Why Consider a Roth Conversion?

Converting a traditional individual retirement account (IRA) to a Roth IRA can provide tax-free growth and withdrawals in the future. Many people choose this strategy if they expect their tax rate to rise by the time they retire. However, the conversion itself is taxable. You must pay ordinary income tax on the amount you convert, which can be a significant upfront cost.

Understanding the Costs

Use this calculator to estimate the tax owed on a conversion and how the move might affect your nest egg over time. The key formula is:

where $B$ is the balance you convert and $R$ is your marginal tax rate expressed as a decimal. To understand the future value of leaving the balance in a traditional account, we model growth using

where $g$ is the annual growth rate and $y$ is years until retirement. Comparing the future value after paying the conversion tax today versus leaving funds in the traditional IRA helps determine if the conversion is worthwhile.

Other Factors

The decision also depends on your ability to pay the tax bill from other savings, how long the funds will remain invested, and potential changes in tax law. While this tool simplifies things, it provides a quick snapshot of the immediate tax hit and long-term benefit of tax-free growth inside a Roth.

Putting It All Together

Enter your current traditional IRA balance, marginal tax rate, expected growth, and years until you plan to retire. The calculator outputs the estimated conversion tax today and the future value of your account under both scenarios: converting now versus keeping the traditional account and paying taxes later. Use these numbers to discuss strategies with a financial professional.