1. What is Roth Conversion?

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

2. How Does the Calculator Work?

The calculator uses the simple formula:

Where:

• \( \text{Amount} \) — The dollar amount being converted (USD)
• \( \text{Tax Rate} \) — Your marginal tax rate for the conversion (unitless, 0 to 1)

Explanation: This shows the net amount that will be transferred to your Roth account after paying taxes on the conversion.

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 required minimum distributions, or desire tax-free growth for heirs.

4. Using the Calculator

Tips: Enter the amount you plan to convert and your estimated tax rate for the conversion year. The tax rate should be entered as a decimal (e.g., 0.24 for 24%).

5. Frequently Asked Questions (FAQ)

Q1: When is the best time to do a Roth conversion?
A: Typically in years when your income is lower than normal, putting you in a lower tax bracket.

Q2: Are there limits on how much I can convert?
A: There are no limits on conversion amounts, but large conversions could push you into a higher tax bracket.

Q3: How is the conversion taxed?
A: The converted amount is treated as ordinary income in the year of conversion.

Q4: Can I undo a Roth conversion?
A: Prior to 2018, you could recharacterize (undo) a conversion, but this option is no longer available under current tax law.

Q5: Should I pay the taxes from the conversion amount or separately?
A: It's generally better to pay taxes from separate funds to maximize the amount growing tax-free in the Roth account.