Roth Conversion Calculator - Pay Tax Now vs Tax-Free Future Value

Why $50,000 at 22% Now Can Beat 24% Later If You Pay Tax From Outside

Roth conversion is a bracket trade. You pay tax now at current rate to avoid paying later at future rate. Math changes based on where tax money comes from. If you pay tax from outside savings, full converted amount grows tax-free. If you pay from conversion itself, Roth starts smaller.

Florida example — $50,000 to convert, current bracket 22%, future bracket 24%, 20 years, 7% return. Tax now = $50,000 × 0.22 = $11,000. If paid from outside, Roth start = $50,000. Future factor = 1.07^20 = 3.86968. Future Roth tax-free = $50,000 × 3.86968 = $193,484. Future traditional = $50,000 × 3.86968 = $193,484 growth, then tax at 24% = $193,484 × 0.76 = $147,048 after tax. Advantage Roth = $46,436. Breakeven future bracket is 22% — any future rate above 22% makes Roth ahead when tax paid outside.

California example — same $50k, 24% now, 24% future, 20 years 7%, tax paid from inside. Tax now $12,000, Roth start $38,000. Future Roth = $38,000 × 3.86968 = $147,048. Future traditional after tax at 24% = $147,048. Tie. If future bracket rises to 32%, Roth ahead by $30,958 even when tax paid inside, because Roth locks current rate.

Texas example — $120,000 conversion in low income year, 12% now, 22% future, 15 years 7%, outside payment. Tax now $14,400. Future Roth = $120k × 2.75903 = $331,084 tax-free. Traditional after tax = $331,084 × 0.78 = $258,245. Advantage $72,839. That is why many convert between retirement and RMD age when bracket drops.

How To Use This Without Pushing Bracket

First — Enter real balance to convert. Use amount you are considering this year, not total IRA. Example $50,000 converts $50k of $300k IRA. If you have $200k traditional, you can convert $40k yearly for 5 years to stay in 22% bracket.

Second — Enter current and future brackets honestly. Current = marginal rate on conversion — check Form 1040 taxable income plus conversion. Future = rate when you would withdraw traditional — if RMDs push you from 22% to 24% or add IRMAA, use higher.

Third — Set years and return and pay-from choice. Years until withdrawal is how long Roth grows — 20 years in example. Return 7% is growth assumption. Pay-from outside keeps full Roth, inside reduces Roth start. Outside is better if you have cash.

Fourth — Review tax now, future values and advantage. Top shows tax now. Boxes show future Roth tax-free, future traditional after tax, advantage positive if Roth ahead, Roth start after tax. Bottom bar shows breakeven future bracket — rate where both equal. Snapshot explains in one line.

How This Calculator Figures Roth Conversion — Formula and Sources

Source: IRS Publication 590-A for Roth conversion taxation, IRS Publication 590-B for RMD and 5-year rules, SECURE 2.0 RMD age 73 if born 1951-1959, 75 if born 1960+, TCJA Jan 1 2018 no reversal. Uses your new incremental formula.

DEFINITIONS
Balance = Amount you want to convert (pre-tax)
OtherIncome = Other taxable income this year
CurRate() = Tax function that returns tax for a given income
TaxNow = CurRate(OtherIncome + Balance) - CurRate(OtherIncome) [incremental, not Balance*rate]
r = Expected annual return / 100
n = Years until you need the money
tCap = Capital gains tax drag on taxable account ~ 0.15-0.23
FutBracket = Future ordinary tax % on Traditional withdrawal / 100

GROWTH
GF = (1 + r)^n

ROTH SIDE
If pay tax from OUTSIDE (taxable account):
  RothStart = Balance
  OutsideCost = TaxNow * GF * (1 - tCap) // what that tax money would have become
If pay tax from INSIDE (from the IRA):
  RothStart = Balance - TaxNow
  OutsideCost = 0

FutureRoth = RothStart * GF // tax-free if: Roth IRA 5+ years old AND age 59.5+ (Pub 590-B)

TRADITIONAL SIDE (if you don't convert)
FutureTrad = Balance * GF * (1 - FutBracket)
// NOTE: If you are 73+ during the n years, GF is lower because you must take RMDs.
// For exact: loop each year: Balance = Balance*(1+r) - RMD, RMD = Balance / Factor

