Fidelity Roth Conversion Calculator

Fidelity Roth Conversion Formula:

\[ \text{After Tax Value} = \text{Amount Converted} \times (1 - \text{Tax Rate}) + \text{Growth} \]

After Tax Value (USD):

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1. What is Fidelity Roth Conversion?

A Roth conversion is the process of moving retirement savings from a traditional IRA or 401(k) into a Roth IRA. This calculator helps estimate the after-tax value of a Roth conversion considering your tax rate and potential growth.

2. How Does the Calculator Work?

The calculator uses the following equation:

\[ \text{After Tax Value} = \text{Amount Converted} \times (1 - \text{Tax Rate}) + \text{Growth} \]

Where:

\( \text{Amount Converted} \) — The dollar amount being converted from traditional to Roth (USD)
\( \text{Tax Rate} \) — Your expected tax rate on the conversion (decimal between 0 and 1)
\( \text{Growth} \) — Expected growth of the converted amount (USD)

Explanation: The equation calculates the net value after accounting for taxes paid on the conversion and adds any expected growth.

3. Importance of Roth Conversion Calculation

Details: Calculating the after-tax value helps determine whether a Roth conversion makes financial sense for your situation, considering current vs. future tax rates and investment growth potential.

4. Using the Calculator

Tips: Enter the amount you plan to convert in USD, your expected tax rate as a decimal (e.g., 0.24 for 24%), and any expected growth in USD. All values must be valid (amount ≥ 0, tax rate between 0-1, growth ≥ 0).

5. Frequently Asked Questions (FAQ)

Q1: When does a Roth conversion make sense?
A: Roth conversions are typically beneficial when you expect to be in a higher tax bracket in retirement or want to reduce future required minimum distributions.

Q2: How is the tax rate determined?
A: The tax rate should reflect your marginal tax rate on the conversion amount, which may span multiple tax brackets.

Q3: What should I include in the growth amount?
A: Include expected investment growth between the conversion date and when you plan to withdraw the funds.

Q4: Are there limitations to this calculation?
A: This is a simplified model that doesn't account for state taxes, IRMAA surcharges, or changing tax laws over time.

Q5: Should I consult a financial advisor before converting?
A: Yes, Roth conversions have complex tax implications and professional advice is recommended before proceeding.