This video provides a demonstration of how to model a Roth conversion in Voyant.
Transcript:
In today's example, we will explore two scenarios for a client: their current situation versus the benefits of scheduling Roth conversions for their tax-deferred 401(k) accounts. We will compare both scenarios side by side to visualize the advantages this recommendation could bring to your client.
In the retirement section for the current situation, we have two traditional 401(k) accounts. Moving to the “What If” section, we will create a Roth conversion option. We begin by going to the bottom right-hand corner, selecting the retirement tile, and choosing “Retirement Plan.” We'll create a Roth IRA for each of our clients, leaving the amounts at zero, and do the same for the spouse, Julie, saving each entry as we go. In the retirement section for this “What If” scenario, you will now see the traditional 401(k)s alongside the two empty Roth IRA buckets.
Next, we schedule the conversions. Using the plus button, we select “Transfers” under Plan Actions to transfer to the Roth IRA buckets. We'll start with the primary client, transferring from his traditional 401(k). We can choose to convert the full amount, either evenly over a specific number of years or within a selected tax bracket. In this example, we’ll convert evenly over a set number of years. Taxes on converted funds can be paid from all available sources or from specific accounts. We’ll do it from all available sources and let the software handle the details. The timing will start now and end at his retirement.
We then add another transfer to Julie's Roth IRA, transferring from her 401(k) in the same manner, starting now and ending at her retirement. Once saved, these transfers will be visible in the transfer section. To review them, use the year view in the retirement tile and the slider bar to observe contributions and withdrawals going into any account over time.
To compare and contrast the two options, switch to chart view. The Roth conversion option appears at the top, and the current position is at the bottom. Turning on the details allows for a more informative view, which can be a helpful educational moment during a client conversation. The black “Total Need” line reflects total expenses in retirement, including estimated annual expenses and taxes, and will be mirrored in the current position scenario. Traditional 401(k) savings appear in blue, while the Roth IRA balances are shown in light green as tax-free savings.
One key difference is visible at age 75 in the current position. The cash flow exceeds the total need line because those traditional 401(k) accounts are subject to required minimum distributions, or RMDs. This means clients must withdraw money even if they don’t need it, and those funds are no longer invested and growing.
Roth IRA transfers can significantly help clients in the long term, particularly with taxes. The charts make it easy to see that Roth accounts do not generate taxes on withdrawals, while traditional 401(k)s do. Hovering over the cumulative taxes option shows the total impact over time. In the current position, clients would pay approximately $4.2 million in taxes over the lifetime of their plan, compared to around $3.6 million if conversions were completed. These figures are estimates based on the information available.
Looking at assets, Roth IRA conversions reduce the need to withdraw funds to pay taxes or meet RMDs. Examining liquid assets in the final year shows a projected legacy of $15.1 million with the Roth conversion strategy, compared to $11.8 million under the current position. This gives clients more flexibility for unexpected expenses, long-term care, enhanced spending in retirement, and a larger tax-free inheritance for heirs. These comparisons are powerful tools to demonstrate the value of your advice and highlight the benefits of thoughtful planning strategies.
If you have any questions following this webinar, feel free to reach out to me at support@playwithvoyant.com. You can set up one-on-one time by emailing me directly, or send over any client cases by clicking the client's name in the top right to request support. This sends an active link to your plan so I can open it and review it. I’m also happy to assist in preparing for upcoming client meetings if needed.