How do Roth conversions work in preretirement?

By default, an Income Lab plan with Roth conversions (bracket management) will only allow Roth conversions once the income plan has begun. 

Pre-retirement years won't contain Roth conversions unless you explicitly allow them by going to the plan's Advanced Settings > Taxes section and clicking Specify years when Roth conversions are allowed.

Next, click Customize years and choose when Roth conversions will be allowed.

If you want to allow them in all years, click Select All.

If you allow Roth conversions in years before the income plan begins, the software will calculate those conversions and pay taxes in the following way:

1. Determine the net-of-tax income in each pre-retirement year.
2. Take Roth conversions in such a way that this net-of-tax income is maintained.
3. Taxes for the Roth conversions will be paid (i) first from any available excess non-portfolio income (wages, etc.), (ii) then from taxable accounts, and (iii) finally by netting out the Roth conversion amount from the tax-deferred account withdrawal(s).

In order for Roth conversion calculations to be useful in pre-retirement, you'll want to be sure the pre-retirement phase of the plan contains all household income. Otherwise, (1) will not be correct.

If you are including years when clients are not yet 59 1/2, be on the lookout for any possible early withdrawal penalties for the final way of paying taxes (3iii).