higher than the default or your investment returns are lower. But the program's default assumptions are very conservative, including that you'll live to the age of 99. Roth conversions are obviously beneficial if your marginal tax rate now for the conversion is lower than you anticipate it will be in retirement (i.e., pure tax arbitrage). But as others have mentioned, Roth conversions are usually advisable even if they move you to a higher tax bracket now. This is because one of the main advantages of Roth conversions is that, when you pay the tax on the conversion out of a taxable account, the conversion in effect moves the amount you paid in tax from your taxable to your Roth account. That reduces the yearly tax drag that would occur if you did not convert and that amount stayed in your taxable account. Over time the tax drag from a taxable investment account has a huge cumulative effect, and you have an unusually long amount of time to benefit greatly from this factor. I suspect that Maxifi will recommend large conversions for you -- other considerations aside, conversions into the 24% bracket will definitely be advisable. The White Coat Investor has a nice article on 10 principles to consider with Roth IRA contributions and Roth IRA conversions. His Principle #4 works out an example of this effect. In his particular example, with a 30-year time horizon (which is less than you have at your current age of 56), it is beneficial to convert now even if your tax rate 30 years from now will be up to 9 percentage points lower than the tax rate on a conversion now. That said, last year I did not convert as much as the large amount that Maxifi recommended. That was because all future planning programs convey a false sense of precision because the future, especially the distant future, is so unknowable. And there are other considerations discussed in the White Coat Investor Article.
thanks Fred, accordingly I would amend my version of the question to: Suppose you had $100 in a savings account, and the annual interest rate was 2% on the balance, paid yearly into the account. After 5 years, how much do you think you would have in the account if you left the money to grow?
Something I've heard people commonly purchase and then regret is expensive exercise equipment. We've bought several that we've gotten great use out of, but the one I'm thinking of was used a few times and never again. We ended up selling it back to the store as used for a lot less.
We followed the Dick Quinn method (and didn't even have to pay him any royalties!). My wife and I decided at the start of our earning lives to save 20% of our income each year in retirement accounts and live off the rest. No financial planning/planner, just hoped/trusted that would be enough. No spreadsheets or budgeting, just being disciplined in spending. Early on we thought we were spending too much but didn't know where it was going, so we kept track of spending for a few months and discovered we were spending a lot more than we had realized on take-out food, so we cut back on that. Our self-employment income was somewhat irregular so we used a HELOC to smooth it out; somewhat risky but we trusted our ability to earn more $. During the pandemic our income dropped and we just didn't have enough money to make the full 20% retirement contributions for 2 years, but our retirement accounts had done well to that point so it was ok. We're planning to 80-90% retire at the end of this year at age 69. At that point I am planning to keep track of our spending for awhile, but for the opposite reason as before: to make sure we're not spending/giving too little! I've witnessed that it can be hard to transition to spending more, especially when you're drawing down your assets instead of building them (no pensions, only SS will be coming in at age 70).
