Roth Conversion Calculator

Six Friends, One Airbnb, and a Question Worth Asking

Last New Year's Eve, a group of friends in their late 30s spent the last hours of 2025 doing Roth IRA conversions on their laptops in a Florida rental. Bloomberg reported on it — Roth conversions jumped 41% in Q1 2026 compared to a year earlier, hitting record levels at Fidelity. The story went mildly viral in personal finance circles because it was both slightly absurd and completely logical.

Absurd because — come on, New Year's Eve. Logical because those people had figured out something that most people haven't: moving money from a traditional IRA to a Roth before the calendar year ends is one of the few tax moves that actually has a hard deadline. Miss it and you're paying next year's tax rates instead.

So what's actually going on with these conversions? Why are they suddenly everywhere, who should be doing them, and — most importantly — should you? Let's go through it honestly, including the parts that aren't obviously a good idea.

What a Roth Conversion Actually Is

A traditional IRA (or 401k) is a deal with the government: you put in pre-tax dollars, the money grows without being taxed along the way, and you pay income tax when you pull it out in retirement. A Roth IRA is the opposite deal: you put in after-tax dollars, the money grows tax-free, and you pay nothing when you withdraw it.

A Roth conversion is when you take money sitting in the first bucket and move it to the second. The government wants its cut, so you pay income tax on the converted amount in the year you convert. After that? The money is yours, tax-free, forever — as long as you follow the rules.

Think of it as choosing when to pay the bill. Traditional: pay later, in retirement, on whatever amount the account has grown to. Roth: pay now, on today's balance, and let the future growth be completely tax-free. Neither is universally better. The right answer depends entirely on whether your tax rate now is lower than your expected rate in retirement. The calculator above works this out with your actual numbers.

The Tax Hit — And Why It's Not As Bad As It Sounds

Here's the part that stops most people: the conversion amount is treated as ordinary income in the year you convert. Convert $40,000 and your taxable income goes up by $40,000. That's a real, immediate tax bill.

But here's the thing — it's not 40% of $40,000. The US has a progressive tax system. If you're in the 22% bracket, only the amount that spills above the 22% bracket threshold gets taxed at 24%. Everything else gets taxed at your existing marginal rates. The calculator shows you this breakdown in real-time.

There's also a smarter way to do this: the bracket-filling strategy. Instead of converting a lump sum and hoping for the best, you figure out exactly how much room you have left in your current bracket and convert only that amount. If your taxable income is $85,000 and the 22% bracket tops out at $103,350 (single filer, 2026), you have $18,350 of room. Convert that much and you pay 22% on the conversion — not a penny at 24%. Do this every year and you systematically shift a large traditional balance to Roth without ever jumping brackets. The Bracket Optimizer tab shows exactly how much room exists in each bracket given your income.

One thing you cannot do anymore: undo a conversion. Before 2018, you could reverse a Roth conversion by the tax filing deadline — useful if the market tanked after you converted. The Tax Cuts and Jobs Act of 2017 eliminated that option permanently. Conversions are now one-way, which makes the planning more important.

Do You Have to Convert Everything at Once?

Absolutely not. In fact, converting your entire traditional IRA balance in one shot is almost always the wrong move — it creates a massive income spike that rockets you into higher brackets and potentially triggers Medicare IRMAA surcharges.

Partial conversions spread over 5–10 years are the standard approach. Convert enough each year to stay in your target bracket, never more. This works especially well during "low income years" — a job gap, early retirement before Social Security starts, or a year with large deductions. The window between retirement (when income drops) and RMD age 73 (when forced distributions start) is often called the "Roth conversion sweet spot." You've left employment income behind, but RMDs haven't kicked in yet. Those are often your lowest-income years in a lifetime.

Which Accounts Can Actually Be Converted?

Traditional IRAs, SEP IRAs, and SIMPLE IRAs (after 2 years) can all be converted directly. 401(k), 403(b), and 457(b) accounts usually need a step in between — either rolling to a traditional IRA first or rolling directly into a Roth IRA, which many employer plans allow when you leave the company. Check with your plan administrator.

There is no income limit on conversions. This is the mechanism behind the backdoor Roth — if you earn too much to contribute directly to a Roth ($161,000+ for single filers in 2026), you contribute to a non-deductible traditional IRA and immediately convert it. Same result, slightly more paperwork. The IRS is aware of this maneuver and explicitly permits it. You do need to file Form 8606 to track the basis.

Should You Pay the Tax Bill From the IRA Itself?

This is one of the most important tactical decisions in a Roth conversion: where does the money to pay the tax come from?

Option A: Pay the taxes from outside funds — your savings account, taxable brokerage, wherever. This is almost always better. The reason: if you convert $50,000 and pay the $11,000 tax bill from a savings account, the full $50,000 goes into the Roth and compounds tax-free. You're effectively adding $11,000 in value to your retirement account (by paying tax outside).

Option B: Pay the taxes from the converted funds themselves — withhold 20% of the conversion to cover the tax. Only $40,000 goes into the Roth, and the $10,000 withheld is a taxable distribution that may also trigger the 10% early withdrawal penalty if you're under 59½. This is a significantly worse outcome. Only use the IRA funds to cover taxes if you have no other option.

The 5-Year Rule — Two Different Clocks

This is where Roth accounts get a bit confusing, and it's worth getting right.

There are actually two separate 5-year rules. The first one: to withdraw Roth earnings completely tax-free, the account needs to be at least 5 years old (clock starts January 1 of the year of your very first contribution, ever) and you need to be 59½. This is a one-time clock per person, not per account.

The second rule specifically applies to conversions: each batch of converted money starts its own 5-year clock. If you convert $30,000 in 2026, that $30,000 can't be withdrawn penalty-free until 2031 — unless you are already 59½. Every year you do a new conversion, a new 5-year clock starts for that amount.

The practical implication: if you're under 54 and might need this money before retirement, plan accordingly. Your regular Roth contributions (money you put in directly, not conversions) are always available penalty-free because you already paid tax on them. Converted funds are the ones that have the 5-year waiting period. The 5-Year Rule tab tracks the unlock dates for five consecutive years of conversions.

Income Limits? Only for Contributions, Not Conversions

People frequently confuse these two. Contributing directly to a Roth IRA phases out at $161,000 for single filers and $240,000 for married filers (2026). If you earn more than that, you simply cannot make a direct Roth contribution.

Roth conversions have no income limit. A surgeon earning $500,000 can convert as much of their traditional IRA as they want. The only cost is income tax on the converted amount. This is why backdoor Roth is so popular among high earners — it's a totally legitimate way around the contribution limits. Contribute to a non-deductible traditional IRA (no income limit on that), then convert it. Done.

RMDs, Social Security, and the Hidden Tax Traps of Retirement

Here's the part most people don't think about when they're 40: traditional IRA money doesn't sit quietly. Starting at age 73, the IRS requires you to withdraw a percentage of your traditional IRA each year — Required Minimum Distributions, or RMDs. You don't get to choose. The formula is based on your account balance divided by a life expectancy factor from the IRS's Uniform Lifetime Table.

At age 73, the divisor is 26.5 — so you're forced to withdraw about 3.8% of your balance. By age 80, it's nearly 5%. And here's the cascade: those RMDs are ordinary income. A large traditional IRA balance generates large RMDs which can push you into a higher bracket. It can also trigger Medicare IRMAA surcharges (you pay higher Medicare premiums above certain income thresholds), and — this catches people off guard — it can make more of your Social Security benefits taxable. Up to 85% of Social Security benefits become taxable above $34,000 in combined income for single filers.

Roth IRAs have no RMDs during your lifetime. Zero. You control when and whether you withdraw. That gives you enormous flexibility to manage your taxable income in retirement — pulling from taxable, traditional, and Roth sources strategically to stay in lower brackets and avoid the Social Security tax trap.

For estate planning: Roth IRAs pass to heirs income-tax-free. Under SECURE Act 2.0, inherited IRAs (including Roth) must be emptied within 10 years. But there's a crucial difference — your kids withdrawing from an inherited Roth IRA pay no income tax. Your kids withdrawing from an inherited traditional IRA pay full income tax at their marginal rate. If your heirs are in their 40s at peak earnings, that's a brutal tax hit. A Roth conversion now means you pay tax at your rate so they don't pay at theirs.

When a Roth Conversion Makes Sense — and When It Doesn't

Converts well in these situations:

• — You're in a lower bracket now than you expect to be in retirement (young, in a career valley, or recently retired)
• — Tax rates are historically low and you expect them to rise
• — You want to reduce future RMDs to control retirement income
• — You want to leave tax-free money to heirs
• — The market just dropped and your account value is temporarily lower (less tax on the same number of shares)
• — You have deductions this year (large charitable contribution, medical expenses) that can offset the conversion income

Not a great fit here:

• — You're in a high bracket now and expect a lower one in retirement
• — You'll need the money within 5 years and are under 59½
• — You'd have to pay the taxes from the IRA itself (meaning less ends up in the Roth)
• — The conversion would spike your income enough to trigger Medicare IRMAA surcharges or make more Social Security taxable