For both the young and the old, Apple's iPhone has become an indispensable part of day-to-day life, so it seemed the most natural platform for Chicago-based accounting and tax firm the NDH Group to launch its RothCalc2010, an iPhone application available for $0.99 designed to help investors determine whether it makes sense for them to convert from a traditional IRA to a Roth IRA. (For further reporting on determining whether to convert, please click here.
"We have seen many of our own clients ask about the benefits and detriments of making the conversion [to a Roth IRA], and we developed this tool originally for them," says Joe Mizzi, RothCalc2010 developer and NDH Associate. "But if our clients were interested in something like this, we knew others would be, too, so we wanted to make something accessible to all, and the iPhone was the best way to get it out to the public."
The iPhone, says Jeremy Dubow, a partner at NDH, continues to gain popularity, and is one of the simplest venues for the kinds of quick, simple, and easy-to-use applications that many investors are seeking these days. The RothCalc2010 application computes the after-tax present value of an individual's retirement income stream and determines if converting to a Roth IRA makes good financial sense or not.
Using a few basic inputs–an individual's age, when they plan to retire, and their tax rate information–the application can modify variables such as future tax rates and investment growth rates, Dubow says, and can also run scenarios to recognize Roth conversion income in 2010 versus deferring it to 2011 and 2012. "It is clear that almost all taxpayers are considering the conversion for 2010, but not everyone has a tax advisor or an investment advisor, so we wanted to develop a tool that can give an answer," Dubow says. "For some people, the decision will be a slam-dunk, but there will also be people on the margins who can take the result given by the application to a tax advisor or investment advisor, who can then help them further with their decision."
Whether or not to convert to a Roth IRA is one of the biggest decisions Americans need to make with respect to their future retirement savings, says Maria Bruno, an analyst in Vanguard's investment strategy group and a Roth IRA expert. As of January 1, legislative changes have made it possible for individuals to convert from their traditional IRAs regardless of their income or tax filing status, and if they convert this year, they can postpone the tax due for the conversion and pay it off over the next few years. "We have seen increased traffic to our Web site for [the Roth IRA conversion] and increased client interest in terms of the number of calls we're receiving on the topic," Bruno says.
According to Cambridge, Massachusetts-based Cogent Research's 2010 Investor Brandscape Study, a greater number of investors are favoring IRAs over 401(k) and other employer-sponsored plans. For the first year since Cogent started the tracker in 2006, affluent investors report having more dollars allocated to IRAs than to employer-sponsored retirement plans, says Meredith Lloyd Rice, a project director at Cogent and one of the authors of the Brandscape Study.
