Roth IRA Conversion Calculator: See Your Tax Trade-off

Converting a traditional IRA to a Roth IRA means paying income tax on the amount you convert now in exchange for tax-free withdrawals later. Whether that trade makes sense depends on a handful of assumptions — the tax bracket you expect to be in when you withdraw the money, and how you plan to cover the tax bill the conversion creates.

That’s where this calculator can help. Before getting started, be sure to gather the following:

• Current IRA balance and any non-deductible IRA balance from your most recent statement.
• Form 8606 if you have made after-tax contributions to a traditional IRA in the past. It will show the non-deductible portion.
• Tax return for your income tax bracket. It is generally your current marginal federal tax rate. Checking current IRS brackets is another option.

Once you have those numbers, enter them along with the tax bracket you expect to be in during retirement, the amount you are considering converting, and how you plan to pay the conversion tax. The calculator will estimate whether converting appears to leave you with more after-tax money than keeping the funds in a traditional IRA.

Get Your Roth IRA Conversion Estimate

What Is a Roth IRA Conversion?

A Roth IRA conversion moves money from a traditional IRA or similar tax-deferred account into a Roth IRA, with income tax due on the converted amount in the year of the conversion. Once converted, the funds grow tax-free, and qualified withdrawals in retirement are not taxed. This appeals to people who expect their tax rate to be similar or higher later in life.

The core trade is straightforward. You pay tax now on the amount you convert, and in return, that money and its future growth become permanently tax-free. If your tax rate turns out to be lower in retirement than it is today, paying tax later through regular withdrawals from a traditional IRA may cost less. If your rate is the same or higher, converting can save you money over time.

Understanding the Assumptions and Pro-Rata Rule

The calculator's result depends on two assumptions. Changing either one can change the answer significantly.

1. The tax bracket you enter for the distribution phase is a projection. If your actual retirement bracket turns out lower or higher than assumed, it changes whether the conversion was worth it in hindsight. A lower bracket means paying tax later through traditional withdrawals might have cost less. A higher bracket means the conversion saved you more than the calculator showed.
2. How you pay for conversion tax changes the math. Paying from savings or non-IRA assets keeps the full converted amount growing tax-free inside the Roth. Paying from the IRA itself means you convert less, because some of the balance is used to pay the tax.

Why is it important to input your non-deductible IRA balance? This is where the pro-rata rule factors in. If a traditional IRA contains both pre-tax and after-tax (non-deductible) contributions, the IRS requires the conversion to be treated as a proportional mix of both.

So if you have existing non-deductible contributions across any of your traditional, SEP, or SIMPLE IRAs, you will owe some tax on a conversion even on the portion that represents your own already-taxed contributions. The IRS looks at the ratio of after-tax to pre-tax money across all of your IRA balances combined, not account by account. The pro-rata rule is why the calculator needs your total non-deductible balance to estimate the taxable portion of your conversion accurately.

How Roth Conversions Fit into RMD Planning

Converting traditional IRA assets to a Roth reduces the balance subject to future required minimum distributions (RMDs), because Roth IRAs are not subject to RMDs during the original owner's lifetime. If you are approaching the age when RMDs begin, a conversion can lower the amount you will be required to withdraw and pay tax on each year.

This connects the conversion decision to your broader RMD timeline. If you expect RMDs to push you into a higher tax bracket, converting some of your traditional balance before that point can spread the tax cost across years you control, rather than letting the RMD schedule dictate your taxable income.

No calculator can fully account for your actual future tax bracket, state tax treatment, or the effect a large conversion could have on Medicare IRMAA surcharges in the conversion year. A sizable conversion raises your taxable income for that year, which can increase your Medicare Part B and Part D premiums the following year.

These are just some of the factors that make a conversion decision worth discussing with a financial advisor. The calculator gives you a starting point, but a conversation with an LPL financial advisor can help you evaluate whether a conversion fits your full tax and retirement picture.