1. What is Roth IRA Rollover?

A Roth IRA rollover involves transferring funds from a traditional IRA or employer-sponsored retirement plan to a Roth IRA. This conversion requires paying taxes on the pre-tax contributions and earnings, but future qualified withdrawals become tax-free.

2. How Does the Calculator Work?

The calculator uses the Roth IRA rollover formula:

Where:

• \( Rollover Amount \) — The total amount being converted from traditional IRA
• \( Tax Rate \) — Your marginal tax rate for the conversion year (%)
• \( Growth \) — Expected growth or additional contributions ($)

Explanation: The formula calculates the net amount after taxes plus any additional growth to determine the final Roth IRA value.

3. Importance of Roth IRA Conversion

Details: Roth IRA conversions can provide tax-free retirement income, no required minimum distributions (RMDs), and potential estate planning benefits. However, they require careful consideration of current vs. future tax rates.

4. Using the Calculator

Tips: Enter the rollover amount in dollars, your expected tax rate as a percentage, and any additional growth or contributions. All values must be valid positive numbers with tax rate between 0-100%.

5. Frequently Asked Questions (FAQ)

Q1: When does it make sense to do a Roth conversion?
A: Typically when you're in a lower tax bracket than expected in retirement, or when you want to eliminate future RMDs and create tax-free inheritance.

Q2: Are there income limits for Roth conversions?
A: No, the 2017 tax law removed income limits for Roth conversions, making them available to all taxpayers regardless of income level.

Q3: When do I pay taxes on the conversion?
A: Taxes are due in the year of conversion. You can choose to pay them from the converted funds or from other sources.

Q4: What is the 5-year rule for Roth conversions?
A: Each conversion has its own 5-year holding period for penalty-free withdrawals of converted amounts (earnings have additional rules).

Q5: Can I reverse a Roth conversion?
A: Previously, recharacterizations were allowed, but current tax law generally prohibits reversing Roth conversions once completed.