A Roth conversion moves money from a tax-deferred retirement account into a Roth account. In general it means paying tax on the amount converted now, rather than paying tax on those dollars when they are withdrawn later.
Money in a tax-deferred retirement account has not been taxed yet. When it is eventually withdrawn, those withdrawals are generally taxable income. A conversion changes the timing: you move some of that money into a Roth account, recognize it as income in the year of the conversion, and pay the tax then.
So a conversion is not primarily about markets or products. It is a question about when tax is paid, and at what rate.
Illustration only. It applies a single assumed rate to the whole amount; a real conversion can push income across brackets and affect other items. Your actual result depends on your own circumstances and current tax law.
The value of knowing this number is that it is concrete. It turns "should I convert?" into a comparison you can actually discuss: this much tax now, versus taxable withdrawals later.
Because those effects are personal, there is no general answer to whether converting is sensible. Two households with the same balance can reach opposite conclusions.
RetirementLeverage™ provides educational calculators and general retirement income information. Nothing here is tax or legal advice, and taxes depend entirely on your individual circumstances and on current law. Please review any conversion with a qualified tax professional before acting.
Conversions are usually considered alongside future required withdrawals — see required minimum distributions — and alongside the monthly income you are trying to produce, which is your retirement income gap.
Enter the amount you are considering and the tax rates that apply to you. The calculator estimates what converting could cost in tax today, so you can see the number before you discuss it with a tax professional.
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It is moving money from a tax-deferred retirement account into a Roth account, which generally means paying tax on the converted amount in the year you convert instead of when you would otherwise withdraw it.
Usually to compare a known tax cost today against future taxable withdrawals whose size and tax treatment are less certain. Whether that trade-off is worthwhile depends entirely on individual circumstances.
No. RetirementLeverage is educational. Conversions interact with brackets, Medicare premiums, the taxation of Social Security and other items, so please review any conversion with a qualified tax professional before acting.
This page is educational and general in nature. RetirementLeverage™ and Retirement Planning Store, Inc. do not provide individualized investment, securities, tax, or legal advice; please consult a qualified tax professional or attorney about your own situation. Insurance products and services may not be available in every state, and any guarantees are subject to the financial strength and claims-paying ability of the issuing insurance company.