A "BETR" approach to Roth conversions

July 19, 2018

 

Investors typically base Roth IRA conversion decisions on current and expected future marginal tax rates. This research provides a break-even tax rate (BETR) to help investors decide whether they should make a conversion.

Use this paper to:

  • Understand how to calculate the BETR and use it to help inform the Roth conversion discussion.
  • Examine how paying Roth conversions from a taxable account can help clients move the full value of their IRA to a tax-advantaged account.
  • See why Roth conversions might be more valuable than the conventional analysis suggests.

Part of Vanguard’s Financial Planning Perspectives research series

Financial advice is more nuanced than ever, with clients seeking individualized attention that caters to their unique circumstances. Financial Planning Perspectives is a series of research-based publications that offers sophisticated planning concepts explained in a way that balances theory and practice.

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Additional materials

Note:

  • All investments are subject to risk, including possible loss of principal.

 

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