- 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 IRA. This calculator assumes
that your return is compounded annually. The actual rate of return
is largely dependent 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
may 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.
|