Roth IRA conversions are white hot right now in our industry as a lead-gen tool. As such, the announcement of our OnPointe Roth IRA Conversion Legacy Planner is very exciting.
FYI, if you are using programs like Retirement Analyzer, Right Capital, Roth Blueprint, Income Lab, MoneyGuide Pro, and even E-money, I hate to break the news to you, but you are NOT running accurate conversion numbers (and certainly NOT legacy numbers).
Download Six (6) Legacy Examples to Review and Compare + an
Overview Video Showing the Legacy Software
The best way to agree with me or prove me wrong is to download a handful of Roth conversion examples where I give the variables and output numbers from our OnPointe Roth Conversion Software. Then you can put the same variables into the programs you are using and see for yourself.
Click on the following to download the examples and watch a video on the legacy app:
https://onpointesoftware.com/legacy-video
The most important Roth Conversion numbers are not being run…until now!
When running “accurate” Roth conversion numbers, you’ll learn that most of the time conversions WILL NOT make financial sense (the IRA owner will NOT have more assets because of the conversion).
If that is true, then who does Roth conversion work for more often than not? More wealth clients who are passing wealth to their heirs.
That’s great. How do you run numbers on the benefit to the heirs? Until now, you couldn’t!
How does OnPointe’s Roth Conversion Software run numbers on the heirs?
1) It starts with running accurate conversion numbers on the parent(s).
This is something other programs don’t do for a variety of reasons, including solving for minimum taxes and RMDs, using flat/level tax rates, not running IRMAA penalty numbers, and many more flaws that are too numerous to list in this newsletter.
2) At the 2nd spouse’s death (if a married couple), OnPointe then runs two parallel fact patterns.
–Fact pattern #1 runs numbers when passing only tax-deferred IRAs to the heirs.
–Fact pattern #2 runs numbers passing Roth IRA assets to the heirs (solely, or also some tax-deferred IRA assets if not ALL of the tax-deferred IRA assets were converted).
Variables to run numbers for the heirs:
a) Are they a non-minor/non-spouse (i.e. an adult child)?
b) The age at which the heir(s) will inherit the Roth IRA (at the parent’s death)
c) The gross income of the heir(s) at which they inherit the Roth IRA
d) The rate of return on investments inside the Roth IRA over the 10-year inherited time frame
e) The tax filing status of the heir(s) (like married filing jointly)
Then, OnPointe will run the numbers and tell you the financial benefit to the heir(s) at the end of the 10th year (remember, the money must be distributed at the end of the 10th year).
Example
–Age: 65 (married couple, both the same age)
–Life expectancy: 89 (for both spouses)
–Assets: $725,000 in a tax-deferred IRA; $250,000 in a NQ brokerage account ($125k basis)
–SS income: $70,000 (combined for both spouses)
–Annual expense at age 65: $95,000
–Other variables: Inflation, SS COLA increase, income tax bracket inflation factor, all @ 2.7%
–ROR on investments: 4.5% net (so, fund expenses, advisor fees, cap gains taxes if any)
After determining the optimal amount and years to convert, here are the results:
At age 89 (when they died):
$123,710 LESS in total assets
$793,139 in a Roth RIA that will pass to the heirs
$609,532 in saved RMDs (meaning they didn’t have to take this amount in RMDs)
$43,542 more in income taxes paid
If the goal is more money for the parent clients, should they implement a conversion?
NO! They will have LESS money and have paid MORE in taxes due to the conversion.
But would this conversion be a good idea if the goal was the best outcome for the heir(s)?
Assumptions for the Legacy number for their heir
Age: 30 (current age and will be 49 when he/she inherits the IRA)
Estimated gross income at age 49: $150,000
ROR on investments in the IRA over the 10-year inherited time frame: 6.0%
Filing tax status at age 49: married filing jointly
What is the net benefit to the heir because the parents implemented the conversion?
$306,563!
$483,432 is the total taxes saved by the heir due to the conversion.
There is NO program in the industry other than OnPointe that runs legacy numbers.
Ready to Run Accurate Roth Conversion Numbers & Legacy Numbers?
Are you ready to run the most accurate Roth conversion numbers AND, equally as important, are you ready to go after affluent clients so you can run their legacy numbers?
If so, sign up to use our OnPointe conversion software, and you will be on your way to providing better advice and really truly being able to use Roth conversions as a lead magnet.
To learn more, go to https://onpointesoftware.com/roth-app
