A Roth conversion moves money from a Traditional IRA into a Roth IRA, and the catch is that you pay ordinary income tax on the converted amount in the year you convert. The reward is that the money then grows inside the Roth and can be withdrawn tax-free in retirement, provided the account rules are met.

The calculator above turns that trade-off into concrete numbers. You enter the balance you want to convert, your current federal and state tax rates, the return you expect, and the tax rate you expect to face when you withdraw the money years from now.

It then shows the tax bill for converting, the projected Roth value at withdrawal, the projected after-tax value of leaving the money in the Traditional IRA, and a verdict on which path comes out ahead. This guide explains every moving part behind those numbers so you can read your result with confidence.

What Does the Schwab Roth Conversion Calculator Do?

You describe a conversion scenario: how much you want to convert, what tax rates apply today, what return you expect, and how many years the money will grow. The calculator works out the conversion tax bill first, splitting it into federal and state portions so you see exactly where the money goes.

Next it projects both paths forward. The Roth path grows the post-tax amount tax-free to your withdrawal date. The Traditional path grows the full pre-tax amount, then subtracts the tax you would owe at withdrawal. The difference between the two is your net advantage.

How to Use the Schwab Roth Conversion Calculator

Type the Traditional IRA balance you plan to convert into the first box. This can be the whole account or a partial conversion, since converting in slices across years is a common strategy.

Enter your federal marginal tax rate, not your effective rate. A conversion stacks on top of your other income, so the marginal bracket is what prices the extra dollars. Add your state income tax rate in the next box; enter zero if your state has no income tax.

Enter the annual return you expect and the number of years until you plan to withdraw. Then enter the tax rate you expect to face in retirement, and choose whether you will pay the conversion tax from outside funds or from the converted amount itself. Press Calculate.

What a Roth Conversion Actually Is

A conversion re-characterizes Traditional IRA dollars as Roth IRA dollars. The IRS treats the converted amount as taxable income for that year, which is why a big conversion can push you into a higher bracket all by itself.

Once converted, the money follows Roth rules. Qualified withdrawals after age 59 and a half, once the five-year clock is satisfied, come out federal-income-tax-free, including all the growth. That is the prize you are buying with today's tax payment.

Why the "Pay From" Choice Changes Everything

The calculator asks whether you pay conversion taxes from outside funds or from the converted amount, and this single choice can flip the verdict. Paying from outside funds means the full balance lands in the Roth and starts compounding immediately.

Paying from the converted amount means the Roth starts smaller because the tax bill is carved out of it first. A $50,000 conversion at a 29 percent combined rate leaves only $35,500 actually entering the Roth.

Today's Tax Rate vs Your Withdrawal Tax Rate

The single most important comparison in conversion math is your tax rate today against your tax rate at withdrawal. If your rate will be lower in retirement, converting now means paying tax at the higher rate, which usually loses.

If your rate will be higher later, perhaps because required minimum distributions will stack on top of Social Security, then paying tax now at the lower rate usually wins. Same rate both times is roughly a tie when taxes come from the conversion itself.

The Five-Year Rule You Should Know

Each Roth conversion starts its own five-year clock for the converted principal. Withdraw the converted amount before five years pass and you may owe a 10 percent early-withdrawal penalty on it if you are under 59 and a half.

Earnings have their own five-year rule tied to your first Roth contribution or conversion. The calculator assumes you will respect these clocks, which is realistic for retirement planning but worth stating.

Worked Example: $50,000 Conversion at a 29 Percent Combined Rate

A 45-year-old converts $50,000 with a 24 percent federal rate, a 5 percent state rate, a 7 percent expected return, and 20 years until withdrawal. She expects a 22 percent rate in retirement and pays the tax from outside funds.

First: the combined rate is 24 + 5 = 29 percent, so the conversion tax bill is $50,000 × 0.29 = $14,500.

Then: the full $50,000 enters the Roth and grows for 20 years at 7 percent. The growth factor is 1.07²⁰, about 3.87, giving a Roth value near $193,484, all tax-free.

The Traditional path grows the same $50,000 to $193,484, then pays 22 percent at withdrawal, leaving about $150,918.

Answer: converting wins by roughly $42,566 in this scenario.

