Frequently Asked Questions

No, actually quite the contrary.  Those that have significant IRA resources (perhaps over $3 million) find themselves converting over a much longer timeframe sometimes reducing the overall impact to their retirement.  That being said, there is still significant benefits to those holding larger pre-tax funds.

There is no age limit when doing a Roth conversion...you can convert at any age.

The time frame for any given individual varies based on how much one has to convert.  Additionally, it is also dependent on how aggressive one wants to be during the conversion process due to various factors such as the expiration of the 2017 Tax Cuts and Jobs Act, the Medicare B surcharge (otherwise known as IRMAA) and when one wishes to claim Social Security.  These factors are fully addressed in our RothAware sofware.

Many financial professionals advocate that paying the conversion tax liability from traditional IRA funds is cannibalizing the Roth conversion benefit.  While it may somewhat dilute the conversion benefit, as RothAware illustrates, there is still significant benefits realized even while using IRA funds to pay the conversion tax due to the collateral benefits realized from Roth conversions.  These include, among others, the compound benefit of having your funds grow tax-free versus taxable as well as the legacy benefit component of a Roth conversion. 

There is no limit on how much one can convert in any given tax year.  The amounts to convert annually are best based on effective tax rates one may experience during conversion periods taking into consideration any continuing earned income, timing of Social Security benefits and the Medicare B surcharge (IRMAA).  A Roth conversion is most efficient when smoothing out the effective tax rates anticipated over the conversion years while taking all of the above into consideration.  Our proprietary software, RothAware, does just that.

Contrary to popular belief, and maybe even common sense, due to the compound benefits of a Roth conversion strategy (tax free growth, the legacy factor, paying tax at a current higher tax rate initially over a much shorter period versus paying at a slightly lower tax rate over a much longer time frame), most individuals will experience significant benefits through a full Roth conversion over their lifetimes.  RothAware has built-in features to illustrate just this point.

Roth conversions aren't for everyone, however, they are for the great majority.  Several factors need to be considered to determine the actual benefit of a conversion for any given individual.  That is why we created RothAware...a software platform that takes a deep dive into the myriad of factors that determines the "true value" of a conversion strategy thereby easily allowing any individual to make an informed decision on whether to move forward.  In order to better facilitate the decision making process, RothAware uses a "net present value" approach to all analytics so that all financial results presented in the software can be understood on an apples-to-apples basis.

Roth conversions usually present the better results over one's lifetime when implemented sooner rather than later.  While one needs to be sensitive to compounding earned income with Roth conversions during their working years, the benefits of transitioning the funds earlier than waiting for retirement far outweighs the additional tax (and corresponding tax rates experienced) due to the impacts Social Security and the Medicare B surcharge (IRMAA) have on conversion periods.  This is best illustrated through RothAware.

Most would advocate deferring Social Security until 70 if implementing a Roth conversion strategy due to the fact that more of your Social Security benefits will be subject to taxation.  While this may appear rational on its face, RothAware, in many cases, will show that claiming Social Security at earlier ages optimizes the total overall value of the Roth conversion strategy.

Most would naturally believe that a Roth conversion in any given year equal to, or greater than, their Required Minimum Distribution (RMD) for that year would satisfy their RMD.   That would seem to make sense as, after all, they are still paying the same, or more, in taxes taxes on their qualified funds as they would if they were not otherwise executing a conversion in that current year.  Unfortunately, however, conversions in any given year do not satisfy the RMD requirements and, as such, if converting during an RMD period, one must still calculate, withdraw, and pay taxes on their RMD.