Roth Conversions to Lifetime Effective Rate in Income InSight

Calculating the Lifetime Effective Rate

In Income InSight, you can select "Roth Conversions to Lifetime Effective Rate." How is that rate calculated? The Lifetime Effective Rate is calculated by dividing Total Tax / Total Cashflows over the course of the client's lifetime. Currently, lifetime tax is displayed in the Income InSight report, in the "Base Case: Income by Source” section. 

Example

  • Lifetime Tax = $149,240 
  • Total Cashflows = $1,581,915.06 
  • Lifetime Effective Rate is: $149,240 / $1,581,915.06 = 9.43%  

It's important to note if this option is selected and the Effective Marginal Rate is 12% in particular year, there would be no conversion in that year because the Lifetime Effective Rate is 9.43%, which is less than 12%.