Is a Roth conversion worth it?

How this calculator works

A Roth conversion moves money from a traditional (pre-tax) account to a Roth account. You pay ordinary income tax on the converted amount this year, at your current marginal rate. In exchange, that money — and everything it earns — is never taxed again.

The alternative is to leave the money in the traditional account, where it keeps growing tax-deferred and gets taxed at your (assumed) marginal rate when you withdraw it. We grow both paths at the same expected return and compare the after-tax dollars you end up with:

• Tax paid now = conversion amount × current rate
• Converted (Roth) future value = (conversion amount − tax paid now) × (1 + growth)^years, tax-free
• Not converted future value = conversion amount × (1 + growth)^years × (1 − retirement rate)

The math boils down to a simple rule of thumb: converting wins when your retirement tax rate is higher than your current rate, and loses when it's lower. If the two rates are equal, it's roughly a wash before other factors (like avoiding future RMDs, estate planning, or bracket management) are considered.

A worked conversion: $50,000 at 22% today

Convert $50,000 while your marginal rate is 22%, expect 24% in retirement, and give the money 15 years at 6%:

• Tax paid now: 22% × $50,000 = $11,000.
• Converted path: $39,000 lands in the Roth (the tax came out of the conversion) and grows to $39,000 × 1.06¹⁵ = $93,466, all of it tax-free.
• Left alone: $50,000 grows to $119,828, then 24% comes off at withdrawal — $91,069.
• The conversion wins by $2,397, about 2.6%.

That is a thin margin for a two-point rate difference, and it flips entirely if the later rate turns out lower: at 12% in retirement the untouched account is worth $105,449 after tax and the conversion loses by nearly $12,000. The rate gap is the whole decision.

One change makes it much better. Pay the $11,000 from a taxable account instead of out of the conversion and the full $50,000 goes into the Roth, growing to $119,828 tax-free — while the $11,000 you spent would have been generating taxable dividends and gains anyway. Paying the tax from outside cash is the difference between a marginal conversion and a clearly good one.

The pro-rata rule

If you have ever made a non-deductible contribution to a traditional IRA, you cannot choose to convert "just the after-tax part." The IRS aggregates every traditional, SEP and SIMPLE IRA you own at the end of the year and taxes each conversion in proportion to the pre-tax share of the whole.

Two things sit outside the aggregation: 401(k) and 403(b) balances are not counted, which is why rolling pre-tax IRA money into a workplace plan is the standard way to clear the decks before a backdoor Roth; and Roth IRAs are never part of the calculation.

Conversions and RMDs

A conversion does not count toward a required minimum distribution, and an RMD can never be converted. Once you reach RMD age — 73, or 75 if you were born in 1960 or later — the required amount must come out first, as a taxable distribution, and only money above it is available to convert.

This is the strongest argument for converting early. Every dollar moved to a Roth before RMDs begin permanently shrinks the balance the IRS will later force out, which keeps future taxable income lower, keeps more room under the IRMAA thresholds, and reduces how much of your Social Security is taxed. The RMD calculator shows what the required amount looks like at each age.

Two rules that catch people out

• Each conversion has its own five-year clock. Withdraw converted principal within five years and before 59½ and the 10% early-distribution penalty applies to it — even though the tax was already paid. That is separate from the five-year clock governing whether Roth earnings come out tax-free.
• Conversions cannot be undone. Recharacterisation of a Roth conversion was repealed for 2018 and later years, so a conversion made in a year that turns out worse than expected is permanent. Converting in several smaller tranches across the year, rather than one December decision, is how people manage that risk.

Keep the plan honest

Planomy models Roth conversions inside your full withdrawal plan — filling tax brackets year by year against your real accounts, RMDs, and Social Security — instead of a single one-year estimate. The Roth conversion ladder guide covers the multi-year version of this strategy, and the withdrawal tax calculator shows what a distribution costs if you decide against converting.

Frequently asked questions