The first rule of tax planning has always been simple: defer taxes as long as possible. But a growing body of academic research complicates that advice. Some studies show real benefits to taking early distributions from tax-deferred accounts, while others point to Roth conversions as a way for early-stage retirees to capitalize on temporarily low marginal tax rates. The trouble is, most of this research treats the two strategies in isolation — a simplification that makes the math tractable, but doesn't reflect how retirees actually plan.
In this session, Dr. Jim DiLellio presents a single-period non-linear programming model that breaks down that isolation, analyzing tax-deferred distributions and Roth conversions together rather than separately. The result is a striking finding: thanks largely to the progressive structure of the U.S. income tax system, multiple — very different-looking — decision paths can lead to equivalent after-tax wealth outcomes.
For financial planners, this isn't just an academic curiosity. It's a practical lens for evaluating the FinTech tools already in use, untangling a genuinely complex area of practice, and better managing the longevity and market risks tied to these decisions.
