Roth Conversion Calculator: Taxes, Future Value and Net Benefit
Considering a Roth IRA conversion? Our Roth conversion calculator can estimate how much of a benefit you'd get.
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A Roth IRA conversion is a transfer of funds from a pretax retirement account (usually a traditional IRA or an employer plan) into a Roth IRA. The conversion typically requires paying taxes on the funds that are transferred, but the upside is that future growth and withdrawals can be tax-free.
If you have a traditional IRA, there are a number of reasons to consider a Roth IRA conversion. Maybe your retirement plans have changed. Maybe you want to set your heirs up for tax-free withdrawals after you're gone. Or maybe you're considering the backdoor Roth IRA strategy because your income is too high to contribute directly to a Roth IRA.
» Learn more: Roth IRA income and contribution limits
Regardless, there's a lot to consider before you do a Roth conversion, such as:
Conversions are irreversible.
You cannot make tax-free withdrawals from a Roth IRA for five years after conversion.
Perhaps most important, conversions can generate a heavy tax bill in the year they're performed.
Our Roth conversion calculator can help you determine whether a conversion might be worthwhile for you. Fill out the fields below for an estimate of the taxes you might owe, your estimated final converted (and unconverted) IRA balances, and the net benefit you might get from a Roth conversion, if there is one.
If your income is near the top of your state or federal income tax bracket, keep in mind that a Roth conversion may generate additional taxable income that may bump you up to the next bracket and/or change your eligibility for certain tax credits and deductions. If you think this might happen, consider entering the higher bracket in our calculator, just in case. Consulting a qualified financial advisor is also a good idea for complex situations.
How to use NerdWallet's Roth conversion calculator
Enter your traditional IRA balance. This is the full balance of the account you're considering converting: both contributions and earnings.
Enter the amount of after-tax contributions you've made to your traditional IRA. If you haven't made any nondeductible contributions, you can leave this field blank. If you've opened a nondeductible IRA for the purposes of a backdoor Roth conversion, only enter the amount of nondeductible contributions, not any earnings those contributions have accrued.
Enter your federal and state tax rates. Some states don't have an income tax. If you live in one of those states, you can leave the state tax field blank.
Enter your expected annual return. The S&P 500 index has a long-term average annual return of 10% per year before inflation, but many retirement portfolios are more conservative. For example, if you're young and investing aggressively, you may feel that 8% or 9% may be a good benchmark. If you're near retirement and investing with capital preservation in mind, 4% or 5% may feel more realistic.
Enter the number of years until you plan to start withdrawing from your Roth IRA. Keep in mind that you typically cannot make tax-free withdrawals from a converted Roth IRA until five years after the conversion, even if you're over age 59 1/2.
Click "Calculate." This will display the amount of tax you may owe in the conversion year, the estimated after-tax withdrawal value if you don't convert your traditional IRA, the estimated future value of your Roth IRA if you do convert it (less the opportunity cost of the money you'd use to pay conversion taxes), and the net benefit you might get from a conversion.
This calculator assumes that you'd pay conversion taxes with funds from outside of the IRA. Paying those taxes directly from the IRA itself may zero out any conversion benefit.
» More about Roth IRA conversion strategies: Mega backdoor Roth IRAs
