How Roth Conversion Math Works
A conversion moves pre-tax dollars into a Roth IRA: you pay ordinary income tax on the converted amount this year, and in exchange that slice grows and withdraws tax-free. Keeping the money Traditional means the full balance compounds but every withdrawal dollar is taxed later. The winner depends on three variables, your current marginal rate, your retirement rate, and time for tax-free compounding to outrun the upfront tax bill.
Tax today = Converted × Current rate · Roth future = Converted × (1+r)^t (tax-free)
r = Annual Return, t = Years to Retirement
Worked Example
Scenario: $500k Traditional, convert $50k, 15 years at 7%, 24% now vs 22% later
Tax Cost Today
$12,000
Converted Slice at 15 yrs
~$138,000 tax-free
Same Slice If Kept Traditional
~$108,000 after tax
Net Advantage
~+$30,000
Low-income years, early retirement gaps, job breaks, market dips, are ideal conversion windows. Convert only enough to fill your current bracket.
What the Calculator Shows
- Tax cost today, exact dollars owed this year on the conversion
- Keep Traditional value, after-tax future value if you do nothing
- Convert to Roth value, tax-free future value of the converted slice plus after-tax remainder
- Net advantage, positive means conversion wins; negative means keep Traditional
- Breakeven rate, the retirement tax rate at which both paths tie
Conversion Mistakes to Avoid
Never convert so much that you jump brackets, trigger Medicare IRMAA surcharges, or lose credits, spread large conversions over years. Remember the 5-year rule on withdrawals and that conversions cannot be undone. For full retirement modeling, combine this with our 401k Retirement Calculator and FIRE Calculator.