Roth conversions can be modeled with inStream by making use of our account withdrawal feature.
Let’s say a client has $100,000 in an Individual (Taxable) Account as well as $50,000 in a Traditional IRA (Tax Deferred). The client would like to convert their Traditional IRA to a Roth IRA in 2020.
First, you would create a goal in 2020 titled “Roth Conversion”, in the amount of $50,000.
Next, within the Traditional IRA Account, input a Net Withdrawal of $50,000 for 2020.
Lastly, add a Net Contribution to the new Roth IRA account in the same amount, for the same year. No change is needed for the taxable account.
Please see below the resulting cash flow from the above plan details.
The $50,000 withdrawal from the Traditional IRA is reflected in the Gross Tax Deferred Distribution. It will offset the $50,000 Goal labeled Roth Conversion. The $50,000 contribution made to the Roth IRA is reflected in the Excess Income + Contributions column. The only money that has actually left the portfolio, as shown in the ending value, is the tax liability of $10,620 from the Tax Deferred Withdrawal and $162 in capital gains taxes from the Taxable Distribution.
The resulting Withdrawal Schedule found in Plan Analysis will then look like this.