Build Back Better Roth Conversion Calculator Analyzer

Analysis: Tax Now vs Tax Later under BBB

\[ Value = (Current \ Balance \times (1 + Growth)^{Years}) \times (1 - Future \ Tax \ Rate) \]

Current Traditional IRA Balance:

USD

Current Tax Rate:

Expected Future Tax Rate:

Expected Annual Growth Rate:

Years Until Withdrawal:

years

Roth Conversion Future Value:

Traditional IRA Future Value:

Difference (Roth - Traditional):

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1. What is the BBB Roth Conversion Analyzer?

This calculator helps determine whether converting a traditional IRA to a Roth IRA under the Build Back Better (BBB) tax provisions would be advantageous by comparing the future value after taxes of both options.

2. How Does the Calculator Work?

The calculator uses the following formulas:

\[ Roth \ Value = Current \ Balance \times (1 - Current \ Tax \ Rate) \times (1 + Growth)^{Years} \] \[ Traditional \ Value = Current \ Balance \times (1 + Growth)^{Years} \times (1 - Future \ Tax \ Rate) \]

Where:

\( Current \ Balance \) — Current traditional IRA balance
\( Current \ Tax \ Rate \) — Your current marginal tax rate
\( Future \ Tax \ Rate \) — Your expected future marginal tax rate
\( Growth \) — Expected annual growth rate
\( Years \) — Years until you plan to withdraw the funds

Explanation: The calculator compares paying taxes now (Roth conversion) versus paying taxes later (keeping funds in traditional IRA).

3. Importance of Roth Conversion Analysis

Details: The Build Back Better Act may change tax rates, making Roth conversions potentially more attractive now if tax rates are expected to rise in the future.

4. Using the Calculator

Tips: Enter your current IRA balance, current and expected future tax rates, expected growth rate, and years until withdrawal. Be realistic about future tax rates.

5. Frequently Asked Questions (FAQ)

Q1: Why consider a Roth conversion under BBB?
A: The BBB may increase tax rates for high earners, making it advantageous to pay taxes now at current rates.

Q2: What are the main factors in this decision?
A: The key factors are your current vs. expected future tax rates and your time horizon.

Q3: Are there other considerations beyond taxes?
A: Yes, Roth IRAs have no RMDs and can provide tax-free inheritance benefits.

Q4: What if tax rates don't change?
A: If tax rates stay the same, the mathematical outcome would be identical, but Roth still offers other benefits.

Q5: Should I convert my entire IRA at once?
A: Partial conversions over several years may be more tax-efficient to avoid pushing into higher brackets.