The decision to save in a Roth account or convert from a traditional IRA or 401(k) to Roth savings is not an easy one. There are many criteria to consider, but ultimately any decision on a loss strategy comes down to what suits you and your goals, your assumptions about the future, your current and future income and investments.
There are rules of thumb for making decisions about your Roth strategy, but here we want to show you how you can use the Roth Conversion Explorer (a tool within the NewRetirement Planner) to make more informed and personalized decisions. increase.
Get a multi-year Roth conversion strategy with the Roth Conversion Explorer
NewRetirement Planner is a system that puts the power of financial planning in your hands. There is a very unique tool called Roth Conversion Explorer, designed to help you identify the amount and timing of future Roth conversions.
Explorer is very powerful and runs a “greedy” algorithm to determine a Roth conversion strategy that meets the goals and parameters you define in your tool and your overall financial plan.
Here are seven tips for getting the most out of this tool.
Make sure the scenario you are using (you can run explorer in any scenario) is accurate and up to date. If your planning data is not accurate, you will not get good results. Please pay particular attention to the following:
- Retirement date and how the amount and source of income change over time
- Assumptions about inflation, return on investment, and longevity
- tax rate. Make sure you understand the future tax rates you are using. this is,[マイ プラン]>[仮定]>[税金]can be set with .
- The withdrawal strategy you have active in your plan can affect the amount you withdraw from your savings in the future, which in turn can affect your income, which in turn can affect your conversions
First, know that the Roth Conversion Explorer ignores the Roth conversion strategy modeled in the NewRetirement Plan.
Then select what you want to model.
What is your conversion goal? Would you like to find a way to:
- Maximize your wealth with longevity
- Maximize wealth while staying within a certain tax threshold
- Minimize lifetime tax liability – This long-awaited feature is almost ready for release. I think it will come out in the first half of April.It suggests conversions to ensure you pay less tax
How do you cover the taxes payable for the conversion? You have the option to tell the tool whether the tax burden of the proposed Roth conversion can be paid with the converted funds.
- Answering yes may result in additional taxes and may not always be the best option. However, the tool is less constrained and may have a longer life.
- If you say no, we may stop proposing conversions for more tax-friendly options and tools if you don’t have enough money in your taxable savings, checking, or investment accounts in a given year. You are choosing something expensive.
- If you say no, you will also be asked if you want to protect a minimum amount of taxable savings. If you want to save an emergency fund of after-tax money, you can do this.
We strongly recommend that you use the parameters on the left side of the result to interact with the explorer. Use the different criteria provided and see how they affect your suggested conversions.
You may get completely different results when you click. But most importantly, we can learn a lot through this exploration.
Note: Be sure to evaluate your optimistic, average, and pessimistic predictions about conversions. Although the future cannot be predicted, it is important to understand the various future possibilities and assess how your conversion strategy will be affected by interest rates, returns and inflation. Roth Conversion Explorer provides toggles for optimistic, pessimistic, and average forecasts.
You can also adjust tax coverage, lifespan, and other criteria for the scenarios listed in Tip 1 above, and rerun the explorer to see how these criteria affect your results.
The explorer shows a very rich set of results worth digging into. you can see:
- You can see the number of conversions and the lifetime impact on your property and taxes in our summary of proposed conversions.
Also get the following charts and data tables:
Toggle between your current plan and the plan with the proposed conversion to see:
- Yearly conversions – the year in which they are expected to occur and their value
- Forecast Roth, pre-tax, and traditional savings account balance trends
Additionally, you can examine the following comparisons:
- Summary of projected annual effective tax rate and lifetime effective tax rate with or without proposed conversion
- A summary of the amount of taxes you plan to pay each year and your lifetime
- IRMAA charges apply with or without conversion.
- Required minimum distribution (RMD) with and without conversions
This version of the tool will not help you evaluate all possible factors in your Roth conversion strategy.The higher income that Roth conversion triggers can trigger higher costs.
Examples of costs that may rise with increasing income include:
Ilmer: The IRMAA fee is a Medicare surcharge for high-income earners. Roth Conversion Explorer shows IRMAA costs with and without conversion, but it is not yet possible to plan conversions to avoid these costs. Note that Explorer indirectly considers IRMAA when trying to optimize for higher real estate values (of course, paying IRMAA negatively impacts savings).
AMAs: If you are insured through the Affordable Care Act, your increased income could result in the loss of valuable medical subsidies. Planner does not currently model ACA grants, so they are not taken into account by Explorer.
College costs: Be careful if you’re hoping to cover college costs. Higher conversion income may mean that you are eligible for less assistance.
You may not want to do conversions in the years covered by these costs.
Depending on the situation, the Roth Conversion Explorer may recommend 0 to 10 or more conversions.
The tool currently cannot apply the suggested transformation directly to one of your scenarios. And we recognize that entering a large number of conversions one by one is tedious.
However, it may be important to model the Roth transformation under consideration and stress test the plan (for example, by switching to pessimistic assumptions). You can use the suggested conversions table within the explorer to replace suggested conversions with plans.
It is important to remember that the proposed loss conversion strategy is based on the details of your current plans and your personal and financial circumstances may change in the future. It’s important to check Planner regularly to see if any changes have impacted your conversion plans. NewRetirement actively updates Planner’s tax rules.
Understanding future Roth conversions and what to convert and when to convert is a hot topic and a great way to pay less taxes for the rest of your life. I have a question for Roth. If you’re interested in the Roth strategy, here are some additional methods to try.
If you’re still accumulating wealth, you may be asking yourself whether you should keep it in your Roth account, traditional savings, or both.
There is no one right answer, but there may be a better answer for you.
NewRetirement Planner lets you run “what if” scenarios to help you decide how to save. You can apply future contributions to ross in one scenario and future contributions to traditional savings in another, and do full scenario comparisons to assess future wealth, income, tax liability, etc. .
Planner allows you to try out individual Roth transformations in any future year and assess the financial impact across different planning metrics.
NewRetirement Planner is a forward-looking forecasting tool. I’m not sure about this year’s conversion.
If you would like to know how much you will need to convert to ross in 2023, we encourage you to try our 2023 ross conversion calculator to see all of the various tax implications of this year’s ross conversion, including IRMAA. increase.
go to —> new retirement To use the rich Roth features that are part of the all-inclusive Planner
–> Here is the calculator for 2023: