Should you convert traditional IRA money to Roth?

How a Roth conversion works

A Roth conversion moves money from a tax-deferred account (traditional IRA or 401(k)) into a Roth account. You pay ordinary income tax on the converted amount in the year you do it. After that, the money grows tax-free and you owe no tax on qualified withdrawals in retirement.

The trade-off is upfront tax now vs. potential tax later. If your current marginal rate is lower than your expected rate in retirement, converting now locks in the lower rate. If your current rate is higher than your future rate, keeping the money traditional and paying tax at withdrawal is generally better.

Why the break-even age matters

The break-even age is when the Roth scenario catches up to the traditional scenario in cumulative after-tax value. Before that age, you've paid more tax than you would have without converting. After that age, the tax-free Roth growth starts to compound past what the traditional account is worth net of future taxes.

A break-even in your 70s or 80s with a conversion done at 40 is common for partial conversions. The longer your money has to grow tax-free, the better Roth looks — provided your retirement tax rate isn't dramatically lower than your current rate.

What this calculator includes and excludes

The calculation models year-by-year balance growth, required minimum distributions (RMDs) on the traditional account starting at the current RMD age, state income tax for your state, and the effect of your retirement income on your projected retirement tax bracket.

It does not model Medicare IRMAA surcharges, NIIT on investment income, Social Security taxation thresholds, or conversion ladders done across multiple years to manage brackets. Rikdom's full planning surface handles all of those.