What Strategies Work?
I saw a Facebook advertisement called the ROTH Blueprint. I rarely click on links in Facebook, but this time I was curious to see what this might offer for my ROTH conversion efforts. I want to save my readers some time and give you some thoughts about how you think about different kinds of investment advice.
Some Helpful Reminders
One thing that this resource gets right is that there are hidden costs in retirement, and one of the big ones is income taxes, surcharges for Medicare, and the risks for a surviving spouse and heirs. “Roth Blueprint was built around one idea, that retirement is full of hidden costs nobody itemizes for you. Required distributions you never asked for, taxes on your Social Security, Medicare surcharges, the survivor’s single-filer brackets, the tax bill your heirs inherit.” – Source: Email from Roth Blueprint.
The Roth Blueprint boldly proclaims that you can have up to “97% more Lifetime Wealth.” There is a tool to “Run my Numbers”, so I gave it a try.
Here are the results from entering my numbers. They said, “This represents a 27% increase in lifetime wealth for you and your spouse, more than 7 out of 10 people who run their numbers. Our projections indicate that you would significantly benefit from an optimized Roth Blueprint conversion.” However, I wondered about two things: 1) What does this cost? 2) How is this accomplished? What do they do?
How does ROTH Blueprint manage a ROTH conversion?
ROTH Blueprint manages it by modeling a multi-year conversion plan and optimizing how much to convert each year. It tests tax brackets and IRMAA tiers against your account size, filing status, and income, then searches for the plan that maximizes lifetime after-tax wealth while respecting constraints like how long you want the conversion to take. In practice, it asks for basic inputs like age, traditional IRA balance, Roth balance, and Social Security status, then generates an illustrative report with the optimal conversion path. This sounds marvelous and simple! But what are the costs?
The Zoom Call with Roth Blueprint
I had a Zoom call with a representative of Roth Blueprint. I wanted to learn more to see if I could use this or if I could recommend it to others. She asked me about our investments and some other general questions. She then started her pitch and made it clear that she felt I could benefit from their services. That is when I started asking questions. What I learned caused me to recoil from the “solution” they offer.
I wanted to know where this work was done. She said my assets in my traditional IRA would move out of Fidelity Investments to another platform. It wasn’t clear what that platform would be or if I would have visibility or any control over what was being done. That is not attractive to me.
I asked if I would be able to trade options contracts on the assets. The answer was “no.” Because I have already earned over $100KK this year trading options contracts, that is a huge negative.
The Fees and the Bad Word “Annuity”
The question about fees is always on my mind. When I asked what the fees were, she said that there were no fees. That rang a bunch of warning bells in my mind. She used the word “annuity” and that made it clear that they were going to convert my traditional IRA assets from my holdings to a ROTH IRA that held an annuity. What a terrible idea!
They convert the IRA to a Roth IRA, then buy the annuity inside the Roth. As expected, in the year of the conversion, you will usually owe income tax on the amount converted because traditional IRA assets are pre-tax. After the Roth IRA exists, you can purchase an annuity inside the Roth IRA. In that case, the annuity itself sits inside the Roth, but the conversion tax is still driven by the Roth conversion amount (i.e., you don’t “avoid” the conversion tax just by buying an annuity).
Are There Reviews and Customer Experiences?
There are no good reviews to know if the Roth Blueprint was really delivering to their client base. Furthermore, they aren’t the only ones trying to sell solutions.
Skepticism and Concerns
Among experienced investors and financial planners, several themes come up when discussing Roth conversion software in general—and they apply to Roth Blueprint’s proprietary solution as well:
“Proprietary” doesn’t necessarily mean better. Many planners point out that several respected tools (Income Lab, Holistiplan, RightCapital, Boldin/NewRetirement, MaxiFi) also perform sophisticated Roth conversion analyses. Some advisors question whether any proprietary optimization engine consistently produces meaningfully better recommendations.
Marketing claims don’t always translate into reality. Roth Blueprint advertises examples suggesting clients can preserve their starting retirement value while converting assets and paying the associated taxes. The company describes this as an optimization strategy, but prospective clients should ask exactly how the strategy works, what products (if any) are involved, and what assumptions are required. Also know that Blueprint is not providing individualized tax, investment, or legal advice. This is not a one-stop solution.
Questions I Always Consider
If I were evaluating Roth Blueprint before hiring an advisor who uses it, I would ask:
- What products, if any, are recommended as part of the strategy?
- How is the advisor compensated (fee-only, commission, assets under management, or a combination)?
- Can they show how the recommendation compares with a simple annual tax-bracket-filling Roth conversion?
- Can they provide a sensitivity analysis showing how different assumptions (investment returns, tax rates, lifespan) affect the recommendation?
- What are the total implementation costs, including advisory fees, product expenses, and potential surrender charges if insurance products are involved?
8 Factors to Consider When Considering a Roth Conversion
“Roth conversions, which transform traditional IRAs into Roth IRAs, are a powerful retirement and tax tool. Here are eight facts to get you started.” SOURCE: Kiplinger
Craig Wear
Another resource I often see mentioned is Craig Wear. I haven’t explored his solutions, but I would be more inclined to work with him than Roth Blueprint. He also has a free book that you can download for free.
Another Free Book from Blueprint
I also clicked on a link and found another free book from the Roth Blueprint website. It will come in the mail. I’m curious and I suspect it is a marketing gimmick.
There are good reasons to consider a ROTH conversion. In our situation, the ability to generate significant income from trading options is an important piece of the puzzle. Each asset that is moved from the traditional IRA to the ROTH can generate additional tax-free income in the ROTH IRA. Of the $100K of options income received YTD, $20,157 is in my ROTH IRA. I could have withdrawn those dollars tax-free.
That is only part of the equation. In addition to the options income, my ROTH IRA has generated $43,125.50 in dividend income YTD. Therefore, the total income YTD is over $63,000. The IRS doesn’t get to take any of it.
Therefore, when you are thinking about using a service, ask a lot of questions. I’m willing to help you navigate this if you have a traditional IRA (or a 401(k)) and you don’t know where to begin.
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