Should I convert pre-tax money to Roth?

It may make sense to convert to Roth if you can pay taxes at a lower rate today, or if you foresee RMD problems down the road. For instance, if your future RMDs will put you into higher tax brackets or cause you to pay more for Medicare, it's worth exploring Roth conversions.

How much should I convert?

A good strategy might be to convert a portion of your pretax money to Roth over multiple years, and you'd convert an amount that results in an acceptable tax outcome. For instance, you might choose to convert enough to fill up a certain tax bracket or to avoid an IRMAA surcharge. Alternatively, you might look at converting enough to dodge long-term tax problems. For step by step guidance, see this article: https://www.approachfp.com/how-much-to-convert-to-roth/.

What is a Roth conversion?

When you move money directly from a pretax account to a Roth account, you convert that money to Roth by paying taxes today. The goal is that you'll pay less tax later, and you might avoid other problems, like extra Medicare costs each month (IRMAA).

Are there income limits or requirements for Roth conversions?

No, you can convert to Roth whether you have zero income or you earn a substantial amount. The income limits and requirements apply for Roth contributions—not Roth conversions.

How much will my RMD be?

RMDs generally start out at roughly 4% of your account balance, they're around 5% when you're 80, and they continue to increase as a percentage as you grow older. They are designed to deplete your account when you reach life expectancy. The dollar amount can increase dramatically through the early years if your account grows or maintains value during those years.

Do Roth conversions help with RMDs?

Yes, Roth conversions typically help to reduce your future RMDs by moving money out of pre-tax accounts. By prepaying the tax, you eliminate the need to withdraw those funds later. However, you might still have sizable RMDs even if you convert pretax money to Roth. In some cases, it's hard to shrink your future RMDs to a level you want.

What RMD should I aim for?

One approach is to arrange things so that your RMDs are roughly the exact amount you would withdraw anyway for spending. That way, you take only what you need, without piling on tens of thousands (or more) of additional income. But getting to that point might be painful: You may need to make massive Roth conversions, which can cause tax consequences and other issues while you're converting. It's a balancing act, and you have to evaluate the pros and cons of converting more or less.

Should I convert all of my pretax money to Roth?

Probably not, because you might pay more tax than you need to. It often makes sense to keep some money in pretax accounts so you can take advantage of the standard deduction each year, give to charity efficiently with qualified charitable distributions (QCDs), potentially deduct high medical expenses, and more. That said, it could make sense in your specific situation.

Can you help me figure out if Roth conversions make sense?

Yes, as a fee-only fiduciary and CFP® professional, I help people evaluate Roth conversions: whether or not they're a good idea, how much to convert, and when. We can review the tradeoffs and how your income might change over time, along with potential tax law changes, and more. See the Pricing page to understand your options.

Roth Conversion Calculator: How RMDs and Taxes Change

This online Roth conversion calculator helps to model the impact on taxes and required minimum distributions (RMDs).

Estimate how your taxes in retirement might change with Roth conversions.
View how RMDs would change if you convert to Roth.
Export the results to a CSV file as a free download, which you can open in Excel or Google Sheets.

RMDs can eventually create taxable income, which may affect your tax rates, Medicare premiums, and more. By converting pre-tax retirement accounts to Roth—as a one-time event or a multi-year series of partial conversions—you might be able to manage your income. This calculator helps you figure out how much you might pay in taxes today and how much you might pay in tax later if you convert (or don’t).

Scroll to the bottom for important information, assumptions, and warnings. Use at your own risk, and verify results with other sources. Any Roth conversion analysis is imperfect, and this calculator follows in that tradition.

Calculator Inputs (Read Details Below)

Overview

This Roth conversion calculator shows what might happen if you reduce your pre-tax retirement account balances. The result should be smaller RMDs.

Important: This calculator shows that if you convert pre-tax money to Roth, you’ll pay less in taxes later and have smaller RMDs—but that doesn’t necessarily mean that converting is the right choice. Those results are obvious when you think about it. If you convert, you pay taxes today, so you should pay less later. Plus, when you remove money from pre-tax accounts today, you’ll naturally have smaller-than-otherwise RMDs later. Whether or not conversions work to your advantage will depend on multiple (additional) factors.

You typically pay tax when you convert pre-tax money to Roth. But if you can pay at a lower rate or you come out ahead in other ways, it may be worthwhile. For example, if you can convert at a lower tax rate than you’d have to pay later in life, you might come out ahead.

It’s crucial to understand that Roth conversions from pretax balances can create ordinary income tax, which typically increases your tax liability. In this calculator, tax payments are assumed to be paid out of external (non-IRA) accounts like individual or joint bank accounts. If you use pre-tax IRA money to cover the taxes, you’ll increase your total tax liability. And if you’re under age 59.5 while using pre-tax money for tax payments, you may owe an additional 10% penalty tax for early withdrawal.

For Roth conversions to work well, it’s best to meet the requirements for qualified withdrawals (or tax-free withdrawals). Those are generally available after:

Having a Roth funded for at least five years, and
Reaching age 59.5

Other situations may also allow for qualified withdrawals.

Want help with all of this? See the Pricing page to view your options.

