Roth IRA conversion
An estimate under the assumptions you state, not tax advice and not a Form 8606 recreation. The tax is a marginal-rate approximation on rates you supply.
After 20 years: $952,623 of net wealth if you convert against $941,884 if you do not — both after the estimated tax each path still owes, and after the outside cash spent on tax today.
Break-even future tax rate under these assumptions: 23.60%. Above that combined rate the conversion comes out ahead in this model; below it, it does not. Note that this sits below today's 29.00% — the break-even is not the same thing as your current rate, because basis, the horizon and the cost of the tax cash all move it. Re-running both scenarios at the solved rate leaves a residual of $5.
- Nontaxable (recovered basis): $5,000 (5.0%)
- Taxable this year: $95,000 (95.0%)
What this does not model. There is no bracket engine here: the tax above is your marginal rate applied to the taxable amount, so it does not show a large conversion pushing income into higher brackets. It also does not model any other consequence of higher income in the conversion year — credits, deductions, Medicare premium effects, ACA subsidies or any other income-tested threshold — nor required minimum distributions, nor whether an early distribution would incur an additional tax. Those are not footnotes; they can outweigh the figures shown.
| If you do not convert | If you convert | |
|---|---|---|
| Gross value at the comparison date | $1,282,854 | $1,282,854 |
| — of which Roth (no further tax) | $0 | $320,714 |
| — of which still traditional | $1,282,854 | $962,141 |
| Estimated tax at withdrawal | -$340,971 | -$255,728 |
| Outside cash spent on conversion tax, carried forward | $0 | -$74,503 |
| Net value | $941,884 | $952,623 |
The gross value at the comparison date is the same either way — every dollar of difference comes from when the tax is paid and on what.
Scroll the table sideways on a narrow screen to see every column.
| Future combined rate | No conversion | Conversion | Difference |
|---|---|---|---|
| 22.00% | $1,005,026 | $999,980 | $5,046 against |
| 27.00% (selected) | $941,884 | $952,623 | $10,739 for converting |
| 32.00% | $878,741 | $905,266 | $26,525 for converting |
A single combined rate stands in for federal plus state at withdrawal. Nobody knows their future marginal rate, which is the honest reason to read a range rather than a point.
Scroll the table sideways on a narrow screen to see every column.
| Years held ↓ / Future rate → | 22% | 27% | 32% |
|---|---|---|---|
| 10 years | $7,007 against | $1,698 for | $10,402 for |
| 20 years (selected) | $5,046 against | $10,739 for | $26,525 for |
| 30 years | $2,738 for | $31,205 for | $59,673 for |
Time amplifies both sides: tax-free Roth growth and the compounding cost of the cash spent on tax today. Which one wins depends on the rate, which is why the two are shown together.
Scroll the table sideways on a narrow screen to see every column.
| Amount converted | Tax now | Roth at withdrawal | IRA left, after tax | Cost of tax cash | Difference |
|---|---|---|---|---|---|
| $0 | $0 | $0 | $941,884 | $0 | $0 for |
| $100,000 | $27,550 | $320,714 | $706,413 | $74,503 | $10,739 for |
| $200,000 | $55,100 | $641,427 | $470,942 | $149,007 | $21,479 for |
| $300,000 | $82,650 | $962,141 | $235,471 | $223,510 | $32,218 for |
| $400,000 | $110,200 | $1,282,854 | $0 | $298,013 | $42,957 for |
Each row is a full re-run, with its own pro-rata split. The difference scales almost linearly here only because one flat marginal rate is assumed — a real conversion of this size would climb through brackets, which this page cannot see. Read the rows as a shape, not as an instruction to convert the largest one.
Scroll the table sideways on a narrow screen to see every column.
| Step | Amount |
|---|---|
| Year-end value of the remaining IRAs | $300,000 |
| Plus other distributions this year | $0 |
| Plus the amount converted | $100,000 |
| Denominator | $400,000 |
| Total nondeductible basis | $20,000 |
| Nontaxable ratio (basis ÷ denominator) | 0.050000 (0.050 at three places) |
| Nontaxable portion of the conversion | $5,000 |
| Estimated taxable conversion | $95,000 |
| Basis left for later years | $15,000 |
An estimate under the stated IRA-basis assumptions, not a completed Form 8606. A filed return uses the December 31 fair market value, which is unknown on the conversion date, and permits rounding the ratio to as few as three decimal places.
Scroll the table sideways on a narrow screen to see every column.