Tax Guide Clarifications and Questions

Comments and questions on “The Individual Investor’s Guide to Personal Tax Planning 2015,” in the December 2015 AAII Journal.

Where on AAII.com is the fillable tax forecasting PDF worksheet mentioned in the tax planning article?
—Mary Reding from Minnesota

Charles Rotblut, CFA, responds:
Near the top of this article is a link on the left-hand side that says, “Estimate Your Taxes on AAII.com.”

An important detail (if you do not itemize deductions) is that the standard deduction for a married couple filing jointly where are both over 65 at the end of 2015 is enhanced by an age-related amount of $1,250 for each person, so the total standard deduction is $15,100 (12,600 + 1,250 + 1,250). See IRS Publication 17 for full details (note that it only has 2014 amounts at this time).
—Richard Shaw from Arizona

If a person is past age 70½ and converts a portion of their traditional IRA to a Roth IRA, can the amount being converted also be counted as part of the required minimum distribution (RMD) for the year in which the conversion occurs?
—AAII Member

Barbara Weltman at J.K. Lasser responds:
An RMD is an RMD. The tax on it cannot be avoided (other than using the direct-transfer-to-charity option). If the person wants to make a Roth IRA conversion, it must be done from funds that are not part of the RMD (i.e., an additional taxable amount results from the conversion).

Debating an Optimal Glide Path

Comment posted to “Exploring the Optimal Equity Allocation Path for Retirees,” by David Blanchett, in the December 2015 AAII Journal.

It seems that the conclusions reached are largely driven by current market conditions. A more normal yield of 5% and CAPE of 17 would indicate an optimal increasing glide path. This analysis would imply that no optimal path exists for every market situation. I concur. When individual risk tolerance is included, the conclusion is even more evident. There is no optimal glide path for every market situation and/or every retiree. This is a very interesting paper and one that makes one think about views that have been formed based on historical patterns that are not in evidence today.
— Robert Greving from Tennessee

It is impossible to predict market returns monthly, let alone yearly, far into the future. Whatever glide path is chosen has a good chance of turning out to be the wrong one.
— George Pettiford from Illinois