Roth Conversion Break-Even Calculator

When you convert traditional IRA funds to Roth, you pay income tax today in exchange for tax-free growth and distributions later. The break-even point is when the Roth account's advantage finally exceeds the cost of having paid that upfront tax bill — including the opportunity cost of the money you spent on taxes.

This calculator gives you the exact year-by-year comparison. It accounts for a detail most break-even tools miss: the tax dollars you spend on conversion could have sat in a taxable account earning after-tax returns. That opportunity cost matters.

How to read these results

The calculator compares two paths for the same dollars:

• Roth path: You convert $X to Roth today, paying taxes upfront. The full $X grows inside Roth, tax-free, for N years. At the end, you take it out tax-free.
• Traditional + Taxable path: You leave $X in the traditional IRA. It grows at the same rate, but distributions are taxed at your future rate. Separately, the conversion tax dollars you didn't spend (t × $X) sit in a taxable account, growing at an estimated after-tax rate (80% of gross return, accounting for capital gains and dividend drag).

The break-even year is when Roth Value first exceeds Traditional + Taxable combined. Before that point, the traditional path technically has more total after-tax wealth. After it, Roth compounds ahead — and the gap widens with time.

The key driver: taxable account drag

Many break-even calculators ignore a critical detail: the taxes you pay on conversion don't disappear — they come out of your taxable account. That account could have kept growing. If you pay $22,000 in taxes to convert $100,000, you're giving up the future growth of $22,000 in taxable investments.

The catch is that taxable accounts earn less than Roth after tax. If your gross return is 7%, a taxable account earns roughly 5.5–5.8% after capital gains and dividend taxes (depending on your asset mix). Roth earns the full 7%. Over 20–25 years, that difference is substantial — it means Roth often breaks even sooner than the simple "just compare tax rates" analysis suggests, even when current and future rates are equal.

When Roth conversions clearly make sense

• You're in the pre-RMD income trough. Between retirement and age 73, most retirees have lower income than they did while working — and lower than they'll have once RMDs force distributions from large accounts. This window is the cheapest time to convert.
• Your future rate will be higher. If RMDs will push you into a higher bracket — or if tax rates rise generally — paying 22% now to avoid 28–32% later is clearly advantageous.
• You're in the IRMAA zone. Converting reduces your future traditional IRA balance, which reduces future RMDs, which reduces future MAGI, which can keep you below Medicare IRMAA surcharge thresholds. The IRMAA avoidance value often makes Roth conversions worth it even at equal rates.
• You plan to leave IRAs to heirs in a high tax bracket. Under the SECURE Act 10-year rule, adult children must drain inherited IRAs within 10 years — often piling the distributions on top of their own earned income. Converting to Roth during your lifetime passes tax-free assets instead.
• Your estate is large. Roth IRAs have no lifetime RMDs, so they compound longer before being touched. For estate planning, an untouched Roth at age 90 has grown far more than a traditional IRA that was drained by RMDs.

When to be cautious

• You're converting at a rate significantly higher than your future rate. If you're in a temporarily high-income year (large capital gain, consulting income) and your ordinary retirement rate will be much lower, the math rarely works in Roth's favor within a normal planning horizon.
• You'd have to sell retirement assets to pay the conversion tax. The break-even analysis above assumes you pay conversion taxes from your taxable account, not from the converted amount itself. If you'd have to withhold taxes from the conversion (reducing the Roth balance), the math changes — you're effectively converting less at a higher effective rate.
• You'll need the money within 5 years. Roth conversions come with a 5-year seasoning rule before converted amounts can be withdrawn penalty-free if you're under 59½. For older retirees this usually doesn't apply, but it's worth confirming.
• You're already past your RMD age. After 73 (or 75 for born 1960+), the RMD must come out first — the ordering rule (IRC §408(d)(3)(E)) prohibits converting your RMD dollars. You can still convert the remaining balance, but the math changes because you're funding conversions from smaller residual amounts.

Rates to consider at different income levels

Most retirees with significant tax-deferred balances find themselves in the 22%–32% federal bracket range once RMDs begin — especially when stacked with Social Security (up to 85% taxable) and pension income. The table below is illustrative; your effective rate depends on your specific deductions and income mix.

Note: "combined rate" includes federal + state. If your state has no income tax on retirement income (Florida, Texas, and others), your future rate may be lower than your conversion rate — factor that in.