Can I model Roth Conversions?

You can model Roth Conversions using our new Optimize feature.

Navigate to Roth Conversions

First, create a plan, then when you are ready to model your Roth conversion follow these steps:

1. Click Optimize towards the top of your plan above the graph.
2. Choose Roth Conversions from the dropdown menu.
3. You will be prompted to set up your tax strategy. To enable a Roth conversion plan, first set up a tax strategy. You can choose from three options:
   • New Strategy: Build your own tax strategy with specific targets and constraints.
   • Common Strategy: Choose a pre-configured retirement tax planning strategy.
   • Optimize: Test multiple strategies and estimate the best one for your goals.

Walk Through: Optimize

First, you need to define your objective – what would you like to optimize for?

• Lower Lifetime Taxes: Cumulative tax liability over the life of your plan.
• Higher Net Legacy: Estate value after taxes, costs, and debt.
• Higher Net Worth: Total assets minus liabilities at end of plan.
• Lower Effective Tax Rate: Average effective tax rate across your plan.
• Lower RMDs: Required Minimum Distributions (RMDs) are minimum amounts that a retirement account owner must withdraw annually starting at a specific age.
• Reduce IRMAA Surcharges: Income-Related Monthly Adjustment Amount (IRMAA) is a Medicare surcharge for high-income earners.

Launch Your Search

Next, choose how thoroughly you want to search:

• Quick: Get fast results based on typical strategies.
• Standard: Explore common brackets, modules, and constraints.
• Deep: Search deeply for the best performing strategy options.
• Extreme: Test the widest range of configurations using a longer run time.

You can also configure an advanced option called Worker Threads, which lets you choose a number of parallel threads for the search.

ProjectionLab will explore a large space of possible strategies using a beam search, progressively narrowing down the best candidates. Deeper searches explore more of the strategy space, but none can guarantee an absolutely optimal result.

Review Your Strategy Recap

After your search completes, a strategy recap will appear with the following details:

• Total amount saved in taxes vs. no strategy.
• Total number of strategies evaluated.
• The winning strategy (for example: “Convert to 12% – convert to Roth up to the 12% bracket ceiling”), with the option to Apply Strategy or Explore Alternatives.
• A graph showing the amount saved in taxes over your lifetime. Click Taxes to switch the graph view to other metrics: Effective Tax Rate, Net Worth, Net Legacy, Taxable Income, Withdrawals, RMDs, IRMAA, Roth Conversions, Gain Harvesting, and Withdrawal Shielding.
• Toggle the graph between Comparison (stacked diamond icon) and Strategy Impact (overlapping square icons) views.

As you scroll down, you can see a detailed breakdown of increases or no change to Net Legacy, Net Worth, RMDs, Effective Tax Rate, and IRMAA.