COMPARISON
Advantage = FutureRoth - FutureTrad - OutsideCost

If pay from INSIDE: Roth wins if FutBracket > CurBracket (effective)
If pay from OUTSIDE: Roth wins even if FutBracket is ~5-10% LOWER than CurBracket
Breakeven FutBracket = CurBracket * (1 - benefit of paying outside)

RULES - MUST ADD
1. RMDs cannot be converted - take RMD first if age 73+
2. 5-Year Rule: conversion principal always tax-free, earnings tax-free after 5 years + age 59.5
3. Conversion is not reversible since Jan 1, 2018 (TCJA)
4. SECURE 2.0: RMD age 73 if born 1951-1959, 75 if born 1960+

• IRS Pub 590-A • Pub 590-B • SECURE 2.0 RMD 73/75 • 2022 IRS Tables • 5-Year Rule • Form 5329

Verified with $50,000, OtherIncome $80k, 22% now, 24% future, 20 yrs, 7% outside, tCap 15%:

• TaxNow = CurRate(80k+50k) - CurRate(80k) = 50,000 × 0.22 = $11,000 incremental
• RothStart = $50,000 (outside payment)
• GF = 1.07^20 = 3.86968446
• FutureRoth = 50,000 × 3.86968446 = $193,484.22 tax-free
• OutsideCost = 11,000 × 3.86968446 × 0.85 = $36,181.60
• FutureTrad = 50,000 × 3.86968446 × 0.76 = $147,048.01 after tax at 24%
• Advantage = 193,484.22 - 147,048.01 - 36,181.60 = $10,254.61 Roth ahead after drag

Verified with $50,000, 24% now, 24% future, 20 yrs, 7% inside, tCap 15%: TaxNow $12,000, RothStart $38,000, FutureRoth $147,048.01, FutureTrad after tax $147,048.01, OutsideCost 0, Advantage $0 tie — if outside, Advantage +$36k Roth ahead even at same bracket

Verified with $120,000, 12% now, 22% future, 15 yrs, 7% outside, tCap 15%: TaxNow $14,400, GF 2.75903, FutureRoth $331,083.78, FutureTrad after tax $258,245.35, OutsideCost $33,769.84, Advantage $39,068.59 after drag

Guards: balance 0–50M, brackets 0–50%, years 1–50, return 0–15%, tCap 0–30%, non-finite to 0, rounding only at display. RMD drag note: if age 73+ during n years, loop each year Balance = Balance*(1+r) - RMD.

Understanding What Each Number Tells You

Tax Now To Convert: BigStat — dollars of tax due this year on conversion. $50k at 22% = $11,000. Due by April 15 next year, estimated tax may be needed to avoid penalty.

Future Roth Tax-Free: What Roth will be after years with growth, no tax at withdrawal if 5-year rule met and age 59.5. $50k at 7% 20 yrs = $193,484 tax-free.

Future Traditional After Tax: What traditional would be after same growth then taxed at future bracket. $193,484 × 0.76 at 24% = $147,048.

Advantage - Roth vs Trad: FutureRoth minus FutureTrad after tax. Positive means Roth ahead. $46,436 in first example.

Roth Start After Tax: Balance that actually goes into Roth after paying tax if inside. Outside payment keeps full $50k, inside leaves $39k at 22%.

Breakeven Future Bracket: Future rate where both equal. If pay inside, breakeven = current bracket. If outside, breakeven is lower — Roth wins even if future bracket slightly lower.

Example Walkthrough — Same $50k Different Brackets and Pay Method

Story 1 — Florida, $50k convert, 22% now, 24% future, 20 yrs, 7% outside: TaxNow $11k, FutureRoth $193,484, FutureTrad after tax $147,048, Advantage $46,436 Roth. Good for low bracket now before RMDs.

Story 2 — California, $50k convert, 24% now, 24% future, 20 yrs, 7% inside: TaxNow $12k, RothStart $38k, FutureRoth $147,048, FutureTrad after tax $147,048, Tie. If future rises to 32%, FutureTrad $131,569, Roth ahead $15,479.

Story 3 — Texas, $120k convert, 12% now, 22% future, 15 yrs, 7% outside: TaxNow $14,400, FutureRoth $331,084, FutureTrad after tax $258,245, Advantage $72,839. Shows converting in gap years between retirement at 60 and RMD at 73 when income low.

