Blog 81 Q and A Economics of a Roth IRA Conversion

What software was used for the analysis of the IRA vs. Roth IRA?

InsMark’s Wealthy and Wise® was used.

What software was used for the analysis of the Inherited IRA vs. Inherited Roth IRA?

Three calculators from the InsMark Illustration System (InsCalc tab) were used:

Inherited IRA Calculator

Inherited Roth IRA Calculator

Comparison of Inherited IRAs

Data for the IRA and Roth IRA was entered into each plan’s respective calculator, and results of each were easily imported into the Comparison of Inherited IRAs calculator.

How was the data obtained for the Inherited IRA and Inherited Roth IRA Calculators?

Simon and Ann’s Wealthy and Wise report from Option 1 (Keep the IRA) named Defined Contribution Transfer Tax (Summary) provides the numbers for the data needed for the Inherited IRA Calculator. We assumed the beginning of year 38 (Simon and Ann’s ages 92/87 - their joint life expectancy) as the point to demonstrate the effect of their daughter Marianne inheriting the IRA at her age 53. Click here to view that report. The number in Column 1 in year 38 is the key number needed to enter into the Inherited IRA Calculator.

Simon and Ann’s Wealthy and Wise report from Option 3 (Roth + Life Insurance) named Roth Defined Contribution Transfer Tax (Summary) provides the numbers for the data needed for the Inherited Roth IRA Calculator. We assumed the beginning of year 38 (Simon and Ann’s ages 92/87 - their joint life expectancy) as the point to demonstrate the effect of their daughter Marianne inheriting the Roth IRA at her age 53. Click here to view that report. The number in Column 1 in year 38 is the key number needed to enter into the Inherited Roth IRA Calculator.

Why was Marianne’s age 81 selected as the end of her report?

Both the Inherited IRA and Inherited Roth IRA have required minimum distributions. As a result, values in both are depleted by Marianne’s age 81.

Note: In the System Workbook Files section near the end of Blog #81, if you are licensed, or become licensed, for current versions of both Wealthy and Wise and the InsMark Illustration System, you can request copies of Workbook files from both systems to see the exact way data in the prompts was entered.

Important Note

The information in this presentation is for educational purposes only. In all cases, the approval of a client’s legal and tax advisers must be secured regarding the implementation or modification of any planning technique as well as the applicability and consequences of new cases, rulings, or legislation upon existing or impending plans.

IRS Circular 230 Disclosure

Any tax advice contained in this presentation (including any attachments or referred material) was not intended, or written to be used, and cannot be used by you or any other person or entity for the purpose of avoiding penalties under the Internal Revenue Code.