Kelley Rating (one asterisk = lowest, five asterisks = highest):
- Ease of navigation, design of interface and learning curve *****
- Instructional documentation and help system ***
- Carries out the goal of the product as advertised ******
- Overall usefulness *****
The Roth 2010 Conversion Package from Advisors Trusted Advisor (ATA) is designed to help you cope with the new opportunities and challenges presented by the rules affecting IRA conversions. The package addresses the opportunities and techniques of conversions, the calculation of the tax and economic effects of conversions, and the goal of helping your clients make knowledgeable and effective decisions about Roth conversions.
When the $100,000 modified adjusted gross income (MAGI) ceiling on an individual’s ability to convert from a conventional IRA to a Roth IRA is eliminated for years after 2009, the number of IRAs eligible for conversion to Roths will greatly expand. The scope of Roths in 2010 is further enhanced by the increase in the MAGI limits to $167,000 for joint filers and $105,000 for single filers. Conversions are made even more complex by the choice available in 2010 to divide the income tax on a conversion between 2011 and 2012 and by the ability to fund a Roth in 2009 by a withdrawal from a conventional IRA.
The Package, available via an online “portal,” is the result of a partnership between ATA, Convergent Retirement Plan Solutions and Archimedes Systems. It includes educational resources on the Roth rule changes (continually updated) and the online Roth Conversion Optimizer tool (which may be licensed separately). Also included are Roth conversion business-building strategies and tactics (which include an audio interview on conversion strategies), Roth-related articles, materials on staging a Roth workshop, help on marketing and public relations, and other planning materials. The educational material addresses issues such as basis recovery, tax diversification, exemption from required minimum distributions (RMDs) and related estate tax planning issues.
The Roth 2010 Conversion Package includes PowerPoint presentations on the impact of RMD avoidance, optimal Roth conversion strategies and an analysis of who is a good candidate for conversion.
The Package stresses that conversion is not an all-or-nothing proposition. It addresses the analysis of partial conversions, that is to say, what is the appropriate level of conversion.
There are a lot of moving parts to the conversion decision, including economic and tax calculations. The Roth Conversion Optimizer tool addresses the variables of future tax rate assumptions, projected consumption and the source for payment of conversion taxes. This optimizer computes the projected net benefit of a Roth conversion, including calculation of the consequences of a deferred start date, estimation of future income tax, the effect of desired withdrawals and first generation/second generation comparisons.
Separately, RothRetirement.com by Convergent Retirement Plan Solutions provides answers to frequently asked questions and a series of brief videos explaining traditional IRAs, Roth IRAs, and the possibility of converting from a traditional to a Roth, especially during 2010.
For a background on Roth conversion calculations, Categorizing Roth IRA Web-Based Free Calculators by Dr. Gobind Daryanani is an exhaustive discussion of the calculations associated with traditional and Roth IRAs, including links to other web sites that do such calculations. His article, An Evaluation of Vanguard’s Roth IRA Conversion Calculator, discusses the factors affecting the conversion decision with an example worksheet and basic calculations.
Other Products and Information
For information on web-based programs and software that address basic computations related to Roth IRAs see:
Brentmark Software Roth IRA, which aims “to provide technical and planning information on Roth IRAs to practitioners and consumers.” It has a compendium of articles about traditional and Roth IRAs, including links to other sites. It presents a variety of pension related calculators. CalcTools.com provides online calculations using the Brentmark Roth Conversion Calculator.
Forbes.com discusses and analyzes a number of online Roth IRA calculators available from various financial firms and insurance companies. It points out weaknesses and discrepancies in the online calculators.
Retirement Plan Analyzer (formerly the Pension & Roth IRA Analyzer) from Leimberg Associates, Inc. evaluates pension/profit sharing plan distribution strategies, including minimum distribution rules with comparative graphs and reports.
How Does It Work?
