Behind the Tool: The Roth Conversion Simulator

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From filing status and life expectancy through to the optimisation engine, bracket fill feature, bespoke scenario building, and the downloadable comparison report. Whether you’re configuring the simulator for the first time or need a quick reference before a client meeting, this video and article cover every setting you need to understand to produce accurate, client-ready Roth conversion analysis.

Duration: ~8 minutes | Series: Behind the Tool

What You’ll Learn

Page 1: Assumptions — The Input Page

This is where you configure every variable that drives the simulation. FP Alpha pre-populates most fields from the client’s profile and uploaded tax return, but every field is editable. Accuracy here is critical, the output is only as good as the inputs.

Field	What It Does	Best Practice & Notes
Filing Status	Sets the tax brackets and thresholds for the simulation.	Ensure this reflects today’s status, which may differ from the uploaded tax return (e.g., recently widowed or married).
Current Age	Based on date of birth in the questionnaire. Can only be increased, not decreased.	For couples with significant age gaps or married filing separately, create a separate profile for each individual and run separate simulations.
Retirement Age	The age at which the client transitions from pre-retirement to retirement taxable income.	Can be lower than current age (e.g., 68-year-old who retired at 63). Once the client reaches this age, the simulator switches to the retirement income figure.
Life Expectancy	Determines how long the simulation runs. Default is age 99.	Adjust based on your best judgement or consult the National Center for Health Statistics. This significantly affects results — a shorter expectancy compresses the benefit window.
Beginning Traditional IRA Balance	Combined total across client and co-client. Includes all qualifying traditional/pre-tax assets.	Verify accuracy — this is a combined figure. Include all traditional IRAs, 401(k)s, and other pre-tax qualified accounts.
Beginning Roth IRA Balance	Combined Roth balance for client and co-client.	Include all existing Roth IRAs and Roth 401(k)s. This is the starting point before any conversions are modelled.
Investment Rate of Return	Applied to traditional, Roth, and hypothetical taxable accounts throughout the projection.	Think of this as a reflection of the client’s risk profile over time. A conservative range is typically 6–9%.
Supplemental Withdrawals	Annual amount needed from these accounts to cover expenses beyond RMDs, starting at retirement age.	Set to zero if RMDs alone cover expenses (only RMDs will be withdrawn). If > zero, the tool withdraws this amount annually. When RMDs exceed the supplemental amount, no extra withdrawal occurs. When RMDs are less, the tool withdraws the difference to satisfy the supplemental need.
Pre-Retirement Taxable Income	Taxable income from current age until retirement age.	Not applicable for clients already retired. Pre-filled from the uploaded tax return.
Retirement Taxable Income	Taxable income during retirement: Social Security, dividends, interest, pensions, part-time work.	Do NOT include RMDs or supplemental withdrawals — the tool calculates those separately. Enter only the taxable portion (e.g., 85% of Social Security, not gross).
Income Growth Rate (Pre)	Annual growth rate applied to pre-retirement income. Default is 5%.	Adjust based on expected salary trajectory. Higher for early-career, lower for late-career.
Income Growth Rate (Post)	Annual growth rate applied to retirement income. Default is 1%.	Reflects cost-of-living adjustments to Social Security, pension increases, etc.
TCJA Sunset Toggle	ON: tax rates revert to pre-TCJA levels in 2026. OFF: current rates continue indefinitely.	Leave ON by default — this is what’s currently scheduled. Turn OFF to model a scenario where current rates are extended permanently.
Pay Conversion Taxes from Outside Account	YES: taxes paid from external funds; FP Alpha generates a hypothetical tax account tracking opportunity cost. NO: taxes withheld from the conversion itself, reducing the net Roth amount.	Major impact on results. YES is the more realistic scenario for most clients (recommended). The tool grows the tax amount at the investment rate of return and deducts it from the total portfolio balance.
Heir’s Tax Rate	Effective rate (not marginal) applied when accounts pass to heirs at death.	Default is 37% (conservative — assumes heirs in the highest bracket). Adjust between 20–28% if heirs are in lower brackets or will use a 10-year distribution strategy. This rate drives the “Heirs Max Benefit” optimisation.

HOW SUPPLEMENTAL WITHDRAWALS WORK — EXAMPLE

Your client needs $10,000/year from retirement accounts starting at age 67. You enter $10,000 in the Supplemental Withdrawal field. The tool withdraws $10,000 annually until life expectancy. When RMDs begin (e.g., at age 73), if the RMD is $15,000 (greater than $10,000), no additional withdrawal is needed — the RMD covers expenses. If the RMD is only $7,000 (less than $10,000), the tool automatically withdraws an additional $3,000 to meet the $10,000 need. This logic runs every year, always taking the greater of the supplemental amount or the RMD.

Page 2: Projection Screen — Building Scenarios

After confirming your assumptions, you move to the projection screen where you build up to three unique conversion scenarios side by side. Use the pencil icon next to each scenario name to customise the label (e.g., “Convert $100K over 4 years” or “Fill 24% bracket”) for clarity when presenting.

