Open the Sally Johnson case study before you start. As you run each scenario the numbers in your report will match exactly – so you can see how the analysis comes together in real time.
View the Sally Johnson Case Study-
1Download the Sally Johnson case file – this will save to your downloads folder as sally-rc-1yr.json.
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2Log in at fincw.com and access Break Analytics. Click the Roth Conversion module.
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3Open the hamburger menu at the top right of your browser and click Open Case. Select the sally-rc-1yr.json file you just downloaded.
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4Click the Illustration/Analysis tab and select Generate Report. This is Scenario 1 – a 1-year Conversion Smoothing™ strategy. Sally converts her entire $1.2M Traditional IRA in year one.
The tax bill drops. The total NPV improves. Spreading the conversion over 5 years saves approximately $60,000 in taxes compared to converting all at once – and still leaves Sally’s children the same $2,137,056 Roth inheritance.
This is the question every client asks: what if we spread it out? Now you can show them exactly what that means.
Bracket Ride produces the lowest lifetime tax bill of the three strategies. But because conversions extend further into the Medicare lookback window, IRMAA surcharges reduce the total NPV below the 5-year approach.
Lower taxes does not always mean the best outcome – and this is the page that makes that conversation easy to have.
There is no single right answer for Sally – and there is no single right answer for your client either. The right strategy depends on what the client is trying to accomplish – reducing lifetime taxes, managing Medicare exposure, or leaving a more tax-efficient inheritance to their beneficiaries. In some cases converting costs more in taxes and is still the correct recommendation. Break Analytics shows the trade-offs clearly so the conversation becomes straightforward.
When you are ready to run this for a real client the inputs are the same. Just load your client’s information instead of Sally’s.