Use the Roth Explainer to help decide whether a Roth conversion is the right move for your client.
You can also view our tutorial video below, in which our VP for Subscriber Success and Engagement Ben Birken walks through using the Roth Explainer and interpreting the results.
The videos below feature the "What is a Roth Conversion? and "Benefits of a Roth Conversion" sections, which have since been removed from the Roth Explainer report.
To access the Roth Explainer, start in the Scenario Analysis screen, and navigate to the Roth Conversion Worksheet by clicking on the pencil icon next to the Roth Conversion line within the 1040 Income section as highlighted below.
NOTE: If you want to change the amount of the Roth conversion after accessing the Explainer, you will need to navigate back to Scenario Analysis - it cannot be changed within the Explainer tool.
Once an entry is made for one of either Taxpayer 1 or Taxpayer 2, you will see the purple Roth Explainer button pop up to launch the Roth Explainer wizard. In this example below, Taxpayer 1 is going to make a $25,000 Roth conversion.
NOTE: If you receive a message within the Roth Conversion Worksheet with the red text seen in the screen shot below, that means one of two things are disabling the Roth Explainer.
- The Roth Conversion (Override - All taxpayers combined) field is being used, instead of the fields specific to Taxpayer 1 and/or Taxpayer 2. In the example below, you would clear the $50,000 entry, which will open up the highlighted fields to enter in the amount of the Roth conversion per taxpayer.
- Taxpayer 1 and/or Taxpayer 2 have not been assigned in the Age/Filing Status/Dependents tab of Scenario Analysis. In the example below, we have not assigned Paula Professor as Taxpayer 2. If you have not added the second taxpayer (Paula for example in this case) you will need to navigate back to the client household and add them as a client.
Once you access the Roth Explainer, you will be prompted to enter assumptions in three steps. Any amounts pre-populated are simply placeholders and may be adjusted according to what is most appropriate for your client situation.
You will notice that there are warnings in red text below. The balance entered for Taxable Assets must exceed the Roth conversion cost, and the Roth conversion amount must be less than the total balance of Tax Deferred Assets.
NOTE: We do not support the modeling of Roth conversions where the tax cost of the conversion is paid from the IRA being converted. Also, we flag any entry where the amount of the Roth conversion entered in Scenario Analysis exceeds the total balance of tax deferred accounts entered in the Explainer wizard.
The assumptions you will see for Rate of Return and the Portion of Returns that are Capital Gains are placeholder entries. You may adjust them as needed to more accurately reflect your client's portfolio return and composition. A higher percentage of capital gains (relative to dividend/income) will result in less annual tax drag, since those gains are assumed to be unrealized unless/until sales occur. 
In the next step(s), you will enter the Life Expectancy, Social Security Start Year, and Social Security Expected Amount (expressed in today's dollars) for your client(s), depending on if your clients file as single or married filing jointly.
The next step will include spending and inflation assumptions. The Spending Assumption is entered annually and will be satisfied by income in the following order:
- Income (Wages or Social Security), entered later
- Portfolio Distributions (taxable first, then tax-deferred, then Roth)
***NOTE: Once your client reaches RMD (Required Minimum Distribution) age, then RMDs are the first component of portfolio distributions that are used, not taxable accounts.
Spending is entered annually in the step addressed above for the current year. You may later update spending changes from the base year (2024) used in the explainer.
The final step prompts you to enter a Tax Adjustment Assumption (highlighted below), indicate if you want to adjust tax-deferred accounts for the embedded tax liability (red arrow), and indicate if you want to assume the tax laws enacted by the Tax Cuts and Jobs Act (TCJA) sunset in 2026 as currently scheduled.
The Tax Adjustment Assumption 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.
Once you have completed the steps in the Roth Explainer wizard, you will see the results. On the left-hand side of the screen, you can edit the layout by toggling the options displayed below.
You can make changes to the client's Life Expectancy, Social Security, and joint Spending amounts that were previously entered in the wizard. To update these values, click on the respective item to open up their worksheet.
Add an income item by selecting Add Row then providing the Year, Value, and Inflation percentage. In the example below, if Client 1 will begin receiving $30,000 in Social Security income in 2039, you would enter $30,000 as the value for that year.
The assumptions used will also show up at the bottom of the Roth Explainer report as seen below.
You may now also include the client's Wages, Pension, and Annuities. In the example below, client 1 will continue their $124k wage until 2039. 
Be sure to note when income items stop by adding a row for the year of the stoppage and indicating a value of $0. The Roth Explainer attempts to meet spending needs by first using income items (Wages, Social Security, pensions, annuities) before moving to portfolio distributions. If you extend wages well beyond your client's retirement date, the outcome is going to be significantly skewed!
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.
Check out the video below for a walk through of the math under the hood in the worksheet available using the "Export" button shown above.
Once you complete any changes to the assumptions above, you are ready to run your analysis. As you make changes to those assumptions, the analysis will update in the background, and where needed, you will be prompted to reload the graphs as seen below.
The three graphs at the bottom of the Roth Explainer are the evaluation tools you can use to evaluate how the proposed Roth conversion will play out. 
The first graph shows the resulting portfolio value (the blue line) if the Roth conversion you entered in Scenario Analysis for that one tax year is implemented. The base case (teal line) shows the portfolio values if the Roth conversion is not implemented. Often the lines will be so close to one another that it may be difficult to make out the difference. That's where the second Difference graph comes in.
The second graph illustrates the difference between the blue line (Roth conversion) and the teal line (the base case as if no Roth conversion was done).
NEW ADDITION: You asked; and we listened! Holistiplan is always open to feedback that improves the software. One such request was to add a Required Minimum Distributions graph to the Roth Explainer to show the impact of the Roth conversion on future RMD amounts.
The third graph RMD graph illustrates the impact that the Roth conversion will have on the annual RMD amounts in the future. Here we see that in this example, projections are indicating that by undertaking this Roth conversion, these clients' combined RMDs will be reduced from $298,879 in 2050 to $288,710.
If you would like to take a deeper dive into the math behind the Roth Explainer, check out the video below in which our co-founder Roger Pine breaks it all down in a behind the scenes look.