Three Ways to Build Scenarios

Approach	How It Works	When to Use
1. Optimisation Engine	Runs advanced modelling across thousands of combinations to find the optimal result for one of three goals: Client Max Benefit (largest after-tax portfolio at end of life), Heirs Max Benefit (largest after-tax inheritance using the heir rate), or Minimum Taxes (lowest total tax liability over the client’s lifetime, including conversion taxes and distributions).	When you want the mathematically best answer. Run all three to compare — they often produce very different strategies. Use as a ceiling, then adjust for client comfort.
2. Fill Tax Bracket	A dropdown lets you select a marginal tax rate. The system calculates the maximum conversion amount that keeps the client within that bracket without crossing into the next one.	Bracket management conversations. When the client is psychologically attached to staying in a specific bracket. When you want a quick, low-risk conversion amount.
3. Bespoke Scenario	Manually set three variables: kickoff age (when conversions start), conversion amount (per year), and number of years. Full customisation.	When the client has a specific preference (“I only want to convert $50K/year”) or when you want to model a scenario the optimiser wouldn’t generate.

Two Specialised Override Features

Edit Income Projection — override the system’s income growth path for specific years. Use when a client has an unusual year: a one-time bonus, a gap year, part-time work, or a pension starting at a specific age. This overrides the linear growth path the system generates from your Page 1 inputs.
Edit Conversion Amount — override the straight-line conversion amount for specific years. The optimiser and bespoke builder both produce equal annual conversions by default. Use this to model variable amounts (e.g., $75K this year, $50K next year, $25K the following). Note: once used, any previously optimised scenario is overwritten.

Page 3: Results — The Reporting Dashboard

The results page presents year-by-year data comparing life with and without the Roth conversion. The dynamic graph at the bottom updates based on which column header you select.

Available Column Views

Column	What It Shows
Total After-Tax Portfolio	Combined value of traditional + Roth + hypothetical taxable account, after all taxes. The primary outcome metric.
Traditional Balance	Remaining traditional IRA balance each year. Decreases as conversions and RMDs occur.
Roth Balance	Growing Roth balance including conversion amounts and tax-free growth.
Taxable Account	Hypothetical account starting at zero that catches leftover RMDs (after expenses). Grows over time as RMDs exceed supplemental needs.
Taxes Paid	Year-by-year comparison of taxes with conversion (blue) vs without (orange). The most powerful visual for client conversations — shows upfront tax cost followed by decades of savings.
Conversion Amount	How much is being converted each year in the modelled scenario.
Income Amount	Total income each year including retirement income, RMDs, and supplemental withdrawals.
Medicare B & D Premiums	IRMAA bracket impact. Shows premium spikes during conversion years and savings after RMDs are reduced.
Withdrawal Amount	How much is being spent each year to cover expenses. Not included in the portfolio balance — informational only.
Tax Bracket	Which federal bracket the client falls into each year under each scenario.
Value to Heirs	After-tax inheritance value using the heir tax rate from Page 1.

Downloading the PDF Report

Click the download button to generate a branded PDF. The report includes the summary page (conversion amount, total taxes, client benefit, heir benefit), the detailed year-by-year data tables, and — on the final page — a cross-comparison summary of all three scenarios side by side. This last page is particularly useful for client presentations where you want to compare the optimised scenario against the client’s preference and a conservative alternative.

Tips & Best Practices

Always verify filing status against today’s reality, not the uploaded return.

A recently widowed client’s return may show married filing jointly, but they’ll file single next year. This changes brackets dramatically.

For couples with significant age gaps, run separate profiles.

The simulator only models the primary client’s age. If there’s a 10-year age gap, the surviving spouse’s bracket trajectory will be very different. Create a second profile to model the younger spouse’s scenario.

The outside account toggle has the biggest impact on results.

Turning this ON (recommended) means taxes are paid from external funds, and the opportunity cost of those funds is tracked. Turning it OFF means taxes come out of the conversion itself, reducing the Roth amount. Most clients will pay from outside funds — use the toggle that reflects reality.

Run all three optimisation goals and compare.

Client Max Benefit, Heirs Max Benefit, and Minimum Taxes often produce very different strategies. Present all three to show the trade-offs, then let the client choose based on their priorities.

Use the bracket fill feature for low-risk, quick conversations.

If a client just wants to stay in their current bracket, the dropdown calculates the exact maximum conversion in one click. No further analysis needed for straightforward cases.

The Taxes Paid column is the best storytelling visual.

Blue (with conversion) shows upfront cost. Orange (without) shows growing tax burden every year from RMDs. The visual gap between the two lines is the most compelling argument for conversion.

Use Edit Conversion Amount to model real-world variability.

The optimiser produces straight-line annual amounts. Real life isn’t straight-line. Override specific years to account for bonus income, a gap year, or a client who wants to convert more aggressively early and taper off.

The cross-comparison page on the last page of the PDF is your meeting closer.

Three scenarios side by side with total taxes, client benefit, and heir benefit. This single page often drives the final decision.

Ready to build your first scenario?

Upload a client tax return and start modelling. Navigate to Tax Module → Tax Projector.

[OPEN TAX PROJECTOR]