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Why doesn't the Roth Conversion Explorer suggest an optimization plan?
Why doesn't the Roth Conversion Explorer suggest an optimization plan?

This article documents common solutions for Roth Conversion issues.

Nancy Gates avatar
Written by Nancy Gates
Updated over a week ago

Roth Conversion Explorer Error Message

If you received an error message, it does not mean there is a problem with your plan. The beta, or test, version of the Explorer does not accommodate every scenario and is not compatible with all of the NewRetirement withdrawal strategies. It also could mean that your results took too long to process. The NewRetirement team will continue to release new versions to optimize speed and expand functionality. Please look for notifications of Roth Conversion Explorer updates and try again as the tool evolves.

If you received the message, "Optimizer failed to improve forecast" here are a few common reasons this could happen:

1. Your current Roth Conversion plan has higher growth assumptions for the converted accounts.

The Explorer assumes that the converted Roth Account will grow at the same rate as the account that it was converted from. Check My Plan > Accounts and Assets to see if the Roth Conversions that you modeled in your plan are set to a lower amount than your current Roth Account.

2. Your 401k account type is "Current" and you are retiring early.

The Explorer assumes that current 401k's may not be converted until you are eligible to withdraw money without a penalty when you have income linked contributions directed to the 401k.

3. The expenses and withdrawals modeled in your plan are already triggering a tax liability, adding Roth Conversions on top of those withdrawals does not project a larger estate.

The Explorer generates a plan that projects a larger estate value projection at your goal age(s). Theoretically, this occurs when you convert money early in your plan and allow it to grow tax-free for a long period of time. Roth Conversions may not increase your estate value at goal age due to the interactivity with other elements in your plan.

4. You may not have enough taxable savings to cover the tax liability for a Roth Conversion.

The Explorer will not recommend a Roth Conversion if you have insufficient funds in your taxable accounts to cover the liability.

5. Your after-tax accounts have a higher growth rate than your tax-deferred accounts.

The Explorer assumes that the converted account will grow at the same rate as the account it was converted from. If your After-Tax accounts are growing at a higher rate, conversions may not be advantageous. This is due to the opportunity cost of using money projected to grow at a high rate to pay conversion taxes on an account projected to grow at a lower rate.

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