The Bare Minimum

You don’t need to use every feature of this calculator. For quick results, you’ll likely want to enter:

Date of birth (for age calculations)
Your pre-tax account balances
The amount you wish to convert each year
The number of years to convert
Current and future tax rates

The result will be an oversimplified model, and you may want to dig deeper into the numbers.

Pre-Tax Retirement Accounts

Pre-tax retirement accounts might include any pre-tax money in the following vehicles:

IRAs
401(k) plans
403(b) plans
SEPs and SIMPLEs
TSP
And more

When the accounts hold pre-tax balances, it typically means you got a deduction (or otherwise reduced your taxable income) while contributing. Alternatively, your employer may have contributed funds into your account on a pre-tax basis.

Enter the total of all pre-tax retirement accounts that will be subject to RMDs. Any exceptions (like the “still working” exception) may cause complications.

The calculator assumes all money in your pre-tax accounts is pre-tax. There is no accounting for after-tax contributions, but you can enter any existing Roth balances separately (in a different input box) if you like.

Roth Conversions

Enter the amount you want to convert from pre-tax to Roth each year, and the number of years you’ll convert. Conversions start immediately.

Enter a single conversion, or enter a number of years for a multi-year strategy with partial Roth conversions.

Minimum Remaining Pre-Tax Balance

This allows you to set a reserve so you don’t convert everything to Roth. For instance, if you want to keep $100,000 in pretax accounts throughout your conversion period, enter that number here. Your Roth conversions will stop if the pre-tax balance falls to $100,000. This might make sense if you want to take advantage of low tax rates, the standard deduction, charitable giving strategies, etc.

Years to Simulate

How many years from now would you like to simulate? It may make sense to enter the number of years you expect to live. Note the life expectancy calculation under this box.

Tax Rates

Enter the assumed tax rates for the years when you complete Roth conversions and your withdrawal years. Be sure to consider any state and local taxes, if applicable.

Total Taxes Paid Over Simulation

The calculator provides a total of the projected taxes and compares results with and without converting to Roth.

Note: This accounts for taxes due from pre-tax account balances only and ignores any taxes you’d owe on other types or sources of income.

Remember that we’re predicting the future, which is impossible. So, any numbers specifying tax savings are based on assumptions that are virtually guaranteed to be wrong. Take that with a grain of salt. You may just want to consider directional numbers (positive vs. negative) and degree (much bigger vs. much smaller) as you evaluate your options.

More Information

Uniform Life Expectancy Table

This calculator uses the IRS uniform life expectancy table. In some cases, the IRS joint life expectancy table may be an option, such as when a spouse is a sole beneficiary and more than 10 years younger than you. For the first version of this calculator, the joint life expectancy table is not available.

More on Calculating Roth Conversions

How do you calculate Roth conversion taxes?

Detailed calculations are complicated, and tax or financial planning software might provide the most informative calculations. For rough estimates, apply your total income tax bracket (state, federal, and local) to the amount you convert. For example, if you convert $100,000 and you pay taxes at 20%, the conversion costs roughly $20,000 in taxes. However, additional “costs” may arise, such as if the conversion causes your income to rise so high that you face IRMAA surcharges (higher Medicare premiums) or NIIT, among other things.

Can I analyze the Roth conversion calculations in Excel?

Yes, click the button to export the data table to a CSV file, which you can download for free. You can then open that file in Excel or Google Sheets and perform additional analysis.

How much can you convert?

There is no limit to the amount you can convert to Roth in a given year. You can convert all of your pre-tax money, if those funds are available for conversion. However, it may make sense to keep some pre-tax funds for charitable contributions (QCDs), medical expenses, or to take advantage of the standard deduction later in life. Roth conversions generally do not count against your regular IRA contributions if done properly.

Note that you generally cannot convert RMDs directly to Roth accounts.

Is a Roth conversion considered earned income? No. But converting pre-tax assets to Roth generally adds to your income, similar (but not identical to) earnings you get from a job. You are not required to have earned income to convert.

What articles can help with my strategy?

Should I convert to Roth?

Any calculator like this gives you useful information, but cannot definitively tell you yes or no. For a more complete answer, you need to do more robust planning. Such planning includes all sources of income, including capital gains, interest income, Social Security and pensions, wages or self-employment, and more. You’d also want to look at more detailed tax calculations with potential deductions and other aspects.

Remember that these calculators often show that you pay less in tax later if you convert today. That’s because you’re reducing the size if your pretax account balances, resulting in smaller RMDs. But you paid taxes from somewhere. And we’re not looking at all of your spending or tax liability.

In general, you should convert if you’ll come out ahead. But you can’t know anything for certain because we’re predicting the future. Some things to analyze include:

What tax rate will you pay when you withdraw funds? Is that higher or lower than the rate you’d pay on conversions?
What are the impacts of smaller RMDs on your finances? Will you avoid Medicare surcharges or have less Social Security included in your taxable income, for example? What else?
Are you married? If one of you dies, the survivor will likely be in a single tax-filing bracket or be closer to IRMAA levels. At that point, they’ll likely pay tax at higher rates, which is worth looking into.

