Roth IRA Alternative

Frequently Asked Questions

Q. What is the purpose of The Roth IRA Alternative software?
A. To answer the following questions for your customer in a precise, clear, understandable way:

"Should I convert my Ordinary IRA to a Roth IRA?"
"If so, what are the benefits? The costs?"

Q. Is The Roth IRA Alternative just a number calculator or is it a sales tool?
A. It calculates accurate numbers, but its primarily purpose is to persuade people to convert their current IRA to a Roth IRA when it is in their best interest to do so. The reports are clear, concise, and understandable. Confused customers never buy anything. They "shop around" or "think about it."

Q. What are some of its unique calculation assumptions?
A. The Roth IRA Alternative assumes that IRA deposits and taxes are paid on April 15th of each year. Calculations are performed daily. This software takes into account the fifteen month compound interest advantage one has by converting his/her Ordinary IRA to a Roth IRA on January 1, 1998, then waiting until April 15, 1999 to pay the first installment of the resulting additional taxes.

Q. How is the Roth IRA death benefit calculated?
A. Assume a 100,000 Roth IRA conversion takes place on January 1, 1998 for a customer in a 28% tax
bracket. In 1998, since no taxes have yet been paid, the software assumes that the entire balance is
taxable upon death. In 1999, the customer has paid one fourth of the taxes due, so the software subtracts
$25,000 from the Roth IRA accumulation value then calculates income taxes on the balance. In 2000 it
subtracts $50,000 from the balance and 2001 $75,000 from the balance. The Roth IRA is assumed to be
entirely income tax free -- even on the increase -- if the customer dies thereafter.

Q. Explain the "Side Fund." I find the negative side fund on the Roth IRA ledger confusing.
A. Keep in mind that The Roth IRA Alternative is conceptual in nature, not a projection of future results. The side fund is a purely hypothetical way of showing the compound interest effect, or opportunity cost, of the income tax differences between an Ordinary IRA vs a Roth IRA. Contributions into an Ordinary IRA are deductible whereas in a Roth IRA they are not. For this reason the Ordinary IRA shows a side fund with a positive value earning interest. Your customer, conceptually at least, could be earning interest on the income tax savings they realize each year from their Ordinary IRA.

On the other hand, your customer must pay taxes to convert their Ordinary IRA to a Roth IRA. This money must come from somewhere. Most people will increase the withholding from their paycheck and pay the taxes out of their income. Some will take the money from savings, and still others will borrow the money. It doesn’t matter. Conceptually, your customer will lose the interest they could have earned on the money they used to pay these taxes. This is why the side fund shows a negative number on the Roth IRA ledger.

Don’t let the Side Fund columns confuse the sale. Keep the Roth IRA concept simple. For most people tax-free retirement income far outweighs today’s income tax deduction. This is the whole story behind these columns of numbers.

Q. Should I print every report for every customer?
A. No. The software allows you to print or not to print certain reports based upon each customer’s needs. We recommend that you print a cover page, summary page, comparison ledger, and after-tax income to-date graph for each customer. The current IRA ledger and Roth IRA ledger pages are designed for more mathematical, technical, customers.

Q. What is the price of The Roth IRA Alternative software?
A. $79.95 for an individual license. Company licenses are also available.

Q. Why is the price so high?
A. Others have asked why the price is so cheap. Price is largely a matter of perspective. Have you ever bought anything based solely on price? My mother has. She once thought she had a tremendous bargain when she bought a pair of leather gloves for only ninety-nine cents. After she got home she discovered that she had bought two left gloves, and her "bargain" was a total waste of money.

We believe that the benefits you will receive from using The Roth IRA Alternative will far outweigh the price you pay for it. I know a carpenter who spent $50 on a hammer. This seems like a lot of money until you consider that he made his living last year pounding nails with that hammer. We hope that our software will help you make the most of "The Year of the Roth!"

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