It seems to me that the first question does not specifically test compound interest, only simple interest. But compounding is an important concept for saving for retirement, especially for young people because it confers the greatest benefits over long periods of time. So I would change the first question to: Suppose you had $100 in a savings account and the annualinterest rate was 2% paid yearly. After 5 years, how much do you think you would have in the account if you left the money to grow? And I would change the answers to: more than, exactly equal to, or less than $110. (not $102)
The issue of obtaining sufficient value for health care dollars spent is real and hugely important, but I don't think the new generation of anticoagulants (popularly but incorrectly called blood thinners) is an example of poor value. I treated patients with warfarin when it was the only option, so I am familiar with the difficulties involved in doing it safely. Also, for 25 years I have been reading summaries of 2,000+ medical malpractice claims yearly for my malpractice prevention newsletter for physicians. In my experience, warfarin generated a hugely disproportionate share of serious injuries and malpractice claims. Those human and economic costs must be considered along with the price of the drug. The processes and systems required to manage warfarin safely for long periods of time are complicated, ongoing, and prone to errors. It requires a conscientious, motivated patient who will obtain regular blood tests to monitor the level of anticoagulation and make adjustments as instructed (which requires more time, additional costs of care beyond the price of the drug, and hassle for the patient not present with the newer anticoagulants), as well as the need to minimize interactions with diet and other drugs -- and still the levels of anticoagulation can vary considerably in any one patient. All anticoagulants are dangerous, but the newer ones are significantly safer than warfarin: the doses are standardized, and the level of anticoagulation is more consistent and does not require monitoring with blood tests. I cannot remember seeing a single malpractice claim involving Eliquis and Xarelto except for the ones inherent to all anticoagulants, mainly stopping and restarting them around procedures and operations that pose a risk of dangerous bleeding. Warfarin can be taken relatively safely with a responsible patient and safe system of care, but the newer drugs are preferable. Xarelto is now available as a generic for less than $100/month.
My wife and I have used WellCare for 3 years, no issues at all, but we use only 3 common drugs, cost to us $0 or $15 for 3-month supply. Premium is only $0.40 per month this year, but going up to $16.80/month for 2025.
Comments
I'm not sure exactly what you mean, but I think it just assumes the taxes are paid from a taxable account without going into detail about which types of income or investments to use. But I may not have examined the output or options closely enough.
Post: Roth Conversion Timing and Amounts to Maximize Benefits
Link to comment from July 20, 2025
I strongly recommend using sophisticated planning software to help analyze your situation. The various considerations, such as IRMAA, interact, and it's impossible to model it accurately on your own. I use Maxifi with its Roth Conversion optimizer, and recommend it. Its default assumptions can be adjusted so you can see what would happen if, e.g., inflation is higher than the default or your investment returns are lower. But the program's default assumptions are very conservative, including that you'll live to the age of 99. Roth conversions are obviously beneficial if your marginal tax rate now for the conversion is lower than you anticipate it will be in retirement (i.e., pure tax arbitrage). But as others have mentioned, Roth conversions are usually advisable even if they move you to a higher tax bracket now. This is because one of the main advantages of Roth conversions is that, when you pay the tax on the conversion out of a taxable account, the conversion in effect moves the amount you paid in tax from your taxable to your Roth account. That reduces the yearly tax drag that would occur if you did not convert and that amount stayed in your taxable account. Over time the tax drag from a taxable investment account has a huge cumulative effect, and you have an unusually long amount of time to benefit greatly from this factor. I suspect that Maxifi will recommend large conversions for you -- other considerations aside, conversions into the 24% bracket will definitely be advisable. The White Coat Investor has a nice article on 10 principles to consider with Roth IRA contributions and Roth IRA conversions. His Principle #4 works out an example of this effect. In his particular example, with a 30-year time horizon (which is less than you have at your current age of 56), it is beneficial to convert now even if your tax rate 30 years from now will be up to 9 percentage points lower than the tax rate on a conversion now. That said, last year I did not convert as much as the large amount that Maxifi recommended. That was because all future planning programs convey a false sense of precision because the future, especially the distant future, is so unknowable. And there are other considerations discussed in the White Coat Investor Article.
Post: Roth Conversion Timing and Amounts to Maximize Benefits
Link to comment from July 19, 2025
thanks Fred, accordingly I would amend my version of the question to: Suppose you had $100 in a savings account, and the annual interest rate was 2% on the balance, paid yearly into the account. After 5 years, how much do you think you would have in the account if you left the money to grow?
Post: I’m Guessing Most HD Readers Will Score 100%
Link to comment from June 1, 2025
Something I've heard people commonly purchase and then regret is expensive exercise equipment. We've bought several that we've gotten great use out of, but the one I'm thinking of was used a few times and never again. We ended up selling it back to the store as used for a lot less.
