Roth Projection Tool

Illustrate the impact of multi-year Roth conversions with our Roth Projection Tool.

Our Roth Projection tool empowers advisors to take Roth Conversion planning to the next level. You can now map out a lifetime of tax-smart Roth Conversions and help clients see the impact on their financial future.

Unlike traditional tools and our Roth Explainer that limit projections to a single year, this multi-year projection capability shows the bigger picture—pinpointing the best years and optimal amounts for conversions, maximizing portfolio growth, and revealing total lifetime tax savings. 


Table of Contents:

Enabling and Accessing the Tool

Creating the Roth Projection

Building the Roth Projection
- Screen 1 of 3 - Conversion Amounts and Account Balances
- Screen 2 of 3 - Assumptions for Return, Life Expectancy, Social Security
- Screen 3 of 3 - Assumptions for Spending, Inflation, and Miscellaneous

Interpreting the Roth Projection
- Roth Projection
- Control Panel

Enabling and Accessing the Tool

The Roth Projection Tool is available to those subscribed to a Premium Plan or higher. Users with Firm Admin privileges will first need to enable the tool by navigating to Settings > Security Settings, and toggle on the "Allow Roth Projections" permission setting seen below underneath the Firm Preferences section.

Creating the Roth Projection

Within an individual client household, you'll navigate to the new "Roth Projections" section and click on the "Create Roth Projection" button outlined in blue below. Once created, your Roth Projections for a client household will be listed in this section. Next, click the "View Projection" link to begin building your new Roth Projection. 





A window will pop up where you will title your projection, and indicate filing status, start year, assign client(s) as Tax Payer 1 and Tax Payer 2, and indicate if they are eligible for the additional standard deduction for blind taxpayers. When you're ready to begin building, click on the "Create Roth Projection" button to start entering details.




You will then be prompted to "Start" the three step data entry wizard as seen below.

Building the Roth Projection

Screen 1 of 3:

In the first step, you'll enter the Roth conversion(s) for Client 1 and/or Client 2 (covered below), as well as the following information:

• Taxable Assets - Enter the combined balance of all non-retirement accounts, including both cash and investments)
• Cost Basis of All Taxable Assets - Enter the cost basis of the taxable asset balance. This information is used to determine the tax impact of any taxable account distributions.
• Tax Deferred Assets - Enter the total balance for any tax-deferred assets that are subject to RMDs (Required Minimum Distributions) for Client 1 and Client 2.
• Combined Household Roth Assets - Enter the combined balance for any Roth accounts for Client 1 and Client 2.

To add Roth conversion amounts click on the pencil Icon shown below.


Within the Roth Conversion(s) details for each client, click the "Add Row" button to add a starting year (outlined in green) and ending year (outlined in red) for your series of Roth conversions. In the example below, we are modeling $50,000 Roth conversions starting in 2024, and ending in 2034. You can also add inflation percentage if you want to inflate the conversion amount over multiple years. When changes are made, you will be prompted to "Apply" those changes to the resulting graph showing the conversion amounts over time.

Screen 2 of 3:

Next, assumptions will be made on the portfolio rate of return, tax efficiency of the portfolio, life expectancy, Social Security benefits start year and amount of each client.

• Rate of Return - Return assumption for the portfolio as a whole. Return by account type or for specific accounts is unsupported.
• Portion of returns that are capital gains (optional) - This assumption approximates the tax efficiency of the investments within the taxable assets account. The higher the portion of returns that are capital gains, the more tax efficient and less tax drag distributions from the taxable account will have. Keep in mind, the taxable assets balance may include not only investment positions, but cash positions as well.
• Life Expectancy - We default to age 100 arbitrarily. Enter the life expectancy of each client.
• Social Security Start Year - When will Social Security retirement start for each client?
• Social Security Expected Amount - Enter the annual amount, in today's dollars, of the expected benefit amount expected once the client(s) begin receiving Social Security retirement benefits.

Screen 3 of 3:

Last, we'll make assumptions about annual spending, inflation, and whether adjustments are made for the imbedded tax liability of tax-deferred accounts and whether the tax rates assume the sunset of the Tax Cuts and Jobs Act (TCJA) in 2026.

• Spending Assumption - Enter the annual spending assumption for your client's true lifestyle spend need for the first year of the projection. While the client may not need to spend any portfolio assets in the first year, entering a number is necessary to properly inflate spending throughout the projection when spending will potentially come from portfolio sources.
• Inflation Assumption - Enter the assumed inflation assumption for tax brackets and the standard deduction amount. Inflation assumptions for spending and income items are added for each of those items individually, and not in this field.
• Tax Adjustment Assumption for Tax-Deferred Accounts (optional) - This setting effectively reduces the tax-deferred balances by the amount of the percentage indicated to reflect the embedded tax liability for those accounts. For example, if the total balance for all tax-deferred accounts were $1,000,000, and the tax adjustment assumption was set to 24%, the adjustment to the tax-deferred account balances would reduce them by 24% ($240,000), and effectively use a new balance of $760,000 in the projections to account for the after-tax funds available from those accounts. This setting can be toggled on/off now or at any time in the future within the projection within the Control Panel.
  
