Roth IRA Rollover Calculator
Estimate the tax implications when rolling over funds from a Traditional IRA or other eligible retirement plan to a Roth IRA.
Enter the portion of your current pre-tax value that will be subject to income tax upon conversion. If your entire balance is pre-tax, this will be the same as the value above. If you have after-tax contributions, enter only the pre-tax portion. Leave blank or 0 if unsure or if this is a Roth-to-Roth conversion.
This is your tax bracket percentage (e.g., 24% means 0.24).
Estimated Tax on Rollover
$0.00
Understanding Roth IRA Rollovers and Taxes
A Roth IRA rollover, often referred to as a Roth conversion, allows you to move funds from a traditional IRA, 401(k), or other eligible pre-tax retirement accounts into a Roth IRA. The primary advantage of a Roth IRA is that qualified withdrawals in retirement are tax-free. However, the conversion itself has tax implications.
The core principle behind the taxation of a Roth rollover is that you pay income tax on the pre-tax money you convert now, so that future qualified withdrawals are tax-free.
How the Calculator Works
This calculator estimates the immediate income tax liability associated with converting pre-tax retirement funds to a Roth IRA.
- Current Pre-Tax IRA/Retirement Value: This is the total amount of money you have in your traditional IRA, 401(k), or other eligible pre-tax retirement accounts that you intend to convert.
- Estimated Taxable Distribution Amount: This is the crucial input. It represents the portion of your total pre-tax value that will be subject to income tax upon conversion. For most traditional IRA or 401(k) rollovers, the entire amount is considered pre-tax and thus taxable upon conversion (unless you have made non-deductible, after-tax contributions to a traditional IRA). If you're converting from a Roth 401(k) to a Roth IRA, this value would be $0. If you're unsure, it's often best to consult a tax professional, but for simplicity in calculation, assuming the full balance is pre-tax is common.
- Your Estimated Marginal Income Tax Rate (%): This is the tax rate applied to your last dollar of income. When you convert pre-tax funds, they are typically added to your taxable income for the year of the conversion. You need to know your marginal tax bracket to estimate the tax impact. For example, if your marginal rate is 24%, you would enter '24'.
The Calculation
The tax on a Roth rollover is calculated as follows:
Taxable Amount for Conversion = Estimated Taxable Distribution Amount
Income Tax = Taxable Amount for Conversion * (Your Estimated Marginal Income Tax Rate / 100)
The result shown is the estimated income tax you would owe in the year of the rollover, based on the figures provided.
Important Considerations:
- Timing Your Conversion: Converting in a year when you anticipate being in a lower tax bracket can reduce the immediate tax burden.
- Paying the Tax: It's crucial to have the funds available to pay the tax liability without withdrawing from the converted amount. Withdrawing from the converted amount before age 59.5 (and before the 5-year rule is met for the Roth account) can result in penalties and additional taxes. Ideally, pay the tax from a non-retirement account.
- 5-Year Rule: Remember that after conversion, the Roth IRA is subject to the 5-year rule. This rule dictates that earnings within the Roth IRA must remain for at least five years from the date of the first contribution (or conversion) to be withdrawn tax-free in retirement. The principal (converted amount) can generally be withdrawn tax-free anytime, but the earnings require the 5-year waiting period.
- 59.5 Age Rule: To withdraw earnings tax-free from a Roth IRA in retirement, you must also be at least 59.5 years old.
- After-Tax Contributions: If you have made non-deductible (after-tax) contributions to a traditional IRA, that portion of the balance is not taxed upon conversion. This calculator assumes the 'Estimated Taxable Distribution Amount' accurately reflects the pre-tax portion.
- Professional Advice: Tax laws are complex and personal situations vary. This calculator provides an estimate. Always consult with a qualified tax advisor or financial planner before making significant financial decisions like a Roth rollover.