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.
Dr. Jim DiLellio is a professor of decision sciences at the Pepperdine Graziadio Business School. He holds a PhD in Applied Mathematics from Northwestern University an MBA from Pepperdine, and a BS in Applied Mathematics from the University of Akron.His current research covers portfolio management, tax-efficient retirement planning, commodity price modeling, insurance claims automation, and the analysis of investment strategies. Dr. DiLellio has published papers in Energy Economics, Decision Sciences, Journal of Economics and Finance, Financial Services Review, Financial Planning Review, and the Journal of Investing.
