If a client with an existing IRA qualifies to convert to a Roth IRA, he or she has two alternatives: 1.Keep the Traditional IRA and pay taxes at the time of withdrawal. (But keep possession of conversion tax funds to invest.) 2.Convert to a Roth IRA by paying the conversion tax due. The Roth IRA will NOT be subject to tax at the time of withdrawal. This tool helps the client decide which is the better alternative. The question the client should ask is: "Will I increase my future wealth by paying the conversion taxes and converting to a Roth IRA? Or by investing the amount needed to pay the conversion taxes in a different investment?” |
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