Amount to convert
Amount to convert from a Traditional IRA account to a Roth IRA.
It is important to note that some high income households do
not qualify for a Roth IRA conversion. Currently, anyone with
an adjusted gross income over $100,000 cannot make a Roth IRA
conversion. For the purposes of this calculator, we assume that
your income does not limit your ability to convert to a Roth
IRA.
We also assume that you are paying any taxes owed with funds
that you have available outside of the IRA you are converting.
The IRS treats any money not directly transferred to the new
Roth IRA as an early withdrawal - even if that money is used
to pay the tax bill caused by the conversion. If you do not
have adequate funds outside of your IRA to pay the tax liability
on a conversion, you probably should not consider converting
your Traditional IRA to a Roth IRA.
Non-deductible contributions
Amount contributed to the Traditional IRA you are converting
that was not tax deductible.
Current tax rate
Current marginal income tax rate that will apply to conversion
amount. Please note that the marginal tax rate for your conversion
may be higher than your current marginal tax rate if the conversion
moves your AGI into a higher income tax bracket.
Tax rate at retirement
Expected marginal income tax rate at retirement.
Investment tax rate
Expected marginal tax rate (base this on expected capital
gains rate) for investments.
Current age
Current age.
Age at retirement
Desired age at retirement.
Rate of return
The annual rate of return for your 401(k) account. This calculator
assumes that your return is compounded annually and your deposits
are made monthly. The actual rate of return is largely dependant
on the type of investments you select. From January 1970 to
December 2007, the average compounded rate of return for the
S&P 500, including reinvestment of dividends, was approximately
11.4% per year (source: www.standardandpoors.com). During
this period, the highest 12-month return was 61%, and the
lowest was -39%. Savings accounts at a bank can pay as little
as 1% or less.
It is important to remember that future rates of return can't
be predicted with certainty and that investments that pay
higher rates of return are generally subject to higher risk
and volatility. The actual rate of return on investments can
vary widely over time, especially for long-term investments.
This includes the potential loss of principal on your investment.
It is not possible to invest directly in an index and the
compounded rate of return noted above does not reflect sales
charges and other fees that funds and/or investment companies
may charge.
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