Money » Calculators » Roth IRA Conversion Calculator
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Roth IRA Conversion Calculator

This calculator compares two alternatives with equal out of pocket costs to estimate the change in total net-worth, at retirement, if you convert your Traditional IRA into a Roth IRA.
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Should You Convert Your Traditional IRA to a Roth IRA?

If you’re read a lot about Roth IRA’s you may be wondering if it’s a good idea to convert your money from that traditional IRA to a Roth. If you do a conversion you can move your money over, pay your taxes and then put it into a Roth IRA without the extra penalties.

And you won’t have to worry about the early withdrawal penalties or other taxes either. You can then use your account just like if you had started with a Roth IRA in the first place.

Of course, you’ll want to take a closer look at some of the factors that affect your use of these accounts. Look at how much your taxes will be if you pull the money and transfer it over.

Remember that a Roth IRA is after-tax income while a traditional IRA is before tax, so you’ll have to pay taxes on what you’ve already invested. You also want to look at what your tax rate is likely to be after you retire, which could affect whether this is a good idea.

  • Roth IRA can be expensive. If you started with a traditional because you have to pay the taxes and you don’t want to pay those taxes out of the money that you’re transferring over.
  • If you’re going to be in a lower tax bracket when you actually retire you’re going to be paying more now than you would by leaving your accounts.
  • If you need the money within the next 5 years you’re not going to be able to take it out of the Roth IRA because there’s a holding period.

You’re going to want to look at the conversion calculators available to see more about if this is going to be a good option for you.

Predicting tax rates and the changes that could happen over the next several years or decades could be difficult and that makes it hard to know what you could be paying on a traditional IRA when you retire.

Make sure that you’re taking a close look and making an informed decision about your conversion before you do it.

Opening a Roth IRA

When you’re ready to open a Roth IRA you need to find an institution that has IRS approval. In general, you can find these all over including banks, federally insured credit unions, savings and loans, brokerages and more.

You can also choose to open the account whenever you want. Just remember that you need to make the contributions before the tax-filing deadline. You can’t use an extension when it comes to your IRA.

You also want to make sure that you choose the right provider for the IRA that you’re getting. Remember, you’re going to be investing your money and you want to be sure that you’re getting a provider who can work with you.

If you want to be active make sure you don’t have to pay too many trading costs. If you want to be inactive and passive make sure you don’t have fees associated with that. Also, look at the types of investments you want most.