How Financial Advisors Can Use Roth Conversions to Add Value

By: Katie Godbout, VP of Sales and Marketing at Covisum

Every year, retirement income planning seems to get more and more complicated. As much trouble as it is to keep up with all the moving parts, as financial advisors, the ever-changing marketplace creates a steady stream of opportunities for you to attract and wow your clients. 

Are you educating clients on the impact taxes have on their plans? Consider this. Your retired clients are probably not experts in the complicated tax rules and regulations impacting their different retirement income streams. That means that right now, you have an opportunity to show them exactly how valuable your advice can be by carefully crafting a retirement income strategy that accounts for taxes. One of the best tax techniques that advisors can recommend for retirees is the Roth conversion.

A Roth conversion moves funds from a client’s traditional IRA into a Roth IRA. During the year you convert the funds, the client will pay taxes. However, moving the funds to a Roth IRA can minimize the client’s taxes paid later in retirement. Withdrawals from a Roth account are tax-free! One thing to note, the client may have to pay some taxes on earnings made within five years of the conversion.

As we near the end of 2021, now is the time to start considering if a Roth conversion could be beneficial for your retired clients. Waiting until the end of the calendar year allows you to ensure that any end-of-year income won’t unexpectedly bump the client into a higher tax bracket or cause them to pay a Medicare premium. 

Roth conversions provide the most value when there is significant space before the client reaches the edge of a tax bracket. For instance, if you have a client in the middle of the 12% tax bracket, you may want to consider converting enough IRA funds to a Roth IRA to fill the 12%bracket but avoid any withdrawals at the 22% tax bracket. 

You also may want to consider Roth conversions to help your clients avoid a “tax torpedo.” A client’s effective marginal tax rate can skyrocket when you factor in capital gains, required minimum distributions (RMDs), and Social Security benefits. When the effective marginal rate exceeds the statutory tax rate, you have a tax torpedo. The tax torpedo can wreak havoc on a retirement strategy—and your relationship with your clients. 


Tax Clarity® makes finding opportunities for Roth conversions simple. After adding the client’s tax return information, the software does the complicated calculations for you, accounting for current rules, regulations, and legislation changes. Tax Clarity can help you: 

  • Uncover hidden opportunities to create more valuable retirement strategies  
  • Quickly and easily identify Roth conversion opportunities 
  • Showcase alternate tax strategies with comparisons 
  • Suggest strategies to avoid tricky tax situations 
  • View the tax landscape for any given year 

Exclusive to White Glove advisors, you receive a 40% discount on an annual subscription to the TaxClarity software and access to a “Taxes in Retirement” webinar/seminar presentation and script. Get started with Tax Clarity now.