Roth IRA Conversion Calculator
Decide whether converting Traditional IRA funds to Roth makes financial sense.
What this calculator does
This calculator compares leaving money in a Traditional IRA against converting it to a Roth. It grows both forward at your expected return over the years to retirement, applies your marginal rate to the Traditional balance at the end, and shows the two after-tax values side by side with the difference expressed as the Roth advantage.
The comparison assumes the conversion tax is paid from outside funds, which is the assumption that makes the Roth look strong and also the way conversions should be done. If you have to raid the IRA to pay the tax, the advantage shrinks considerably and the case for converting weakens with it.
When to use it
The highest-value moment is the low-income window between leaving work and turning 73, before Social Security and required minimum distributions push you into a higher bracket permanently. A retiree at 63 with modest income can often convert six figures at 12 to 22 percent that would later be taxed at 24 or more.
It is also the right tool during any unusually low-income year: a career break, a business loss, a year of graduate study, or the first year of self-employment. And it belongs in any conversation about leaving money to children, since the ten-year rule on inherited IRAs makes their marginal rate the one that matters.
Understanding the inputs
Current savings should be the Traditional balance you are actually considering converting, not your entire retirement portfolio, since conversions are usually done in tranches rather than all at once. Years to retirement drives how long tax-free growth has to compound, and the longer that runway, the stronger the case for converting.
Expected return applies identically to both paths, so it does not decide the answer, but a higher return magnifies whichever side is ahead. The tax rate assumption is what really matters, and the honest version is a comparison: your marginal rate in the year of conversion against your expected rate when the money would otherwise be withdrawn.
How is this calculated?
Compares Traditional (after-tax) balance vs Roth (tax-free) balance over the years to retirement.
A worked example
Converting $100,000 at a 24 percent marginal rate costs $24,000 in tax, paid from a taxable account. Over 20 years at 7 percent the Roth grows to roughly $387,000, all of it spendable. Leave it in the Traditional IRA and it reaches the same $387,000, but withdrawing it at 24 percent leaves about $294,000.
The conversion looks $93,000 ahead, but that is only fair if the $24,000 tax truly came from outside. Had that $24,000 been invested instead, it would itself have grown to roughly $93,000 pre-tax. So the real advantage depends almost entirely on rates: if your retirement rate falls to 12 percent, the Traditional keeps about $341,000 and converting loses.
Limitations and assumptions
This is a projection under assumptions rather than advice. It uses one flat return, one marginal rate at each end, and a single conversion, when real conversion strategies run over many years and interact with bracket boundaries each time. Sequence-of-returns risk means the balances could differ materially from the projection.
It also excludes state income tax, which can swing the answer entirely if you expect to move states, the pro-rata rule, the five-year clocks, Medicare IRMAA surcharges triggered two years later, the effect on Social Security taxation, and the loss of the ability to reverse the decision. Model the year with a tax professional before converting a large amount.
Common Questions
- What is a Roth conversion?
- Moving money from a Traditional IRA or 401(k) into a Roth IRA and paying ordinary income tax on the converted amount in that year. There is no income limit and no dollar cap on conversions. In exchange, the money grows and is withdrawn tax-free thereafter, with no required minimum distributions.
- When does converting actually pay off?
- When your marginal rate today is lower than the rate that would apply to the same money later. The classic window is between retiring and starting Social Security or RMDs at 73, when taxable income can be unusually low. Converting into that gap is often the single most valuable tax move a retiree makes.
- Should I pay the tax from the IRA itself?
- Ideally not. Paying from outside funds means the entire converted balance keeps compounding tax-free, which is where most of the benefit comes from. Withholding the tax from the conversion shrinks the Roth immediately and, if you are under 59 and a half, the withheld amount is treated as a taxable early distribution.
- What is the five-year rule?
- Each conversion has its own five-year clock before the converted principal can be withdrawn penalty-free if you are under 59 and a half. There is also a separate five-year rule for earnings to be qualified. This is why Roth conversion ladders in early retirement are built five years ahead of when the money is needed.
- What is the pro-rata rule?
- If you hold any pre-tax money across all Traditional, SEP and SIMPLE IRAs, a conversion is taxed proportionally across pre-tax and after-tax balances. You cannot convert only the after-tax portion. Rolling pre-tax IRA balances into a 401(k) first is the usual way to clear the path for a clean backdoor conversion.
- Can I undo a conversion?
- No. Recharacterisation of conversions was eliminated by the Tax Cuts and Jobs Act at the end of 2017. Once converted, it is permanent, even if the market falls immediately afterwards. That irreversibility argues for converting in several smaller tranches through the year rather than one large one.
- Will a conversion raise my Medicare premiums?
- It can, and this catches many retirees. IRMAA surcharges are based on modified AGI from two years earlier, so a large conversion at 63 raises Part B and Part D premiums at 65. The brackets are cliffs, not phase-ins, so a few hundred dollars over a threshold costs the full step.
- How much should I convert in one year?
- Usually the amount that fills your current bracket without spilling into the next. If you have $40,000 of taxable income and the 22 percent bracket runs to about $103,000 for a single filer, converting roughly $63,000 keeps every converted dollar at 22 percent. Bracket-filling is the standard approach.
- Does converting help my heirs?
- Substantially. Non-spouse beneficiaries must empty an inherited IRA within ten years. Inheriting a Traditional IRA means ten years of taxable income arriving during a beneficiary's peak earnings; an inherited Roth arrives tax-free. Converting at your rate rather than theirs can be a large family-level saving.
- Is a market downturn a good time to convert?
- Yes, mechanically. Converting $100,000 of shares that were worth $130,000 last quarter moves the same number of shares while paying tax on a smaller amount, and the recovery then happens inside the Roth. Depressed valuations plus a low-income year is the strongest combination for converting.