Roth IRA Conversion Calculator
Estimates the net long-term benefit of moving traditional IRA funds into a Roth IRA after accounting for taxes paid now versus taxes avoided later. Use it when evaluating whether a conversion makes sense in a low-income year.
About this calculator
A Roth conversion means moving pre-tax money from a traditional IRA into a Roth IRA and paying ordinary income tax on the converted amount today, in exchange for tax-free withdrawals in retirement. The net benefit formula used here is: Benefit = conversionAmount × (1 + r)^n − conversionAmount × (currentTax%) − conversionAmount × (1 − currentTax%) × (1 + r)^n × (retirementTax%), where r is the expected annual return and n is years to retirement. The first term is the gross future value of the converted amount. The second term is the tax you pay now. The third term is the retirement tax you avoid on the after-tax remainder grown to the future. A positive result means the Roth conversion wins; a negative result favors keeping funds in the traditional IRA. Conversions are most advantageous when your current tax bracket is lower than your expected retirement bracket.
How to use
Suppose you convert $20,000, your current tax bracket is 22%, your retirement tax bracket is 24%, and you have 20 years until retirement with a 7% expected return. Gross future value: $20,000 × (1.07)^20 = $77,394. Tax paid now: $20,000 × 0.22 = $4,400. After-tax Roth base: $20,000 × 0.78 = $15,600, which grows to $15,600 × (1.07)^20 = $60,367. Retirement tax avoided: $60,367 × 0.24 = $14,488. Net benefit = $77,394 − $4,400 − $14,488 = $58,506. The positive value indicates the Roth conversion adds long-term value in this scenario.
Frequently asked questions
When does converting a traditional IRA to a Roth IRA make financial sense?
A Roth conversion is most beneficial when your current marginal tax rate is equal to or lower than the rate you expect to pay in retirement. This often occurs during a career gap, early retirement before Social Security begins, or years with unusually large deductions. It also makes sense if you want to leave tax-free assets to heirs, since Roth IRAs have no required minimum distributions during the owner's lifetime. Running the numbers with a Roth conversion calculator for your specific bracket situation is the best first step.
How does a Roth IRA conversion affect my taxes in the year I convert?
The converted amount is added to your ordinary taxable income in the year of conversion, which can push you into a higher marginal bracket if not managed carefully. You will owe federal (and possibly state) income tax on the full converted amount. It can also trigger phaseouts for other deductions or credits, such as the premium tax credit for ACA health insurance. Many advisors recommend spreading a large conversion across multiple tax years to stay within a target bracket rather than converting a lump sum at once.
What is the difference between a Roth IRA and a traditional IRA for retirement withdrawals?
Traditional IRA contributions are typically tax-deductible, and withdrawals in retirement are taxed as ordinary income. Roth IRA contributions are made with after-tax dollars, but qualified withdrawals — including all growth — are completely tax-free. Traditional IRAs require minimum distributions starting at age 73 under current law, whereas Roth IRAs have no such requirement during the owner's lifetime. This makes Roth accounts particularly powerful for people who do not need the money immediately in retirement and want to pass wealth to beneficiaries efficiently.