  

Interpreting the Roth Projection

Once the Roth Projection wizard has been completed, your Roth Projection will look like the example below. The Control Panel will be on the left side of your screen, where you can make edits to assumptions and other changes. The right side of your screen will show a preview of the Roth Projection output, complete with your firm logo and any disclaimer language.

You will also see buttons at the top right of the preview panel to view the Roth Projection in Presentation Mode (without the Control Panel) and to Print the Roth Projection.





Roth Projection:

The Evaluator will show lifetime tax projections of both the base scenario (with none of the Roth conversions entered earlier) and the Roth conversion scenario where outlined in blue above. The projection difference indicates the lifetime tax savings anticipated by executing the Roth conversions as entered earlier when you built your projection. In the example above, we see that by utilizing Roth conversions over several years, this client is projected to save $976,175 in taxes.

The graph will show the cumulative effect of the Roth conversions on the combined portfolio balance by the end of the plan, which corresponds to the user-entered life expectancy for the longest lived member in the household.

In the example above, the projected total portfolio balance is $10,343,729 if the Roth conversions are undertaken, compared to $9,774,889 if they were not, indicating total portfolio assets would be estimated to be $568,840 higher. The base case and Roth conversion lines on the graph are sometimes so close that it may be difficult to see the difference, which is why we have included the next graph, shown below.



Next, if toggled on in the Control Panel, is a graph showing what the effects of the Roth conversions will have on the projected RMDs for any tax-deferred asset balance(s) for your client(s). This can be particularly helpful to illustrate for clients who will not need their full RMD to meet spending needs, and can otherwise shift those balances to a Roth IRA which has no RMD requirements for the account owner. In the example below, these series of Roth conversions will lower the RMDs these clients would otherwise have to make.

The end of the Roth Projection will include a summary of the assumptions used in the analysis, and any disclaimer language added by your firm.

Control Panel:

The control panel allows you to edit the same assumptions and settings you saw in the wizard where you built your Roth Projection. There are some other settings you can adjust here as well.

• Toggles: Toggles exist to show or hide the Roth Conversion Evaluator, Difference, and RMDs section, as well as to only show the last 5 years of portfolio balance estimates.
• Clients: Adjust the filing status, clients representing Taxpayer 1 and Taxpayer 2, the year, and to show if either taxpayer is eligible for the additional standard deduction for blindness.
• Assets: Make any edits to the balance for taxable assets, cost basis of those taxable assets, tax-deferred asset balance(s), and combined Roth assets balance(s).
  
  

• Roth Conversions(s): Adjust the amount and sequencing of the planned Roth conversions for your client(s) here.
• General Assumptions:
  • Tax Adjustment Assumption: This setting effectively reduces the tax-deferred balances by the amount of the percentage indicated to reflect the embedded tax liability for those accounts. For example, if the total balance for all tax-deferred accounts were $1,000,000, and the tax adjustment assumption was set to 24%, the adjustment to the tax-deferred account balances would reduce them by 24% ($240,000), and effectively use a new balance of $760,000 in the projections to account for the after-tax funds available from those accounts.
  • Rate of Return: This assumed return is applied to all account types as a blended rate within the investment portfolio - taxable, tax-deferred, and Roth.
  • Returns that are Cap Gains: This assumption approximates the tax efficiency of the investments within the taxable assets account. The higher the portion of returns that are capital gains, the more tax efficient and less tax drag distributions from the taxable account will have. Keep in mind, the taxable assets balance may include not only investment positions, but cash positions as well.
  • Inflation Assumption: This setting adjusts the inflation assumption for tax brackets and the standard deduction amount. Inflation assumptions for spending and income items are added for each of those items individually, and not in this field.
  • Checkboxes:
    • Adjust Tax-Deferred Assets: Checking this box incorporates the Tax Adjustment Assumption above to reduce the starting balance of the total tax-deferred assets by the percentage entered in that field.
    • Assume 2026 Tax Rate Sunset: Checking tis box assumes the tax rates under the Tax Cuts and Jobs Act (TCJA) sunset in 2026 according to that legislation.
  • Expenses: Use this field to edit the spending assumption for your client's true lifestyle spend need for the first year of the projection. While the client may not need to spend any portfolio assets in the first year, entering a number is necessary to properly inflate spending throughout the projection when spending will potentially come from portfolio sources.

• Client Assumptions:
  • Life Expectancy: Use this field to update the life expectancy of your client(s). The projection's end date corresponds to the user-entered life expectancy for the longest lived member in the household.
  • Income Sources: Income sources are the first source used to meet spending needs, so make sure any income from the sources below are entered.
    • Wages
    • Social Security
    • Pensions
    • Annuities
    Otherwise, the portfolio balances will be used from account balances in the following order to meet those needs:
    
    Taxable Accounts > Tax Deferred Accounts > Roth Accounts

Finally, near the bottom of the Control Panel, you can click the "Export" button shown circled below to view a spreadsheet of the math behind the projections. That spreadsheet contains two tabs - one "Projection" tab which shows math under the hood for the base case, and a "Roth Projection" tab which shows the math behind the projections that incorporate the series of Roth conversions that are being modeled.