Are you considering a 60-day rollover strategy to address the risk of a value drop in the first 60 days after conversion ?
To Switch , or Not to Switch
• How do your recommendations above affect the client ’ s FANW , and can you explain the reason for the change ?
• If retirement plan assets will be going to heirs , then how are you factoring in their future tax brackets ? They might be pushed into higher brackets with the likely requirement to liquidate inherited pre-tax accounts within 10 years of your client ’ s death .
• If you recommend splitting contributions into Roth and Traditional portions , what are the changes to FANW if they did 100 percent to one or the other ?
• What software are you using and why ? Are there any shortcomings where you have applied work arounds ?
Are you considering a 60-day rollover strategy to address the risk of a value drop in the first 60 days after conversion ?
• Are you recommending additional Roth conversions in future years ? If so , how are you deciding to split that up ? And if not , why not ?
• Would conversions result in future exhaustion of taxable accounts ( cash / brokerage / non-retirement accounts ), forcing future additional IRA distributions beyond the RMD ? If so , does that impair FANW ?
• How does the software ’ s tax return info for the scenarios compare to the most recent actual tax return ( s )? Can you verify the full Roth conversion being recommended is showing in the scenario ? ( If not , the software may be applying some type of timing proration .)
• How are the stealth taxes related to Social Security income , capital gains , Medicare premiums , NIIT , etc . included in the analysis ? Factoring in these levers gives you the true marginal tax rate . a . Clients in the 15 percent federal tax bracket can be exposed to a true marginal rate of 55.5 percent ( see “ the Hump ” at Bogleheads ). b . You want to convert at a lower true marginal tax rate vs . the future true rate that will apply to the withdrawals on those assets . Even if those two rates happen to be the same , there ’ s a good argument for converting . Why ? Because the invested , taxable assets that would be paying future taxes will likely be exposed to capital gains tax upon liquidation , and maybe some tax drag up until that point .
• Example : You are 67 and have $ 100,000 in an IRA and $ 30,000 invested in a taxable account . Say you have a 30 percent true marginal tax rate now and throughout retirement and all