Post: Stepping In It
Link to comment from June 1, 2025
We followed the Dick Quinn method (and didn't even have to pay him any royalties!). My wife and I decided at the start of our earning lives to save 20% of our income each year in retirement accounts and live off the rest. No financial planning/planner, just hoped/trusted that would be enough. No spreadsheets or budgeting, just being disciplined in spending. Early on we thought we were spending too much but didn't know where it was going, so we kept track of spending for a few months and discovered we were spending a lot more than we had realized on take-out food, so we cut back on that. Our self-employment income was somewhat irregular so we used a HELOC to smooth it out; somewhat risky but we trusted our ability to earn more $. During the pandemic our income dropped and we just didn't have enough money to make the full 20% retirement contributions for 2 years, but our retirement accounts had done well to that point so it was ok. We're planning to 80-90% retire at the end of this year at age 69. At that point I am planning to keep track of our spending for awhile, but for the opposite reason as before: to make sure we're not spending/giving too little! I've witnessed that it can be hard to transition to spending more, especially when you're drawing down your assets instead of building them (no pensions, only SS will be coming in at age 70).
Post: Is it possible to achieve financial well being without a plan or even a spreadsheet?
Link to comment from June 1, 2025
It seems to me that the first question does not specifically test compound interest, only simple interest. But compounding is an important concept for saving for retirement, especially for young people because it confers the greatest benefits over long periods of time. So I would change the first question to: Suppose you had $100 in a savings account and the annual interest rate was 2% paid yearly. After 5 years, how much do you think you would have in the account if you left the money to grow? And I would change the answers to: more than, exactly equal to, or less than $110. (not $102)
Post: I’m Guessing Most HD Readers Will Score 100%
Link to comment from May 31, 2025
The issue of obtaining sufficient value for health care dollars spent is real and hugely important, but I don't think the new generation of anticoagulants (popularly but incorrectly called blood thinners) is an example of poor value. I treated patients with warfarin when it was the only option, so I am familiar with the difficulties involved in doing it safely. Also, for 25 years I have been reading summaries of 2,000+ medical malpractice claims yearly for my malpractice prevention newsletter for physicians. In my experience, warfarin generated a hugely disproportionate share of serious injuries and malpractice claims. Those human and economic costs must be considered along with the price of the drug. The processes and systems required to manage warfarin safely for long periods of time are complicated, ongoing, and prone to errors. It requires a conscientious, motivated patient who will obtain regular blood tests to monitor the level of anticoagulation and make adjustments as instructed (which requires more time, additional costs of care beyond the price of the drug, and hassle for the patient not present with the newer anticoagulants), as well as the need to minimize interactions with diet and other drugs -- and still the levels of anticoagulation can vary considerably in any one patient. All anticoagulants are dangerous, but the newer ones are significantly safer than warfarin: the doses are standardized, and the level of anticoagulation is more consistent and does not require monitoring with blood tests. I cannot remember seeing a single malpractice claim involving Eliquis and Xarelto except for the ones inherent to all anticoagulants, mainly stopping and restarting them around procedures and operations that pose a risk of dangerous bleeding. Warfarin can be taken relatively safely with a responsible patient and safe system of care, but the newer drugs are preferable. Xarelto is now available as a generic for less than $100/month.
Post: Rats!!
Link to comment from March 29, 2025
Disability claims currently account for 11% of Social Security spending, not 1/3. link
Post: Should Social Security benefits be income tax free?
Link to comment from February 1, 2025
My wife and I have used WellCare for 3 years, no issues at all, but we use only 3 common drugs, cost to us $0 or $15 for 3-month supply. Premium is only $0.40 per month this year, but going up to $16.80/month for 2025.
Post: Wellcare for Part D
Link to comment from October 12, 2024
I preface my inexhaustible supply of fascinating stories with: "Stop me if I already told you this one today . . ."
Post: Signs of the Times
Link to comment from July 20, 2024