Finance
Roth Conversion Calculator
Compare keeping a traditional IRA or 401(k) versus converting to Roth: pay tax now for tax-free growth or defer tax until retirement.
Roth conversion comparison
Recommendation
Convert
Converting wins by $85,133 after taxes at retirement.
Break-even retirement tax rate: 24.00%
Path A: Keep traditional
- Future value (pre-tax)
- $386,968
- After-tax in retirement
- $301,835
Path B: Convert to Roth
- Tax owed at conversion
- $24,000
- Roth starting balance
- $100,000
- Tax-free at retirement
- $386,968
Before you convert, consider
- Roth IRAs are not subject to required minimum distributions (RMDs) during the original owner's lifetime, while traditional IRAs are.
- A large Roth conversion can push you into a higher tax bracket and trigger IRMAA Medicare premium surcharges in retirement.
- Roth balances pass to heirs income tax free, which can make conversions attractive for estate planning.
- Paying the conversion tax with funds from outside the IRA (instead of from the conversion itself) almost always improves the outcome.
- The five-year rule applies to converted Roth funds: each conversion has its own five-year clock before earnings can be withdrawn tax free.
Estimate only. Ignores opportunity cost of outside funds used to pay conversion tax, state estate rules, and changes in tax law. Consult a tax advisor before converting.
Frequently Asked Questions about the Roth Conversion Calculator
How does this Roth conversion calculator work?
It compares two paths over your time horizon. Path A keeps the money in a traditional IRA or 401(k), grows it tax-deferred, and applies your expected retirement tax rate. Path B pays income tax on the converted amount today at your current marginal rate, then grows the after-tax balance tax-free in a Roth.
When does a Roth conversion usually make sense?
Conversions tend to win when your tax rate in retirement will be higher than today, when you have many years until withdrawals so tax-free growth compounds, and when you can pay the conversion tax with funds from outside the retirement account.
Why does paying the conversion tax from outside funds matter so much?
If you pay the tax out of the conversion itself, you shrink the Roth starting balance and lose decades of tax-free compounding on that amount. Converting $100,000 at 24% leaves only $76,000 in the Roth, which grows to about $294,096 at 7% over 20 years. Paying tax from outside keeps the full $100,000 working, which grows to about $386,968.
What is the break-even retirement tax rate?
It is the retirement marginal rate at which the after-tax outcomes of the two paths are equal. Under the simplified comparison, that rate equals your current marginal rate. If you expect to be taxed above it in retirement, conversion wins; below it, keeping traditional wins.
What does this calculator not account for?
It does not model the opportunity cost of outside tax-paying funds, future tax law changes, the pro-rata rule for IRAs with mixed pre-tax and after-tax money, the Roth five-year rule for converted funds, IRMAA Medicare surcharges, or state estate rules. Run scenarios with a tax advisor for large conversions.