What converting Traditional money to Roth costs now — and saves later
| Scenario (in 20 yrs, 7% growth) | Spendable |
|---|
A Roth conversion moves money from tax-deferred (Traditional) to tax-free (Roth) — and sends the IRS a bill this year for the privilege. Done in the right year, it's one of the most powerful moves in retirement planning: you prepay tax at a low rate to escape a higher one forever, and shrink future RMDs in the bargain. Done casually, it's a voluntary tax donation. This calculator computes the actual bill (bracket by bracket, not a flat guess), your remaining bracket-fill room, and the honest convert-vs-wait comparison.
The converted amount stacks on top of your other taxable income and climbs through the brackets from wherever you stand. Converting $50,000 on top of $60,000 of taxable income (married) fills the rest of the 12% bracket, then spills into 22% — an effective rate this calculator computes precisely. That's why the same conversion is brilliant in a $40,000-income year and mediocre in a $200,000 one.
| Window | Why it works |
|---|---|
| Early retirement, before Social Security & RMDs | The gap years (often 60–72) can have near-zero taxable income — the gold-standard window; conversions at 10–12% beat future RMDs at 22%+ |
| Sabbaticals, job gaps, business-loss years | Any low-income year is bracket space that expires Dec 31 |
| Market drawdowns | Converting depressed shares moves more future recovery into the Roth per tax dollar |
| Before tax rates rise (law or your own income) | Known bracket increases make current rates a sale price |
The disciplined version converts exactly enough each year to fill your current bracket — the calculator's "room left" card is that number. Repeated annually through the gap years, this "Roth conversion ladder" systematically drains the Traditional balance at low rates before RMDs (see the RMD Calculator) force it out at high ones. Early retirees use the same ladder for penalty-free access: converted amounts can be withdrawn tax- and penalty-free after five years each.
When this year's effective conversion rate is below the rate you (or your heirs) would otherwise pay later — typically low-income years before RMDs. The calculator scores exactly this comparison, including the side-fund tax drag most rules of thumb ignore.
The bracket-fill answer: enough to reach the top of your current bracket and no further — the 'room left' card. Spreading a large balance over several years' brackets nearly always beats one giant conversion.
It's due with that year's return — and conversions may require estimated payments to avoid underpayment penalties. December conversions with a January estimated payment (or increased withholding) is the standard mechanics.
No — recharacterization of conversions ended in 2018. The mirror strategy survives: convert DURING drops, when the same shares cost less tax to move.
Yes — conversion income raises MAGI, which drives ACA subsidies (immediately) and IRMAA surcharges (two years later). Near those cliffs, a dollar of conversion can cost far more than its bracket rate; size conversions beneath the cliffs.
Each conversion's principal must wait five tax years (or until 59½) for penalty-free withdrawal — the mechanism behind the early-retiree conversion ladder: convert in year 1, spend it penalty-free in year 6, repeating annually.
Yes — every figure computes locally in your browser.
Conversions are a use-it-or-lose-it resource: every low-bracket year that passes unconverted is bracket space gone forever. Run the numbers each December — ten minutes with this tool in the right year is worth more than a decade of fund-picking.