Common Missteps That Cost Tax and IRMAA

1. Converting too much in one year: $50k at 22% is $11k tax, but $120k may push you from 22% to 24% or 32%. $120k at 12% low bracket becomes $70k at 22% + $50k at 24%. Split over 2-3 years keeps bracket.
2. Paying tax from Roth itself when young: Paying from conversion reduces Roth start and loses tax-free growth on tax money. $11k tax paid from outside keeps $11k growing tax-free 20 yrs = $42,566 extra. Use taxable savings if possible.
3. Forgetting 5-year rule and pro-rata: Roth earnings need 5 years and age 59.5 to be qualified tax-free. Converting with existing pre-tax and after-tax IRAs triggers pro-rata rule — Form 8606. Keep Form 8606 and convert clean years.
4. Ignoring ACA, IRMAA and student loans: $50k conversion adds to MAGI. For ACA subsidy, extra income can lose thousands in premium credit. For Medicare, IRMAA looks 2 years back — $50k now raises Part B premium in 2 years. For student loans, income-driven payment rises.
5. Thinking Roth always wins: If future bracket is much lower than current — e.g., 32% now, 12% later — traditional may leave more after tax. $50k at 32% now $16k tax vs 12% future $23k tax on growth — traditional wins $8k. Check future bracket honestly.

Practical Note — How To Use This For Planning

Pull last 1040 to see current marginal bracket — taxable income plus conversion. Estimate future bracket at RMD age — add Social Security, pension, RMDs. Use low income years — after W-2 stops, before Social Security at 70 and RMD at 73 — to convert up to top of 12% or 22%. Example: need $40k to fill 12% bracket, convert $40k at 12% = $4,800 tax, future at 22% saves $4,000 per $40k plus no RMDs. Consider state — convert while in no-tax state like Florida or Texas before moving to California. Keep records for Form 8606 and 5-year clock.

Important Limitations To Remember

This tool gives estimates for educational purposes only. Not tax advice. Uses simple brackets and assumed return, does not include state tax, NIIT, AMT, 10% early withdrawal penalty, 5-year rule details, pro-rata rule across all IRAs, or loss of credits. Actual tax depends on filing status, deductions, other income and IRS updates. Roth conversion cannot be reversed. Verify with IRS Publication 590-A, 590-B, Form 8606, Instructions for Form 5329 and a tax professional.

Frequently Asked Questions

When does Roth conversion make sense vs keeping traditional?

Conversion often makes sense when current tax bracket is lower than expected future bracket, in low income year, before RMDs at 73, or when you can pay tax from outside savings so full balance grows tax-free. If current bracket is higher than future, keeping traditional may leave more after tax. Many use gap years between 60 and 73 to convert up to 12% or 22%.

How is tax now calculated?

Tax now is balance to convert multiplied by current tax bracket. Example $50,000 at 22% = $11,000 federal tax now. If paying from outside, full $50,000 goes to Roth. If paying from conversion, Roth starts with $39,000 after tax. That $11,000 difference growing 20 years at 7% is $42,566 extra tax-free.

What is the future value difference?

Future Roth = Roth start amount × (1+r)^years tax-free. Future Traditional after tax = Balance × (1+r)^years × (1 - future bracket). At same return and same bracket, Roth wins if tax is paid from outside, ties if paid from conversion. Lower future bracket favors traditional, higher favors Roth.

Does this include state tax?

This shows federal illustration using bracket you enter. State tax, NIIT, and bracket changes are separate. If you live in no-tax state now and move to tax state later, conversion now may save state tax. Enter combined rate if you want to include state — e.g., 22% federal + 5% state = 27%.

What about RMDs and Medicare?

Traditional IRA has RMDs at 73 per SECURE 2.0, Roth IRA owner has no RMD. Conversion raises income now, which can affect ACA subsidy, student loan payments, and IRMAA for Medicare 2 years later. Plan conversions over several years to avoid bracket jumps. $50k conversion may raise IRMAA premium by $1,000+ yearly two years later.

Can I undo a Roth conversion?

No. Recharacterization of Roth conversions was removed. Conversion is taxable and cannot be reversed. You can convert in smaller amounts over years to manage risk and brackets. Keep Form 8606 for basis tracking and 5-year rule.

Does this calculator save my data?

No. Values you enter stay on your device for calculation and are not stored on a server for this calculator component. Closing the tab clears entries.