How Growth Compounds Inside a Roth

The formula is the standard compound growth expression. The future value equals the starting amount times one plus the return, raised to the number of years.

The formula is:

Future value = Starting amount × (1 + r)^t

Worked Example: Paying Taxes From Outside Funds vs From the Conversion

Take the same $50,000 conversion at 29 percent combined tax, 7 percent return, 20 years, and a 29 percent rate at withdrawal too, so rates are equal on both ends.

First: paying from outside funds puts the full $50,000 in the Roth. It grows to about $193,484 tax-free, while the Traditional path nets $193,484 × (1 − 0.29) = $137,373. Converting wins by about $56,111.

Then: paying from the conversion leaves $35,500 in the Roth, growing to about $137,373, exactly matching the Traditional outcome.

Answer: with equal tax rates, outside funds make converting a clear win; paying from the conversion makes it a tie.

The Break-Even Tax Rate Trick

There is a neat shortcut hidden in the math. When taxes are paid from the conversion itself, converting breaks even exactly when your withdrawal tax rate equals today's combined rate. Higher later means convert; lower later means do not.

When taxes are paid from outside funds, converting wins at equal rates and only loses if your retirement rate drops far enough below today's rate to erase the outside-funds bonus.

Worked Example: When Staying Traditional Wins

A 58-year-old converts $40,000 at a 32 percent federal rate plus 6 percent state, expects 5 percent returns over 10 years, and expects only a 12 percent rate in retirement. She pays the tax from the conversion.

First: the combined rate is 38 percent, so $15,200 goes to taxes and $24,800 enters the Roth.

Then: the Roth grows at 5 percent for 10 years, a factor of about 1.629, reaching roughly $40,398 tax-free. The Traditional path grows $40,000 to about $65,156 and pays 12 percent at withdrawal, leaving about $57,337.

Answer: staying Traditional wins by roughly $16,939. Paying today's steep 38 percent to avoid tomorrow's 12 percent is a bad trade.

Conversion Ladders vs One Big Conversion

A Roth conversion ladder spreads conversions across several low-income years, for example the years between early retirement and required minimum distributions. Each year's conversion fills up a low bracket without spilling into a high one.

One big conversion is simpler but concentrates the tax bill, often at your highest marginal rate. The ladder trades simplicity for a lower average tax price per converted dollar.

Worked Example: Splitting a Conversion Across Two Tax Years

An investor wants to convert $100,000 but a single conversion would be taxed at 32 percent federal. Splitting it into two $50,000 conversions keeps each year's slice at 24 percent federal, with 5 percent state either way.

First: one big conversion costs $100,000 × 0.37 = $37,000 in tax.

Then: two split conversions cost 2 × ($50,000 × 0.29) = $29,000 in tax.

Answer: splitting saves about $8,000 in taxes for the same $100,000 moved into the Roth, before even counting growth.

Common Roth Conversion Mistakes

The most expensive mistake is converting without the cash to pay the tax bill, then raiding the converted amount to cover it. That shrinks the Roth and can trigger penalties if you are under 59 and a half.

Another classic error is using your effective tax rate instead of your marginal rate. The conversion stacks on top of existing income, so the marginal bracket prices it; using the lower effective rate understates the bill.

Where Roth Conversion Math Is Useful

Early retirees use conversion math to fill low-bracket years before Social Security and RMDs begin. Each year's calculation decides how much to convert without breaching the next bracket.

Estate planners use it to compare leaving heirs pre-tax versus Roth dollars, since inherited Traditional IRAs now generally must be emptied within ten years. High earners use it to sanity-check backdoor Roth strategies.

How to Interpret Your Result Correctly

Read the tax bill first and ask whether you can pay it comfortably from the source you selected. A winning projection you cannot fund is not a plan.

Then compare the two future values, not just the verdict. A $2,000 advantage over 30 years may not justify the paperwork and the risk that tax law changes; a $40,000 advantage probably does.

Frequently Asked Questions

1. Does a Roth conversion make sense if I am already retired?

It can, especially in the years between retiring and starting Social Security or required minimum distributions, when your taxable income is at its lowest. Converting during those gap years often prices the tax bill at a much lower bracket than your working years or your RMD years would. The calculator lets you test a low current rate against a higher expected withdrawal rate to see the advantage.

