Roth IRAs offer many benefits. But moving assets to Roth IRAs from traditional, SEP or SIMPLE IRAs could cost you. Our calculator helps you estimate if making a Roth conversion is beneficial to you.
Consider this important information before converting assets to a Roth IRA:
- You'll generally be subject to ordinary income tax on the amount converted (specifically, on pre-tax contributions and investment gains).
- If you pay taxes with money distributed from your IRA, you'll lose the benefits of potential tax-free growth on that amount within the Roth IRA.
- If you're under age 59½, you may be subject to a 10% federal tax penalty for money withdrawn from an IRA to pay tax on a conversion. You may also have to pay state tax penalties.
- For investors in lower tax brackets that meet certain modified adjusted gross income (MAGI) requirements, IRA contributions may be tax deductible. Roth IRA contributions aren't tax deductible (although qualified distributions of Roth earnings are tax-free and penalty-free).
- After conversion, a Roth IRA must be opened for five tax years before earnings can be withdrawn tax-free if certain other requirements are also met. These include those taken after age 59½, for death or disability, or for a first time home purchase.
The Roth Conversion Results at Retirement chart is based on inputs that are hypothetical. Information and interactive calculators are available to you as self-help tools for your independent use and aren't intended to provide legal, tax or investment advice. We can't and don't guarantee their applicability or accuracy to your individual circumstances. All examples are hypothetical and are for illustrative purposes. We encourage you to seek personalized advice from qualified professionals, such as your legal or tax adviser, for all personal finance issues and your specific situation.
There may be a delay between Roth Conversion Results at Retirement updates and the effective date of changes to the tax code or other rule changes.