I never hear any advisors or podcast folks talk about present worth analysis for investment and tax decisions. Do any of you do PW calculations on your own?
The typical line is "rates are lower now than they will be in the future, so do Roth conversions and rip the band aid off!"
I ran some present worth of taxes on my Roth situation, and was a bit alarmed that the present worth of the taxes can be higher (depending on the discount rate used) with the Roth conversion than the do-nothing case.
I think this is because I see a Roth conversion as an "investment" in taxes (pay now to get a benefit in the future), and the return on investment comes over the years that you are taking RMDs, i.e. could be 15-20 years of "benefit", and, the higher benefit is way down the road when RMDs get bigger.
So to stop rambling and ask, does anyone do present worth calculations of taxes and investment returns when considering Roth conversions?
Thanks
The typical line is "rates are lower now than they will be in the future, so do Roth conversions and rip the band aid off!"
I ran some present worth of taxes on my Roth situation, and was a bit alarmed that the present worth of the taxes can be higher (depending on the discount rate used) with the Roth conversion than the do-nothing case.
I think this is because I see a Roth conversion as an "investment" in taxes (pay now to get a benefit in the future), and the return on investment comes over the years that you are taking RMDs, i.e. could be 15-20 years of "benefit", and, the higher benefit is way down the road when RMDs get bigger.
So to stop rambling and ask, does anyone do present worth calculations of taxes and investment returns when considering Roth conversions?
Thanks
Statistics: Posted by R7000 — Sat Aug 31, 2024 7:15 pm