Disclaimer

The Roth IRA Conversion Calculator with Compounded Growth is provided for informational and illustrative purposes only. It is not intended to offer investment, legal, tax, or accounting advice. Users should consult with qualified professionals before making any financial decisions based on the results of this calculator.

Calculations and Assumptions

Beginning IRA Balance:

The initial balance entered by the user is assumed to be accurate and is used as the starting point for all calculations.

Current Calendar Year and Age:

The calculator uses the current calendar year and the user's current age to project values annually up to the specified life expectancy.

Life Expectancy:

Projections extend to the age specified by the user. The calculator assumes the user lives exactly to this age without accounting for mortality variability.

Assumed Rate of Return:

A constant annual rate of return, specified by the user, is applied to the Traditional IRA, Roth IRA, and any invested Required Minimum Distributions (RMDs) each year.
The rate is nominal and does not account for inflation, market volatility, or changes in investment performance over time.

Tax Brackets and Filing Status:

The calculator uses simplified federal tax brackets based on the filing status selected by the user (e.g., Single, Married Filing Jointly).
Tax brackets are assumed to remain constant throughout the projection period.
The calculator does not account for state or local taxes.

Other Income:

The user-specified "Other Income" is considered in calculating how much can be converted to a Roth IRA without moving into a higher tax bracket.
Other income is assumed to be consistent each year and fully taxable at ordinary income tax rates.

Maximum Conversion Amount:

The calculator determines the maximum amount that can be converted from a Traditional IRA to a Roth IRA each year without exceeding the selected tax bracket.
It assumes that the user wishes to "max out" the specified tax bracket by converting as much as possible without moving into the next bracket.

Roth IRA Conversions:

Conversions from a Traditional IRA to a Roth IRA are assumed to be taxable events, with the converted amount added to taxable income for the year.
Taxes owed on conversions are calculated using the user's specified tax rate or the applicable tax bracket rate.
The calculator assumes conversions occur at the end of each year.

Bonus Percentage:

An optional bonus, specified as a percentage of the conversion amount, can be added to the Roth IRA balance. This simulates additional contributions or employer matches.
The bonus is assumed to be tax-free and is added directly to the Roth IRA balance.

Required Minimum Distributions (RMDs):

RMDs begin at age 72, following IRS regulations.
The RMD amount is calculated using simplified divisors based on the user's age.
RMDs are withdrawn from the Traditional IRA and are considered taxable income.
Invested RMDs assume that after taxes, the net RMD amounts are reinvested and grow annually at the specified rate of return.

72(t) Early Withdrawal Option:

If the user selects the 72(t) option and is under age 59½, substantially equal periodic payments are calculated to avoid early withdrawal penalties.
The calculator uses a default reasonable interest rate (e.g., 2.36%) for calculating 72(t) distributions.
Early withdrawal penalties are not applied if 72(t) distributions are used.

Tax Calculations:

Taxes owed on conversions and RMDs are calculated based on the user's specified tax rate or the applicable tax bracket.
The calculator does not consider deductions, exemptions, credits, or other tax factors that may affect actual tax liability.
Tax rates are assumed to remain constant throughout the projection period.

IRA and Roth IRA Balances:

The Traditional IRA balance is adjusted each year for growth, conversions, and RMDs.
The Roth IRA balance grows annually based on conversions, bonuses, and the assumed rate of return.
Negative balances are not projected; if the Traditional IRA is depleted, the balance is shown as zero.

Invested RMDs:

After-tax RMD amounts are assumed to be reinvested and grow at the specified rate of return.
The calculator does not account for taxes on gains from these reinvestments.

Chart and Table Data:

The calculator provides a year-by-year breakdown of balances, growth, conversions, RMDs, taxes owed, and invested RMDs.
Charts visualize the growth of the Roth IRA, Traditional IRA, and invested RMDs over time.

Inflation:

The calculator does not adjust for inflation. All amounts are in nominal dollars.

Regulatory Changes:

Current tax laws, tax brackets, and IRS regulations are assumed to remain constant throughout the projection period.
Potential future changes to tax rates, RMD rules, or other relevant laws are not accounted for.

No Additional Contributions:

The calculator assumes no additional contributions are made to the Traditional IRA or Roth IRA beyond the conversions and bonuses specified.

Withdrawal Timing:

Withdrawals (conversions and RMDs) are assumed to occur at the end of each year for calculation purposes.

Market Risks and Variability:

The calculator does not account for market risks, investment losses, or variability in returns.
The assumed rate of return is hypothetical and not guaranteed.
Important Considerations

Hypothetical Projections:

The results are illustrative and are not guarantees of future performance or outcomes.
Actual results may vary significantly due to market conditions, changes in tax laws, and individual circumstances.

Tax Law Complexity:

Tax laws are complex and subject to change. This calculator simplifies tax calculations and may not capture all nuances of federal, state, or local tax regulations.
The calculator does not account for alternative minimum tax (AMT), net investment income tax, or other specialized tax situations.

Individual Circumstances:

The calculator does not consider personal financial situations such as marital status changes, income fluctuations, healthcare costs, or other factors that can impact retirement planning.
Users should consider their entire financial picture when making decisions.

Professional Advice Recommended:

Users are strongly encouraged to consult with financial advisors, tax professionals, or legal counsel to understand how the results apply to their specific situations.
Professional advice can help tailor strategies to individual goals, risk tolerance, and financial needs.

Assumptions Limitations:

The calculator's assumptions are based on simplified models and may not reflect real-world complexities.
It does not account for required minimum distributions from other retirement accounts, Social Security benefits, pensions, or other income sources.

Liability Disclaimer

The developers and providers of this calculator make no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability, or availability of the calculator or the information contained within it. Any reliance you place on such information is strictly at your own risk.

In no event will the developers, providers, or any affiliated parties be liable for any loss or damage, including without limitation, indirect or consequential loss or damage, arising from or in connection with the use of this calculator.

By using this calculator, you acknowledge that you understand and agree to this disclaimer and the assumptions underlying the calculations.