Roth IRA Conversion Analyzer
Estimate the long-term financial benefit of converting a traditional IRA to a Roth IRA after taxes. Use it when you expect your retirement tax rate to exceed your current rate.
About this calculator
A Roth conversion means paying tax on the converted amount now in exchange for tax-free growth and withdrawals later. The net benefit formula compares two outcomes. The after-tax value of the converted amount if left to grow and withdrawn in retirement is: rothValue = conversionAmount × (1 + expectedReturn / 100)^yearsToRetirement × (1 − retirementTaxRate / 100). The immediate tax cost of converting is: conversionTax = conversionAmount × (currentTaxRate / 100). Net benefit = rothValue − conversionTax. A positive result means conversion is mathematically advantageous over the time horizon. The strategy is most powerful when current tax rates are low, retirement tax rates are expected to be high, and there is a long investment horizon for tax-free compounding to work.
How to use
Suppose you convert $30,000, your current tax rate is 22%, your expected retirement tax rate is 24%, you have 20 years until retirement, and you expect a 7% annual return. Step 1 — Future value of conversion: $30,000 × (1.07)^20 = $30,000 × 3.8697 = $116,091. Step 2 — After-tax retirement value: $116,091 × (1 − 0.24) = $88,229. Step 3 — Immediate tax cost: $30,000 × 0.22 = $6,600. Step 4 — Net benefit: $88,229 − $6,600 = $81,629. Converting yields $81,629 in after-tax retirement wealth versus paying $6,600 today.
Frequently asked questions
When does it make financial sense to convert a traditional IRA to a Roth IRA?
A Roth conversion is most beneficial when your current marginal tax rate is lower than the rate you expect to face in retirement. Common scenarios include a year with unusually low income, early retirement before Social Security begins, or anticipation of future tax rate increases. The longer the money has to grow tax-free after conversion, the greater the compounding benefit. Running the numbers with this calculator for different conversion amounts helps identify the optimal conversion size.
How much tax will I owe on a Roth IRA conversion?
The converted amount is added to your ordinary taxable income in the year of conversion and taxed at your marginal federal (and state) income tax rates. For example, converting $30,000 in the 22% bracket triggers approximately $6,600 in federal tax. Converting large amounts can push you into a higher bracket, so many advisors recommend partial, multi-year conversions to manage the tax bill. It is critical to pay the conversion tax from non-IRA funds if possible, so the full converted balance can compound tax-free.
What is the break-even point for a Roth IRA conversion strategy?
The break-even point is the year at which your accumulated tax-free Roth growth surpasses the after-tax value of simply leaving the money in the traditional IRA. It depends on the gap between your current and future tax rates, the investment return, and the years until retirement. If your current and retirement tax rates are identical, the break-even approaches infinity and conversion offers no advantage. Generally, a 20+ year horizon with a 2+ percentage-point tax rate difference creates a compelling case for conversion.