Retirement Analyzer Software Roth Conversion Analysis

1. Retirement Analyzer SoftwareRoth Conversion Analysis The Genius is in the Simplicity

2. The Advantages of a Roth IRA • Qualified Roth distributions are tax-free. • Qualified distributions will not increase income tax liability or the taxability of Social Security. • No required minimum distributions after 70 ½. • Can continue to make contributions as long as you have earned income. • Assets left to heirs are tax-free regardless of their level of income.

3. Why Convert a Traditional IRA to a Roth? • Some clients are concerned about the level of future tax rates; paying tax today can alleviate future tax liability. • After five years, contributions and gains can be withdrawn without penalty or taxation assuming the client is older than 59 ½. • Stretching a Roth IRA over a long period of time without taking required minimum distributions, can create a long lasting legacy.

4. 2010 Roth Conversion Opportunity • Federal income tax rates are at historic lows due to the Economic Growth and Tax Reconciliation Act of 2001. • One time opportunity to defer income tax liability and spread the conversion taxes over two years; 2011 and 2012 rather than paying taxes all in one year. • Half of the conversion tax will be due in 2011 and the other half will be due in 2012.

5. Step 1 Gather the necessary information and signatures on the Roth Conversion Client Data Form.

6. Step 2 1 2 3 Enter the Current Year or year of the analysis and the Conversion Year, either 2010 or 2011. Next input the Total IRA Funds to be analyzed and Non Deductible Funds if any. The software will automatically calculate Total Taxable Funds. Enter the client’s Current Tax Bracket, their Estimated Future Tax Bracket and the Estimated Tax Rate on Separate Account. The Separate Account will be used to pay all conversion taxes. The software will automatically calculate conversion taxes for you. Enter the Estimated Roth ROR, the Estimated Traditional IRA ROR and the Estimated Separate Account Before Tax ROR. The software will automatically calculate the Separate Account After Tax ROR.

7. Step 3 The software will compare the value of the Roth if converted on the left in red, to the value of the traditional IRA if no conversion occurs on the right in blue.

8. Step 4 The software shows the Total Tax Due to Convert on the left in red and the Total Tax Due if IRA Withdrawn on the right in blue . Note that all taxes are paid by 2013 if the IRA is converted, in red, while the tax liability continues to increase if no conversion takes place, in blue.

9. Step 5 The middle orange column compares the values of a newly converted Roth to the un- converted traditional IRA. A positive number in the orange column shows an advantage to convert whereas a negative number indicates a disadvantage.

10. Step 6 The results from the spreadsheet are depicted on this graph. The blue bars indicate the value of the IRA account if converted to a Roth. The orange bars indicate the value of the traditional IRA if no conversion takes place.

11. Thank You