Roth Conversion Tax Cost & Breakeven Calculator
Example: Amount to convert to Roth: 50000 $ · Your marginal tax rate today: 22 % · Expected marginal rate in retirement: 24 % · Years until you withdraw the money: 20 · Expected annual investment return: 7 %
| Tax you pay today on conversion | $11,000 |
| Tax saved at withdrawal vs traditional IRA | $3,870 |
| Net benefit of converting (positive = Roth wins) | $-38,697 |
| Approximate breakeven (years) | 0 |
Worked example
Converting $50,000 at a 22% marginal rate costs $11,000 in taxes today. If that $50,000 grows at 7% for 20 years, it becomes $193,484 inside a Roth — entirely tax-free. If instead it stayed in a traditional IRA and was withdrawn at a 24% rate, you'd owe $46,436 in taxes at withdrawal. The Roth wins by roughly $35,436 in this scenario. The higher your retirement rate versus today's rate, the faster the conversion pays off.
Frequently asked questions
When does a Roth conversion NOT make sense?
If your retirement tax rate will be significantly lower than today's (e.g., you plan to have modest retirement income or move to a no-income-tax state), paying tax now at a higher rate defeats the purpose. Conversions also backfire if you must use IRA money to pay the conversion tax — always pay the tax bill from outside funds.
What is the 5-year rule for Roth conversions?
Each Roth conversion starts its own 5-year clock. Withdrawing converted funds within 5 years (before age 59½) triggers a 10% early withdrawal penalty on that specific conversion, even though contributions to a Roth IRA can be withdrawn any time. Plan to leave converted funds untouched for at least 5 years.
How do required minimum distributions factor in?
Traditional IRA balances are subject to RMDs starting at age 73 (per SECURE 2.0). Those RMDs are ordinary income and can push you into higher brackets or trigger Medicare IRMAA surcharges. Converting now reduces future RMDs, which is another reason conversions are valuable even when today's and tomorrow's rates look similar.