California CPA June 2023 | Page 23

To Switch , or Not to Switch investments double in 10 years . Some might say converting now won ’ t add value , but this only applies if you exclude the $ 30,000 from this scenario and pay the tax from the IRA . If you have $ 30,000 taxable to pay the conversion tax now , however , you will have $ 200,000 in the Roth in 10 years , so $ 200,000 is spendable . If you do not convert , you will have $ 200,000 pre-tax and $ 60,000 in taxable in 10 years , which covers the tax , so also $ 200,000 spendable , right ? Not exactly — the $ 30,000 growth in the taxable account would be subject to taxation , so you could not cover all the taxes on the $ 200,000 distribution from the IRA .

• If the client might move to another state , is that scenario being provided , including the change in taxes ?

• Are philanthropy goals factored in ? ( Tax-deferred accounts are great for

PROJECTIONS

donations , so don ’ t convert all pre-tax assets .)

• Are you considering a 60-day rollover strategy to address the risk of a value drop in the first 60 days after conversion ?

• Are the “ tax drag ” settings ( turnover , dividends vs . interest , etc .) for your nonretirement accounts realistic ?

• Are the tax / cost basis settings accurate for each non-retirement account ?

• Is the Roth allowed to grow without distributions until death or does it make sense to use it for spending in certain years ? How are you determining this ?

Jim Amerman , CFP , is a CalCPA faculty member and founder of Precision Roth Conversion . He has completed close to 1,000 Roth analysis recommendations over the past 10 + years . Glenn Freed , Ph . D ., CPA ( Florida ) is a planning strategist at Fortress Wealth Management and chair of the CalCPA PFP Committee with more than 20 years of financial planning and investment management experience . You can reach them at Jim @ PrecisionRothConversion . com and Glennfreed @ Fortress-wealth . com .

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