Check the background of this financial professional on FINRA's BrokerCheck.

Calculators


Got a question that involves number crunching? Use the calculators on this page to find the mathematical answer to the most commonly asked number-crunching questions, and see your inputs displayed next to the graph, chart, and/or table output in a side-by-side display.

Calculator: Print This Page
Roth IRA Conversion Calculator
$
$

When you convert a traditional IRA to a Roth IRA, the taxable portion of your traditional IRA (deductible contributions and earnings) is subject to federal income tax in the year of conversion.

This calculator compares two scenarios: Scenario 1--you convert a traditional IRA in 2017; and Scenario 2--you don't convert your traditional IRA at all. The calculator lets you choose whether to pay the conversion taxes from the IRA assets themselves, or from other assets. If you choose to pay income taxes from other assets, the calculator also determines the amount you could have earned on those funds had you not converted (this calculation is accomplished by modeling a separate "side fund").


1The age 70 limit is solely for calculator purposes and does not reflect any legal limits or requirements (extending the age range beyond age 70 would require modeling required minimum distributions (RMDs)).

2If you have multiple IRAs, you must pro-rate your nontaxable balance among them. The IRS provides a worksheet in Publication 590-B.

3Applies only if you elect to pay conversion taxes from other (non-IRA) assets. This is the tax rate that you estimate will apply to the side fund that you would have if you don't convert your traditional IRA to a Roth IRA (and therefore don't have to use these funds to pay conversion taxes). This tax rate may differ from the tax rate that applies to your IRAs because, depending on the investments you choose, earnings on the side fund may be eligible for capital gains or other special tax treatment (for example, income from certain municipal bonds may be tax free), while IRA earnings are generally taxed upon distribution only at ordinary income tax rates.

4 Applies only if you elect to pay conversion taxes from IRA assets.

Roth IRA Conversion Chart
Scenario 1: You convert your IRA in 2017. Your taxes paid upon conversion would be $21,250. Your Roth IRA balance at retirement would be $320,714. There would be no additional taxes assuming you are eligible for a qualified distribution at that time.
Scenario 2: You do not convert your traditional IRA to a Roth IRA. You'll pay no taxes until you take a distribution from your IRA. At retirement your traditional IRA balance would be $320,714. If you took a lump sum distribution at that time your taxes would be $76,428 and you would receive a distribution of $244,285. If you don't convert, you could invest the $21,250 you would otherwise have had to pay upon the Roth conversion. That side fund would equal $57,466 after taxes at retirement.

This chart compares your Roth IRA balance each year with the hypothetical after-tax balance you would have had in your traditional IRA (plus side fund) if you didn't convert.
This chart compares the after-tax balance at retirement, and total taxes paid, under each scenario. (The side fund reflects the additional amount you can save if you don't need to pay income taxes due to a Roth conversion.)


  • This is a hypothetical example intended for illustration purposes only, and does not represent the performance of any specific investment or portfolio, nor is it an estimate or guarantee of future value. The calculations above assume that earnings are compounded annually, and that distributions from the Roth IRA will be tax free. Investment fees and expenses have not been deducted. If they had been, the results would have been lower. When making an investment decision, investors should consider their personal investment horizons and income tax brackets, both current and anticipated, as these may further impact the results of this comparison.
  • The side fund tax rate is assumed to apply to the side fund that you would have if you don't convert your traditional IRA to a Roth IRA (and therefore don't have to use these funds to pay conversion taxes). This tax rate may differ from the tax rate that applies to your IRAs because, depending on the investments you choose, earnings on the side fund may be eligible for capital gains or other special tax treatment (for example, income from certain municipal bonds may be tax free), while IRA earnings are generally taxed only at ordinary income tax rates upon distribution. Taxes are assumed to be paid at the end of the year (as a result, initial deposit to side fund occurs at the end of the year).
  • This illustration assumes a fixed annual rate of return; the rate of return on your actual investment portfolio will be different, and will vary over time, according to actual market performance. This is particularly true for long-term investments. It is important to note that investments offering the potential for higher rates of return also involve a higher degree of risk to principal.
©2017 Broadridge Investor Communication Solutions, Inc. All rights reserved.


 
 
 

  > Sitemap > Legal, privacy, copyright and trademark information

Get in Touch 

511 N. Maitland Avenue , Maitland, Florida 32751
(407) 644-9411 ext 2  |   scott@stewardshipmatters.net

Stewardship Matters, Inc. is registered investment advisor with State of Florida.


Copyright © 2017 Stewardship Matters, Inc.. All rights reserved.


This communication is strictly intended for individuals residing in the state(s) of FL. No offers may be made or accepted from any resident outside the specific states referenced.
 


Check the background of this financial professional on FINRA's BrokerCheck.