2. What is the difference between a Roth conversion and a Roth contribution?

A contribution adds new earned-income dollars to a Roth IRA within annual limits. A conversion moves existing pre-tax dollars from a Traditional IRA into a Roth and has no dollar cap, but the converted amount counts as taxable income that year. Contributions can be withdrawn anytime penalty-free; converted amounts face their own five-year clock before penalty-free withdrawal under age 59 and a half.

3. Will converting push me into a higher tax bracket?

Very possibly, because the converted amount stacks on top of your other income for the year. A $50,000 conversion can easily shove part of your income into the next bracket. This is exactly why many people split conversions across years. Enter your true marginal rate, including any bracket creep, for an honest tax bill.

4. Do I pay state tax on a Roth conversion?

In most states with an income tax, yes, the conversion counts as taxable income at the state level too. A few states exempt retirement income or offer partial exclusions, so check your state's rules. The calculator has a separate state-rate box precisely because the combined rate is what prices the conversion.

5. What is the five-year rule for Roth conversions?

Each conversion's principal must wait five years before you can withdraw it penalty-free if you are under 59 and a half; otherwise a 10 percent early-withdrawal penalty may apply to the converted amount. Roth earnings have a separate five-year rule tied to your first Roth account funding. The calculator assumes you will hold for the full horizon you enter.

6. Can I undo a Roth conversion if I change my mind?

No. Recharacterizations of Roth conversions were eliminated starting in 2018, so a conversion is permanent once done. This finality is why running the numbers first matters so much. Use the calculator to stress-test the decision with pessimistic returns before committing.

7. Should I pay the conversion tax from the IRA or from savings?

From savings whenever possible. Paying from outside funds puts the full balance to work inside the Roth, while paying from the conversion shrinks the amount that enjoys tax-free growth. The calculator's worked examples show this choice alone can swing the outcome by tens of thousands of dollars over 20 years.

8. How does a conversion affect my Medicare premiums?

The extra income in the conversion year can raise your Medicare Part B and D premiums two years later through IRMAA surcharges, which are based on modified adjusted gross income. A large conversion at 63 can mean higher premiums at 65. Factor this hidden cost into big conversions near Medicare age.

9. Is there a limit on how much I can convert?

No. Unlike contributions, conversions have no annual dollar limit and no income limit. You can convert $10,000 or $1,000,000. The practical limit is your willingness to pay the resulting tax bill, which is why bracket management matters more than any statutory cap.

10. What happens if the market drops right after I convert?

You still owe tax on the full converted amount even if the investments then fall, which means you paid tax on value that no longer exists. This sequence risk is real and unfixable since recharacterization was eliminated. Converting in smaller tranches across the year spreads this risk.

11. Do Roth conversions affect required minimum distributions?

Yes, favorably. Money moved into a Roth is no longer subject to RMDs during your lifetime, which can lower your taxable income in your 70s and beyond. Many retirees convert specifically to shrink future RMDs. The calculator's withdrawal-rate input is where you capture this benefit.

12. Can I convert if I am still working and contributing?

Yes. There is no rule against converting while employed or while still contributing to retirement accounts. Many workers convert in a low-income year, such as during a sabbatical or a job change. Just remember the conversion income itself may affect contribution deductibility phase-outs.

13. How are conversions reported on my tax return?

Your custodian issues Form 1099-R showing the distribution, and you report the conversion on Form 8606 with your return. The taxable amount flows to your 1040 as ordinary income. Keep the 5498 forms showing the Roth receipt as your paper trail.

14. Does the calculator account for the pro-rata rule?

No. If your Traditional IRA contains both pre-tax and after-tax (nondeductible) dollars, the IRS taxes each converted dollar proportionally under the pro-rata rule, and the calculator's simple rate math will not match. With purely pre-tax balances, which is the common case, the calculator's approach is correct.

15. When is converting clearly a bad idea?

When you need the money within five years, when you cannot pay the tax bill from outside funds, when your current marginal rate is much higher than your expected retirement rate, or when the conversion would trigger IRMAA surcharges or college financial-aid damage that dwarfs the benefit. The calculator's verdict line will usually show a loss in these cases.