Roth IRA Conversion Calculator

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How To Use The Roth IRA Conversion Calculator

Simply fill out the fields in the Roth IRA conversion calculator featured above, using a value for each of the following items:

• Current IRA Balance
• Taxable Percentage of IRA
• Expected Rate of Return
• Inflation Rate
• Current Tax Rate
• Expected Tax Rate in Retirement
• Current Age, and
• Retirement Age

Not sure what these terms mean? Not sure what numbers to put in?

Use the section below as a guide for your Roth IRA conversion calculations.

Then, as you fill in each field with numbers customized to your situation, the calculator will automatically update to reveal your projected inflation-adjusted after-tax Traditional IRA retirement balance so you can compare it to your inflation-adjusted tax-free converted Roth IRA retirement balance.

Roth IRA Conversion Calculator Terms

Below is an explanation of each calculator term:

Current IRA Balance
This is the current balance in your Traditional IRA (or 401k depending on the type of account you're converting) which you plan to convert to a Roth IRA.

Need an example?

Let's say, you intend to convert $50,000 in your Traditional IRA to a Roth IRA.

If so, then put $50,000 in the "Current IRA Balance" field.

Taxable Percentage of IRA
This is the percentage of your Traditional IRA which is taxable upon conversion.

The default is set to 100% because most Traditional IRAs consist of tax deductible contributions and earnings.

However, in some cases, you might make non-deductible Traditional IRA contributions. These contributions are NOT taxable upon conversion because you've already paid taxes on them.

For example, let's say you want to convert $100,000 - $40,000 in tax deductible contributions, $40,000 in non-deductible contributions, and $20,000 in investment gains.

In such a scenario, 40% ($40,000 of $100,000) of your conversion funds are comprised on non-deductible contributions, meaning only 60% of your conversion amount is taxable upon conversion.

Therefore, you should put 60% in the "Taxable Percentage of IRA" field.

Expected Rate of Return
This is the annual compound rate of return you anticipate receiving on your retirement savings. This will vary from person to person based investing strategy, fees, types of investments, and other factors.

However, since most people invest their retirement savings in stocks, the default is set to 10.85% - the annual compound rate of return on the S&P 500 from 1959 to 2003.

If you expect a higher or lower rate of return, adjust accordingly.

Inflation Rate
This is the annual rate of inflation you project for the timeframe in which your retirement savings is invested.

It's important that you don't underestimate the rate of inflation since it will eat away at the purchasing power of your savings over time.

The default rate is set at 4.1% - the approximate annual rate of inflation over the past seven decades.

However, if you're more conservative, you might want to use a higher rate of inflation.

Current Tax Rate
This is the income tax rate which currently applies to your income.

For instance, if you earn $60,000 per year, and you're currently in the 25% federal income tax bracket, put 25% in the "Current Tax Rate" field.

Expected Tax Rate In Retirement
This is the tax rate you anticipate in your retirement years.

While tax rates are subject to change over time, a good ballpark estimate will serve you well.

For example, if you're currently in the 25% tax bracket but you anticipate earning less in your retirement years, then you might put 15% in the "Expected Tax Rate In Retirement" field.

However, if you're currently in the 25% tax bracket but you expect to earn more in retirement or you think tax rates will climb over time, then you might put 30% or 35% in the "Expected Tax Rate In Retirement" field.

Current Age
This is fairly self-explanatory. Just check your birth certificate if you're not sure!

Seriously, though, you might want to consider an older age for this field if you're not yet ready to perform a Roth IRA conversion but you plan to do so in the future.

Retirement Age
This is the age at which you'd like to retire, and while you'd probably like to make this the same as your current age, that may not be realistic... (although I hope I'm wrong!)

Make sure you put a realistic age in the "Retirement Age" field in order to get the most accurate calculation of your inflation-adjusted Traditional IRA and converted Roth IRA savings balances.

After-Tax Traditional IRA Balance At Retirement
This is the projected inflation-adjusted after-tax value of your Traditional IRA at retirement (what you will have if you don't convert).

The Roth IRA conversion calculator automatically updates this value when you fill in the aforementioned fields.

Roth IRA Balance At Retirement
This is the projected inflation-adjusted tax-free value of your Roth IRA when you retire.

The Roth IRA conversion calculator automatically updates this value when you fill in the aforementioned fields.

Unlike some Roth IRA calculators, this value represents your savings in terms of today's dollars - meaning a million dollar nest egg will retain the equivalent purchasing power of a million dollars today.

Your Roth IRA Conversion Calculations

Compare your projected after-tax Traditional IRA balance at retirement to your projected tax-free Roth IRA balance.

Is one amount higher than the other?

If your Traditional IRA balance is higher, then you might want to reconsider a conversion. But if your Roth IRA balance is higher, then you might want to move forward with conversion.

However, Roth IRA conversions can sometimes be complicated in nature, so it's always a good idea to seek the assistance of a competent financial professional.

Additional Roth IRA Calculators

Roth IRA Calculator - This is our most basic Roth IRA calculator. Simply input the present value of your Roth IRA, along with your expected annual contributions, age, and rate of return, to get a projected value for your Roth IRA when you reach retirement age.

Roth IRA Savings Calculator - Use this calculator to estimate the inflation-adjusted value of your Roth IRA at retirement age. Experiment with different starting balances, annual contributions, rates of return, inflation rates, and retirement ages to help set the parameters of your retirement plan.

Roth IRA vs. Traditional IRA Calculator - Use this calculator to determine which retirement account is best for you - a Roth IRA or a Traditional IRA. Discover why your current tax rate and expected future tax rate play a pivotal role in your decision.

Roth IRA Investment Calculator - Use this calculator to determine the rate of return you need to generate on your Roth IRA savings in order to meet your retirement goal.

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