Roth 401(k) Conversion Calculator

Please note the following important information regarding any Roth conversion

• You must pay ordinary income tax on the amount converted (specifically, on pre-tax contributions and investment gains).
• If you pay the taxes using money from the pre-tax 401(k), you will lose the potential benefits of tax-free growth on that amount.
• If you are under age 59 1/2, you may be subject to a 10% federal tax penalty if you withdraw money from your pre-tax 401(k) to pay the tax on the conversion. You may also have to pay state tax penalties.
• Pre-tax 401(k) contributions may be tax-deductible while Roth 401(k) contributions are not.
• After conversion in order to take any distributions that include earnings that are tax free, the Roth 401(k) must be opened for 5 tax years. Eligible tax-free distributions include those taken for death or disability, after age 59-1/2, or for a first-time home purchase.

Amount to convert

Amount to convert from a Pre-tax 401(k) account to a Roth 401(k). The tool assumes that you are paying any taxes owed with funds that you have available outside of the account you are converting.

Current age

Current age. This age must be less than 70. Since this calculator does not take Required Minimum Distributions (RMD) into account, which begin at age 75 (or 70 1/2 if you were born before 7/1/1949, 72 if you were born 7/1/1949 to 12/31/1951, 73 if you were born 1/1/1951 to 1/1/1960), it is not designed for individuals that are currently required to begin making these distributions.

Age at retirement

Desired age at retirement.

Rate of return

The annual rate of return for your 401(k). This calculator assumes that your return is compounded annually. The actual rate of return is largely dependent on the types of investments you select. The Standard & Poor's 500® (S&P 500®) for the 10 years ending December 31^st 2023, had an annual compounded rate of return of 15.2%, including reinvestment of dividends. From January 1, 1970 to December 31^st 2023, the average annual compounded rate of return for the S&P 500®, including reinvestment of dividends, was approximately 10.9% (source: www.spglobal.com). Since 1970, the highest 12-month return was 61% (June 1982 through June 1983). The lowest 12-month return was -43% (March 2008 to March 2009). Savings accounts at a financial institution may pay as little as 0.25% or less but carry significantly lower risk of loss of principal balances.

It is important to remember that these scenarios are hypothetical and 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 investment funds and/or investment companies may charge.

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. It is also possible, especially on very large conversions, that part of your conversion be subject to more than one tax rate. Use the ‘Filing Status and Federal Income Tax Rates on Taxable Income’ table to assist you in estimating your Federal tax rate.

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. This calculator assumes that you invest the amount that you would have had to pay in taxes in a taxable investment account. The investment tax rate is used for calculating the annual return on these taxable investments. For many, this will be the same as their income tax rate. If you expect your non-401(k) investments to be primarily from long-term capital gains or dividends.