Roth conversion calculator

What a Roth conversion costs

Converting traditional retirement money to Roth means paying income tax now so that all future growth and withdrawals are tax-free. The converted amount stacks on top of your other income for the year, so its cost is the marginal tax it adds - not your average rate. Convert too much in one year and you push yourself into a higher bracket. This calculator shows the true marginal cost of any conversion amount.

Worked example

Convert $50,000 with $200,000 of other taxable income (single, standard deduction applied):

• Tax before conversion: about $36,734
• Tax after conversion: about $51,304
• Cost of the conversion: $51,304 − $36,734 = $14,570
• Effective rate on the converted dollars: about 29%

That 29% is well above the average rate on your income, because the conversion sits in your top brackets. The lower your other income, the lower this marginal cost - which is the whole point of timing.

Bracket-filling strategy

The smartest conversions happen in low-income years: early retirement before required minimum distributions and Social Security begin, a gap year, or a year with unusually low income. The goal is usually to convert just enough to fill a target bracket - say, up to the top of the 22% or 24% band - without spilling into the next one. Watch the effective rate as you raise the amount; when it jumps, you have crossed into the next bracket and may want to stop there and finish next year.

Why convert at all

• Tax-free growth and withdrawals. Everything after conversion compounds and comes out tax-free.
• No required minimum distributions on Roth IRAs, so the money can keep growing or pass to heirs tax-free.
• Rate arbitrage. If you expect higher tax rates later (from RMDs, Social Security, or law changes), paying a known lower rate now can win.

Watch-outs

• The five-year rule. Each conversion starts its own five-year clock before the converted amount can be withdrawn penalty-free under 59½.
• IRMAA and ACA subsidies. A big conversion raises your income, which can increase Medicare premiums (IRMAA) two years later or cut ACA health-subsidy eligibility - factor these in, not just income tax.
• Pay the tax from outside the IRA. Using IRA money to pay the conversion tax shrinks the amount that grows tax-free and may add a penalty if you are under 59½.

Common mistakes

• Converting so much that you jump a bracket and pay a higher marginal rate.
• Ignoring the IRMAA and ACA side effects of the higher income.
• Paying the tax from the IRA itself instead of from cash on hand.

If you are a high earner using the backdoor strategy, pair this with the backdoor Roth calculator and the mega backdoor Roth calculator.