Edit Planning Policy

Consider creditor protection before moving 401(k) money to a Roth IRA

Allow 401(k)-to-Roth-IRA conversions is a household instruction, separate from Roth conversion posture. Choose No when you want to exclude these transfers, even if a conversion strategy projects a financial benefit. Yes permits the model to consider them; it is not a recommendation to convert or confirmation that a real transfer is available.

Most private-employer 401(k) plans are covered by ERISA, a federal law that generally provides strong protection against ordinary creditors and lawsuit judgments while assets remain in the plan. Transferring money to a Roth IRA can change that protection. Outside bankruptcy, IRA protection depends on applicable state law. Bankruptcy protection follows separate rules, so a transfer does not necessarily eliminate all protection.

You might choose No because keeping money in the employer plan matters more to you than potential tax benefits. You might choose Yes after reviewing the actual protections, costs, investment choices, access rules, and tax tradeoffs. Confirm your particular plan with its benefits office and seek qualified advice about the applicable law. ERISA protection has exceptions, including qualifying divorce and support orders, federal tax collection, and certain other government claims. YARCalc does not verify legal protection or calculate its financial value.

No excludes 401(k)-to-Roth-IRA transfers in fixed, tax-bracket, saved, and combined strategies. It does not disable conversions from an existing Traditional IRA, ordinary retirement withdrawals, required distributions, or tax-funding withdrawals. A saved conversion still records its chosen accounts, but an excluded transfer produces no conversion or conversion tax. Saving Yes makes it eligible again under its existing timing and limits.

Conversions within an employer plan are a separate consideration and require confirmation that the actual plan permits them. Merely adding a Roth 401(k) account does not establish that both accounts belong to the same plan or that a conversion is available. To compare different transfer permissions, use separate What-ifs; candidates in one comparison share the same permission. After saving, rerun the affected analysis and inspect conversions by account in Projection.

Set one estate goal for the whole comparison

Choose No estate target to compare wealth preservation without a specific goal, Leave a legacy target to prioritize an amount, or Spend down to emphasize lifetime use. Enter a legacy amount in nominal end-of-plan dollars, accounting for the purchasing power you want it to represent. This goal measures results; it does not automatically change spending or gifting.

Compare Strategies uses this same goal for every candidate. With no target, balances reward wealth preservation; a legacy target caps that reward once met; spend down rewards less remaining wealth. Plans without shortfalls rank first.

Planning Policy states how the plan should be judged

These settings describe the household’s planning standards and preferences. They help YARCalc interpret reserves, allocation changes, stochastic results, legacy tradeoffs, Roth analysis, and reminders. They do not place trades, move cash, file taxes, or change legal ownership.

Leave a policy disabled when it is not part of the decision. Enabling a policy tells the related analysis to evaluate it; it is not evidence that the policy is automatically appropriate.

Cash reserve and fixed-income glide settings answer different questions

Turning off the cash reserve policy also turns off its deterministic readiness target. A saved target amount or number of years remains available for later use, but it does not create a reserve blocker while the policy is disabled. Your current cash coverage can still be reviewed separately.

Individual-bond principal remains unavailable for reserve funding until maturity. Only accessible money in an otherwise eligible account can build the reserve. A large bond balance can therefore coexist with an unmet cash target or a spending shortfall.

Funding cash from your own Traditional IRA uses the same owner-wide after-tax basis calculation as other distributions. Its taxable portion can incur the 10% additional tax before age 59½. Review Projection for both the reserve funding and the taxes needed to support it.

Choose Fixed dollar amount for a constant cash target, Percent of annual spending for a target that follows modeled spending, or Percent with a dollar minimum to use the larger of both. Enter 200% for 2× annual spending. Dated goals and periodic purchases do not increase this recurring-spending target. Use liquid assets that are genuinely available rather than treating every fixed-income holding as immediate cash.

The fixed-income glide path describes a gradual change from Starting safe percentage to Target safe percentage between the selected calendar years. Maximum annual move limits the modeled pace. Confirm that the start year is no later than the end year and that the percentages express the intended fixed-income or safe allocation rather than the stock allocation.

Modeled reserve funding transfers existing savings into cash. The modeled glide path moves balances within the same tax-treatment group. These transfers preserve the total account balance; they do not add new savings. Cash-reserve funding from a tax-deferred account can create taxable income, and a brokerage sale can realize gains or losses. Realized losses enter modeled tax netting and capital-loss carryforwards.

Risk thresholds and preferences change interpretation, not market outcomes

Stochastic success target is the policy threshold used when describing whether a simulated result meets the household standard. Maximum drawdown tolerance expresses how much modeled decline the household is willing to rely on. A result can meet one threshold and fail the other.

Legacy preference and Roth conversion posture guide comparisons and annual suggestions. They cannot determine estate-law consequences, identify the best tax bracket with certainty, or replace current tax advice. Tax filing and estimated-tax reminder switches control reminders, not the underlying obligation.

Review recommendations against the policy that produced them

After saving, inspect Test Market Uncertainty, Compare Strategies, and the Annual Action Plan for references to the changed standard. If a recommendation changes, verify that the policy—not an unrelated plan edit—caused the difference.

Revisit policy after a meaningful change in liquidity needs, risk capacity, legacy goals, or tax strategy. Do not revise it merely to make a warning disappear; a policy is useful only when it represents the household’s actual decision rule.