Remember: The calculator doesn’t necessarily answer those questions. For example, even if you say your conversion tax rate is higher than your retirement tax rate, the RMDs will be smaller because you convert. Smaller RMDs alone don’t mean converting is right for you.

One of the most important determinants is the tax rate you pay at conversion vs. distribution. This table shows how Roth accounts might or might not help. For every $100 in a pre-tax account, you have the choice of leaving it alone or converting. The pretax column illustrates what might happen if you do nothing. The Roth column shows what might happen if you convert. There are three different scenarios, which you can see at the top of the chart:

Same tax rates today and later
Lower tax rate today, higher tax rate later
Higher tax rate today, lower tax rate later

Tax Rate Today	25%		10%		25%
Tax Rate at Retirement	25%		25%		10%
	Pretax	Roth	Pretax	Roth	Pretax	Roth
Amount Available	$100	$100	$100	$100	$100	$100
Taxes Due	$0	$25	$0	$10	$0	$25
Amount Invested	$100	$75	$100	$90	$100	$75
Money Doubles (X Years)	$200	$150	$200	$180	$200	$150
Tax at Withdrawal	$50	$0	$50	$0	$20	$0
After-Tax Value	$150	$150	$150	$180	$180	$150

Note that if tax rates are equal today and later, it might not matter what you do. That said, there may still be reasons to convert, such as trying to avoid IRMAA or other issues.

What about the time value of money?

Spending an extra dollar in taxes today (while converting to Roth) hurts more than spending a dollar 30 years from now. All things being equal, some say that it’s better to wait to pay taxes—but all things are not equal. For example, you might be able to convert at lower rates today. Or, you might be able to avoid higher Medicare premiums (IRMAA surcharges).

FAQs

Should I convert pre-tax money to Roth?
It may make sense to convert to Roth if you can pay taxes at a lower rate today, or if you foresee RMD problems down the road. For instance, if your future RMDs will put you into higher tax brackets or cause you to pay more for Medicare, it’s worth exploring Roth conversions.
How much should I convert?
A good strategy might be to convert a portion of your pretax money to Roth over multiple years, and you’d convert an amount that results in an acceptable tax outcome. For instance, you might choose to convert enough to fill up a certain tax bracket or to avoid an IRMAA surcharge. Alternatively, you might look at converting enough to dodge long-term tax problems. For step by step guidance, see this article: https://www.approachfp.com/how-much-to-convert-to-roth/.
What is a Roth conversion?
When you move money directly from a pretax account to a Roth account, you convert that money to Roth by paying taxes today. The goal is that you’ll pay less tax later, and you might avoid other problems, like extra Medicare costs each month (IRMAA).
Are there income limits or requirements for Roth conversions?
No, you can convert to Roth whether you have zero income or you earn a substantial amount. The income limits and requirements apply for Roth contributions—not Roth conversions.
How much will my RMD be?
RMDs generally start out at roughly 4% of your account balance, they’re around 5% when you’re 80, and they continue to increase as a percentage as you grow older. They are designed to deplete your account when you reach life expectancy. The dollar amount can increase dramatically through the early years if your account grows or maintains value during those years.
Do Roth conversions help with RMDs?
Yes, Roth conversions typically help to reduce your future RMDs by moving money out of pre-tax accounts. By prepaying the tax, you eliminate the need to withdraw those funds later. However, you might still have sizable RMDs even if you convert pretax money to Roth. In some cases, it’s hard to shrink your future RMDs to a level you want.
What RMD should I aim for?
One approach is to arrange things so that your RMDs are roughly the exact amount you would withdraw anyway for spending. That way, you take only what you need, without piling on tens of thousands (or more) of additional income. But getting to that point might be painful: You may need to make massive Roth conversions, which can cause tax consequences and other issues while you’re converting. It’s a balancing act, and you have to evaluate the pros and cons of converting more or less.
Should I convert all of my pretax money to Roth?
Probably not, because you might pay more tax than you need to. It often makes sense to keep some money in pretax accounts so you can take advantage of the standard deduction each year, give to charity efficiently with qualified charitable distributions (QCDs), potentially deduct high medical expenses, and more. That said, it could make sense in your specific situation.
Can you help me figure out if Roth conversions make sense?
Yes, as a fee-only fiduciary and CFP® professional, I help people evaluate Roth conversions: whether or not they’re a good idea, how much to convert, and when. We can review the tradeoffs and how your income might change over time, along with potential tax law changes, and more. See the Pricing page to understand your options.

Important

Use at your own risk. This model ignores many important aspects of retirement, and is not sufficient for robust planning. There is no guarantee that you will achieve any investment results, and you can/will lose money investing, at least temporarily. There is no guarantee that you’ll recover after losses in a timely fashion, which could cause you to run out of money early. Tax laws are complicated and they change frequently. There is no guarantee that you’ll pay taxes at the assumed rates you enter. Additional RMD options may be available and are not shown here. Many risks and opportunities are not shown in this calculator, but it’s a start. This calculator may contain errors and omissions, and is not a substitute for robust financial planning. Triple-check all output with your own financial and tax experts, and use at your own risk.

Roth Conversion Calculator