Roth Conversion Calculator
Estimate the tax cost and long-term benefit of converting a traditional IRA or 401(k) to a Roth IRA.
Roth Conversion Calculator
Calculator
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Formula: Tax Cost = Amount x Current Rate | Future Benefit = Amount x (1+r)^n x (1 - Future Rate) | Traditional Future = Amount x (1+r)^n x (1 - Futu…
Worked example — Roth advantage: $61,740 by converting now
Formula
Tax Cost = Amount x Current Rate | Future Benefit = Amount x (1+r)^n x (1 - Future Rate) | Traditional Future = Amount x (1+r)^n x (1 - Future Rate)
Roth conversion means paying taxes now at your current rate to avoid paying taxes in retirement. It benefits you if your future tax rate will be higher, or if you have a long time horizon for tax-free growth.
Worked Examples
Example 1: $50K conversion at 24%
Problem:Convert $50K, 24% now vs 32% future, 20 years, 7% return
Solution:Tax now: $12K. Roth grows to $193K tax-free. Traditional $193K taxed at 32% = $131K.
Result:Roth advantage: $61,740 by converting now
Frequently Asked Questions
When should I do a Roth conversion?
Consider converting when: your income is temporarily low (job loss, sabbatical), you expect higher future tax rates, you want to reduce RMDs, or you want tax-free inheritance for heirs.
Are there limits on Roth conversions?
No income limits or maximum amount for Roth conversions (unlike Roth IRA contributions). However, the converted amount is taxable as ordinary income in the year of conversion.
How does a Roth conversion affect required minimum distributions (RMDs)?
Roth IRAs are not subject to RMDs during the account owner's lifetime, unlike traditional IRAs which require withdrawals starting at age 73. Converting to a Roth can reduce or eliminate future RMDs, giving you more control over your taxable income in retirement and potentially reducing Medicare IRMAA surcharges.
What is a backdoor Roth conversion and who uses it?
High earners above the Roth IRA income limits ($161,000 single / $240,000 married in 2024) can contribute to a non-deductible traditional IRA and then immediately convert it to a Roth. This strategy, known as the backdoor Roth, allows anyone to get money into a Roth IRA regardless of income, though pro-rata rules apply if you have other pre-tax IRA funds.
What is the five-year rule for converted amounts?
Each Roth conversion starts its own five-year clock. If you withdraw converted principal before that conversion is five years old and you are under 59.5, the 10% early-distribution penalty can apply even though the tax was already paid at conversion. A separate five-year rule governs whether earnings come out tax-free. Because the clocks are tracked per conversion, a series of annual conversions creates a series of staggered dates worth documenting.
Why should the conversion tax be paid from outside the retirement account?
Paying the tax from taxable savings lets the entire converted balance move into the Roth and keep compounding tax-free, which is where the advantage in Roth Conversion Calculator comes from. If you instead have tax withheld from the IRA, that withheld money never reaches the Roth, and if you are under 59.5 it is generally treated as an early distribution subject to penalty. Funding the tax externally effectively shifts extra wealth into the tax-free wrapper.
How can converting push part of my income into a higher bracket?
A conversion is ordinary income stacked on top of your wages, pensions and other taxable income for that year. A large conversion can therefore be taxed at several marginal rates, not the single current rate Roth Conversion Calculator assumes. Many people convert in slices sized to fill the remainder of a target bracket, repeating over several years, so the blended rate paid on conversion stays below the rate they expect to face later.
What is the difference between a Roth conversion and a Roth contribution?
A contribution is new money, limited by an annual dollar cap and phased out above certain income levels. A conversion moves money that is already inside a pre-tax traditional IRA or employer plan into a Roth, has no dollar cap and no income limit, and adds the pre-tax amount to your taxable income for the year. Conversions are a tax-timing decision about existing savings, while contributions are a savings decision about new dollars.
How do the pro-rata rules affect converting nondeductible IRA money?
For conversion purposes the IRS aggregates all your traditional, SEP and SIMPLE IRAs and treats them as one pot. The tax-free share of any conversion equals your total after-tax basis divided by the total balance across those accounts, so you cannot isolate the nondeductible dollars. Someone with a large pre-tax rollover IRA will therefore find most of a backdoor conversion taxable. Rolling pre-tax IRA money into an employer 401(k) first is the usual workaround.
What knock-on effects can a large conversion have in the conversion year?
Because a conversion raises adjusted gross income, it can ripple into income-tested items: the share of Social Security benefits that becomes taxable, Medicare premium surcharges that look back at an earlier tax year, marketplace health-insurance subsidies, and thresholds for the net investment income tax. None of these appear in the simple rate comparison above, so a conversion that looks free at the margin can carry hidden cost. Review the year with a tax professional before converting.
References
Reviewed for accuracy by Sahil, Senior Finance & Tax Editor · Editorial policy
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