Build Back Better Roth Conversion Calculator After Retirement

Tax Savings = Conversion at Low Rate vs Future Withdrawals,BBB after retirement.

\[ \text{Tax Savings (USD)} = \text{Future Tax Liability} - \text{Current Conversion Tax} \]

Current Traditional IRA Balance:

USD

Amount to Convert:

USD

Current Tax Rate:

Expected Future Tax Rate:

Tax Savings (USD):

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From:	To:

1. What is Roth Conversion?

A Roth conversion is when you move retirement savings from a Traditional IRA to a Roth IRA. This triggers a tax bill now, but qualified withdrawals later are tax-free. The Build Back Better plan may affect conversion strategies.

2. How Does the Calculator Work?

The calculator uses this formula:

\[ \text{Tax Savings} = (\text{Conversion Amount} \times \text{Future Tax Rate}) - (\text{Conversion Amount} \times \text{Current Tax Rate}) \]

Where:

Conversion Amount — Dollars being converted from Traditional to Roth IRA
Current Tax Rate — Your marginal tax rate today
Future Tax Rate — Expected marginal tax rate in retirement

Explanation: Positive savings mean converting now could save money compared to leaving funds in Traditional IRA.

3. Importance of Roth Conversion

Details: Roth conversions can reduce lifetime taxes, especially if you expect higher future tax rates or want to minimize Required Minimum Distributions (RMDs).

4. Using the Calculator

Tips: Enter your current IRA balance, amount to convert, and best estimates for current and future tax rates. Consider potential BBB plan changes to tax laws.

5. Frequently Asked Questions (FAQ)

Q1: When does Roth conversion make sense?
A: When current tax rates are lower than expected future rates, or to reduce future RMDs and Medicare premiums.

Q2: How does BBB affect Roth conversions?
A: Proposed changes may limit high-income conversions or add new rules - consult a tax professional.

Q3: What's the ideal conversion amount?
A: Enough to "fill up" your current tax bracket without pushing into a higher one.

Q4: Are there penalties for conversion?
A: No penalties, but taxes are due on converted amounts (except after-tax contributions).

Q5: Can I undo a Roth conversion?
A: Recharacterizations are no longer allowed under current law - conversions are permanent.