A sophisticated tool for evaluating Roth IRA conversions
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 IRA Conversion Evaluator software provides detailed guidance for converting a traditional IRA to a Roth IRA. It gives retirement-planning practitioners the ability to compute and compare a number of conversion options based on projected rates of return and projected tax rates at the time of withdrawal of funds from an IRA. This program provides sophisticated Roth IRA analysis software to assist the professional in assessing the optimal Roth IRA conversion scenario for clients.
The Roth IRA Conversion Evaluator software is part of the Roth IRA Conversion Expert. The Expert addresses the expansion of the Roth IRA due to the repeal of the $100,000 modified adjusted gross income limitation in 2010. It also addresses the recognition of income from 2010 conversions in 2011 and 2012.
The Roth IRA Conversion Expert uses written materials and a client presentation to educate the practitioner on the mechanics of conversion and the income and estate considerations that affect conversion. It also discusses the influence of income tax brackets on conversions.
The Roth IRA Conversion Expert includes explanations of Roth IRA conversion planning basics, conversion benefit information, reasons to convert and guidance on the issues encountered during conversion. Also included are practice management materials consisting of a marketing letter, engagement letter, conversion checklist and educational materials for clients.
The CCH brochure describes the Roth IRA Conversion Expertwith example screens. The expert is comprised of three sections: a client communication and educational component; a professional practice management component; and a mathematical analysis/conversion analyzer component (the Roth IRA Conversion Evaluator).
The Roth IRA Conversion Evaluator provides calculations illustrating up to five conversion options, and a “do-nothing” option per client scenario. The evaluator includes retirement asset worksheets, income tax and cash flow worksheets, variance and step analysis summaries and net-to-family comparison charts. The included Tax Rate Evaluator dialog lets you compare income tax and deduction information before and after conversion and computes the actual incremental effective tax rate for each option.
The Roth IRA Conversion Evaluator was developed by CCH in association with Robert S. Keebler and Stephen J. Bigge. Robert S. Keebler presents a video on strategies and tactics as part of the package.
Other Products and Information
The Roth 2010 Conversion Package (discussed in “Roth Conversion 2010,” Trusts & Estates Technology Review electronic newsletter, December 2009) addresses client communication of the opportunities and techniques available from conversions. The package also calculates the tax and economic effects of conversions after 2009.
Brentmark Software Roth IRA 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.
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 well-designed Roth IRA Conversion Evaluator screen has a ribbon at the top for selection of file operations and preferences. Convenient navigation is provided by a series of tabs below the ribbon. The tabs open dialogs and reports for the Initial Assumptions, Tax Rate Evaluator and Report, Summary, Charts and the amounts received by each beneficiary for each option. You can create new clients and new scenarios for an open client file.
At the Assumptions tab you enter data for:
General: The IRA owner’s and spouse’s age, assumed age at death and beneficiary ages.
Assets: The traditional IRA balance, non-deductible IRA contributions, Roth IRA balance and combined yield and growth rate. You may enter the taxable account balance, cost basis, yield rate, growth rate, annual asset turnover percentage and whether the yield is distributed, as well as similar information for the tax-exempt account balance.
Income and Cash Flow: The client’s other (non-IRA) income. You may postulate an annual increase or enter detailed income amounts for prescribed yearly ranges and make the same choices for after-tax cash flow needs. You may select whether to withdraw from the taxable account first.
Tax: The incremental effective ordinary income and capital gains rates, marginal estate tax rate and ordinary income rate upon IRA liquidation for the client and spouse. You may enter the basic ordinary income and capital gain rates using a basic annual increase assumption or project them for future ranges of years.
Roth IRA Conversion: The conversion amount, number of conversions and the incremental income tax rate on conversion. On the Assumptions screen you are permitted to create up to five different additional options (numbered two through six, with no conversion treated as option one). You may select whether to divide the income from conversion between 2011 and 2012 or confine it to 2010. You may also select whether to pay the income tax on conversion with Roth IRA funds only.
The program allows you to calculate the “Incremental Income Tax Rate on Roth IRA Conversions” that is necessary for accurate computation of the cost of conversion for each option. The Tax Rate Evaluator Report shows you the income tax calculation for each option, the marginal income tax rate, the effective income tax rate and the incremental effective income tax rate. It automatically carries over to the Tax Rate Evaluator screen any conversion amounts previously entered on the Assumptions tab. After computing the applicable tax rates, the evaluator posts the results back to the Assumptions tab when the “Copy Roth IRA Conversion Amount and Incremental Effectives Rates to Assumptions Tab” button is pressed.
The results displayed include a Variance and step by step Analysis by percentage and dollar amount for each option at the Summary tab. The Chart tab displays Net-to-Family bar charts in 10-year increments for each option entered.
The program exports the data entered and the results for each of the conversion options directly to Excel.
What Reports Are Furnished?
The Preferences dialog box allows you to enter what you want included on the cover pages of the scenarios for your client report. You may also create a footer for the printed client reports.
Reports may be printed of the current tab being reviewed or of the entire scenario. The Print Preview facility enables you to select the Cover Page, any of the Assumptions and Option tabs and a range of bar charts for printing as a group.
What About Help and Support?
The help available from within the program includes a tutorial providing a comprehensive explanation of the required data entry and operational features of the Roth IRA Conversion Evaluator. A Quick Start Guide in PDF format clearly explains the installation and operation of the program. The program does not have context sensitive help screens.
CCH maintains a Roth IRA Conversion Expert Knowledge Base that covers information on the installation and operation of the Roth IRA Conversion Evaluator. The Knowledge Base includes an explanation of the significance of various data entries. Customer support includes a chat facility, email support and technical support by phone.
Where Do You Get This Product?
The Roth IRA Conversion Expert is $695 for 1-2 users. The Roth IRA Conversion Evaluator is $595 for 1-2 users.
The Roth IRA Conversion Expert is available from:
Order Line Phone: 888-224-7377
The Roth IRA Conversion Evaluator is a valuable tool for the retirement-planning practitioner. The evaluator provides a comprehensive analysis of conversion options through easy to navigate tabbed screens with unique attention to the incremental tax rate needed for accurate projections. Its reports provide effective tabulated comparisons of alternative approaches to conversion for a given client. The additional materials furnished as part of the Roth IRA Conversion Expert package provide invaluable education and assistance to the practitioner.
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 firstname.lastname@example.org.