The Roth Conversion Optimizer opens with the Your Inputs screen requesting tax and personal information including the date, marital status, year projected for conversion, projected taxable income in the year of conversion and retirement assets available for possible conversion (balance and basis) for both spouses. The birth date for next generation calculations is entered as the birth date of the oldest member of that generation. Clicking a top tab moves you to the Results screen.
The Results screen displays an area on the left side of the screen with sliders to quantify the future rate of return, consumption in the start year, projected future tax rate, number of years of consumption, outside assets available to pay the conversion tax and projected monthly consumption withdrawals for the first generation. This area also includes sliders to enter the future tax rate and monthly consumption withdrawals projected for the next generation. Additional inputs may be added. You also may view a screen that summarizes your assumptions by clicking on the View Assumptions button at the bottom of the Results screen.
Selecting Additional Inputs on the Results screen allows you to add inputs for any additional state level taxes for the year of conversion, earnings on the Outside Assets account, and an inflation adjustment for traditional IRA, Roth or outside assets. The earnings on the Outside Assets account are assumed to be taxed, annually, at the user-defined Future Tax Rate applicable to taxable, traditional IRA distributions. Users may override this default by selecting an alternative Effective Tax Rate for Outside Assets to be used in determining the applicable annual tax to be applied to projected taxable earnings on the Outside Assets account.
The right side of the Results screen displays a bar graph of the projected net benefit of the Roth IRA conversion, that is to say, the hypothetical benefit potentially derived from converting various levels of existing traditional IRA assets to a Roth IRA, based in the complex interplay of the assumptions being modeled. The Results function models the percentage of eligible assets converted (in steps of 10 percent) on the horizontal axis of the graph, against the net benefits amount on the vertical axis. Another graph plots the value of withdrawals for the first generation, next generation and residual amount (on the vertical axis) against the percentage of eligible assets withdrawn (on the horizontal axis).
What Reports Are Furnished?
A PDF Report may be generated from the Results screen. The Report includes text and graphs reflecting the projected net benefit of a conversion for the scenario proposed, the summary of input variables, the potential impact on income and residual assets of full or partial conversion for both first and second generations and the assumptions used in the Roth Conversion Optimizer.
What About Help and Support?
Each screen of the Roth Conversion Optimizer includes a button to view a tutorial on the operation of that screen, with the Results screen including tutorials on both inputs and reports. The Roth 2010 Conversion Package includes audio reports and webinars on conversions.
Where Do You Get This Product?
The price for 12 months of access to the Roth 2010 Conversion Package is $1,495 for one to five users. Access for 12 months to the Roth Conversion Optimizer may be purchased separately for one user for $595.
This service and online optimizer is available from:
Advisors Trusted Advisor
Order Line Phone: 888-580-9473
Email: [email protected]
Website: http://www.advisorstrustedadvisor.com/
Bottom Line
The Roth 2010 Conversion Package provides you with all the tools you will need to communicate the intricacies of conversion to clients and prospects and conduct effective client seminars. The Roth Conversion Optimizer provides a quick, visual representation of a client’s financial picture as it relates to conversion planning. It communicates concepts and approximate results in a meaningful manner.
Trusts & Estates magazine is pleased to present the monthly Technology Review by Donald H. Kelley—a respected connoisseur of the software and Internet resources wealth management advisors use to further their practices.
Kelley is a lawyer living in Highlands Ranch, Colo. and is of counsel to the law firm of Kelley, Scritsmier & Byrne, P.C. of North Platte, Neb. He is the co-author of the Intuitive Estate Planner Software, (Thomson – West 2004). He has served on the governing boards of the American Bar Association Real Property Probate and Trust Section and the American College of Tax Counsel. He is a past regent and past chair of the Committee on Technology in the Practice of the American College of Trust and Estate Counsel.
Trusts & Estates has asked Kelley to provide his unvarnished opinions on the tech resources available in the practice today. His columns are edited for readability only. Send feedback and suggestions for articles directly to him at [email protected].