1. What is a Roth Conversion?

A Roth conversion is the process of moving retirement savings from a traditional IRA or 401(k) into a Roth IRA. This requires paying taxes on the converted amount now, but allows for tax-free growth and withdrawals in retirement.

2. How Does the Calculator Work?

The calculator uses these formulas:

Where:

• \( \text{Pre-Tax Amount} \) — Amount converted from traditional IRA (USD)
• \( \text{Tax Rate} \) — Marginal tax rate for conversion (decimal)
• \( r \) — Expected annual growth rate (decimal)
• \( n \) — Years until withdrawal (years)

Explanation: The calculator shows how much you'll have after paying taxes on the conversion and projects the future value with tax-free growth.

3. Importance of Roth Conversion

Details: Roth conversions can be beneficial if you expect to be in a higher tax bracket in retirement, want to avoid RMDs, or desire tax-free inheritance for heirs.

4. Using the Calculator

Tips: Enter the amount you plan to convert, your expected tax rate, projected growth rate, and years until withdrawal. All values must be positive.

5. Frequently Asked Questions (FAQ)

Q1: When does a Roth conversion make sense?
A: When you have low-income years, expect higher future tax rates, or want to reduce future RMDs.

Q2: What's the difference between Roth and traditional?
A: Traditional IRAs offer tax-deductible contributions with taxable withdrawals, while Roth IRAs have after-tax contributions with tax-free withdrawals.

Q3: Are there income limits for conversions?
A: No, income limits for Roth conversions were eliminated in 2010.

Q4: When can I withdraw converted amounts?
A: Converted amounts can be withdrawn penalty-free after 5 years (for each conversion) or age 59½.

Q5: How does this compare to keeping funds in traditional?
A: The breakeven depends on current vs. future tax rates and investment growth.