Roth IRA Conversion Calculator
Calculates the after-tax future value of converting a traditional IRA to a Roth IRA versus keeping it as-is. Use it when evaluating whether a conversion makes sense given your current and expected future tax rates.
About this calculator
When you convert a traditional IRA to a Roth IRA, you pay ordinary income tax on the converted amount today, but all future growth is tax-free. The net benefit formula used here is: netValue = conversionAmount × (1.06)^yearsToRetirement × (1 − retirementTaxRate) − conversionAmount × currentTaxRate − conversionAmount × currentTaxRate. The first term represents the future value of the converted funds grown at 6% annually, taxed at your expected retirement rate. The two subtracted terms represent the immediate tax cost paid out of pocket. A conversion is advantageous when your current marginal tax rate is lower than your expected retirement rate, or when you have decades for tax-free compounding to outweigh the upfront tax hit.
How to use
Assume you convert $20,000, your current tax bracket is 22%, your expected retirement bracket is 25%, and you have 20 years until retirement. Step 1 — grow the conversion: $20,000 × (1.06)^20 = $20,000 × 3.2071 = $64,142. Step 2 — subtract retirement tax: $64,142 × (1 − 0.25) = $48,107. Step 3 — subtract the two tax-cost terms: $48,107 − ($20,000 × 0.22) − ($20,000 × 0.22) = $48,107 − $4,400 − $4,400 = $39,307 net value. A higher future tax rate makes conversion more attractive.
Frequently asked questions
When does converting a traditional IRA to a Roth IRA make financial sense?
A Roth conversion is generally most beneficial when your current marginal tax rate is lower than the rate you expect in retirement. This can happen if you are in a low-income year, have recently retired but not yet started taking required minimum distributions (RMDs), or anticipate tax rates rising broadly. The longer your time horizon, the more tax-free compounding can offset the upfront tax payment. Running a conversion calculator for multiple scenarios helps identify the optimal conversion amount.
What taxes do I owe when I convert a traditional IRA to a Roth IRA?
The converted amount is added to your ordinary taxable income in the year of conversion and taxed at your marginal federal (and potentially state) income tax rate. There is no 10% early-withdrawal penalty on conversions, even if you are under 59½, as long as you do not withdraw the converted funds within five years. Ideally, you pay the conversion tax using money outside the IRA so the full converted balance can compound tax-free. Large conversions can push you into a higher bracket, so partial conversions spread across multiple years are a common strategy.
How does a Roth IRA conversion affect required minimum distributions in retirement?
Traditional IRAs require you to begin taking required minimum distributions (RMDs) at age 73, forcing taxable withdrawals whether you need the money or not. Roth IRAs have no RMDs during the owner's lifetime, so converted funds can continue growing tax-free indefinitely. This makes conversions especially attractive for individuals with large traditional IRA balances who want to reduce future RMD-driven tax burdens or leave a tax-free inheritance to heirs. Eliminating or reducing RMDs can also lower Medicare premium surcharges tied to income.