Roth Conversion is a term for the process of shifting money from a pre-tax tax-deferred account to a post-tax tax-deferred account. PlannerPlus members can model Roth Conversion transactions in the tool.
Look for conversion opportunities.
Use the Insights > Tax charts to look for tax planning opportunities. The bottom graph on the page shows projections for how tax brackets are filled over time. If there are years that show gaps in tax liabilities, you may have a planning window.
Step 1: Go to My Plan > Money Flows
Step 2: Open the Roth Conversions section
Step 3: Press on "Model a Roth Conversion +"
Step 4: Select the account to convert
Step 5: Enter the amount to convert
Step 6: Enter the age the account owner will be at the time of conversion
Step 7: Enter an optimistic and pessimistic rate of return for the (new) Roth conversion account. The Roth Conversion function will create a "Roth Conversion" account. Make sure to keep the growth rates the same as your current Roth account.
Step 8: Press Save
Step 9: Repeat steps 3–8 to add additional conversions
Watch the charts on the right of the page update in real-time.
I. Click on "Taxes" to see tax liability projections.
II. Notice how the Estimated Lifetime Income Tax changes with each transaction
III. Notice how the columns on the chart change with each transaction
Analyze The Impact
Use the Insights > Tax charts to see how tax projections have changed.
Use the Insights > Savings charts to view ROTH Conversion Withdrawals and RMD withdrawals.
Convert to a current Roth account using a Transfer
If you would prefer to model the conversion into your current Roth account, enter the Roth Conversion as a Transfer. When you do this the converted funds will be held in the account you select. Bear in mind that while the Explorer ignores conversions entered in Money Flows when finding an optimized plan, a Transfer will be recognized by the Explorer when running the algorithm.