In a previous article, I couldn’t tackle all the issues associated with this complicated conversion dilemma, nor can I completely finish them here. However, I’d like to propose a number of additional issues worth considering, based on feedback to my original article, in the hope that it, as well as other discussions, will prompt advisors to step back and at least re-think their opinions on the Roth very carefully.
From my perspective, most recommendations for conversion are not completely and factually accurate. Therefore, I offer these additional thoughts that should also be taken into consideration when considering a Roth conversion for a client:
1. Know that Roth conversion calculators can provide inaccurate analysis
2. Compare apples to apples when doing the analysis
3. Realize required minimum distributions could be viewed as a different type of partial conversion
Let’s look at these more closely:
One assumption used in some online Roth conversion calculators is that outside assets are available for a 100% conversion in order to pay the tax bill. My issue with this comparison is that instead of only comparing the two assets of discussion (IRA money converted to Roth IRA money), some calculators incorrectly slant the presentation by assuming that tax dollars owed for the conversion are paid with outside assets, instead of assets from within the IRA. This slants the presentation unless both sides of the future projected comparison are balanced. If one assumes outside assets will be used to pay…
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Andy graduated from the University of Alabama-Birmingham with a B.S. degree in Accounting. He is a Registered Investment Advisor Representative of Money Management Services, Inc and holds the designations of CPA (Certified Public Accountant), AIF® (Accredited Investment Fiduciary), CTS™ (Certified Tax Specialist), and WMS (Wealth Management Specialist). As an advisor, Andrew specializes in comprehensive financial planning, estate tax planning, personal taxation planning, retirement income distribution planning, wealth accumulation, personalized portfolio management, and fiduciary investment management services.