The formula
Whether a Roth conversion is worth it is three numbers, not one. The Roth value at withdrawal is the amount times the growth factor, (1 + growth ÷ 100)^years, tax-free. The traditional value after tax is the same growth times (1 − future rate). And the tax money is not free — the tax you pay today would have grown too, so what the tax money would have become comes off the advantage. The net advantage is the Roth value minus the traditional after-tax value minus what the tax money would have become. Whichever of the three you are solving for, the same three numbers decide it, and the whole decision is the rate comparison: if your future rate is higher than today’s, converting wins.
Step 1 — Write down the amount and the two tax rates
Start with the five numbers the calculation hangs on. In our worked example the amount to convert is $50,000.00, the current marginal tax rate is 22%, the future tax rate at withdrawal is 25%, the years until withdrawal are 20, and the annual growth rate is 7%. Keep them fixed — every later step uses these five numbers, and changing one halfway through is how conversion math goes wrong. The two rates are the whole decision: 22% now against 25% later is a 3-point gap in converting’s favour, and the dollar gap grows with time and growth.
Step 2 — Work out the growth factor
The growth factor is (1 + growth ÷ 100)^years. At 7% growth over 20 years the factor is 1.07^20 = 3.8697 — every dollar you convert becomes $3.87 by withdrawal. The Roth IRA conversion calculator does this for you, and it finds the growth rate where the Roth is worth exactly $250,000.00 in 20 years: 8.38% (at 8.38% the Roth value is $250,007.44 — $7.44 over the target; at 8.37% it is $249,546.49).
Step 3 — Work out the Roth value
The Roth value at withdrawal is the amount times the growth factor, tax-free. At $50,000.00 and a 3.8697 factor the Roth value is $50,000.00 × 3.8697 = $193,484.22. That is the number converting buys you: the whole balance, with no tax left to pay at withdrawal, and no required minimum distributions for the owner.
Step 4 — Work out the traditional value after tax
The traditional value after tax is the amount times the growth factor times (1 − future rate). At $50,000.00, a 3.8697 factor, and a 25% future rate the traditional value is $193,484.22 × 75% = $145,113.17. The gap between the two balances is $193,484.22 − $145,113.17 = $48,371.05 — but that is not the advantage yet, because the tax money is not free.
Step 5 — Price what the tax money would have become
The tax owed now is the amount times the current rate: $50,000.00 × 22% = $11,000.00, due in the year of the conversion. That $11,000.00 is money you give up today that could otherwise have grown at the same rate, so what it would have become is $11,000.00 × 3.8697 = $42,566.53. This is the opportunity cost of converting, and it is the line most back-of-the-envelope conversions forget — without it, converting always looks better than it is.
Step 6 — Work out the net advantage
The net advantage is the Roth value minus the traditional after-tax value minus what the tax money would have become: $193,484.22 − $145,113.17 − $42,566.53 = $5,804.52 — converting wins by $5,804.52. So the question “is a Roth conversion worth it?” has a dollar figure attached: $5,804.52 to converting, on a $50,000.00 conversion at 22% now and 25% later, 20 years at 7%. The rounding rule matters here: each component is rounded to cents first, and the advantage is computed from the rounded components, so the numbers add up exactly — the unrounded formula gives $5,804.53.
What if the future rate is lower?
At a 12% future rate — lower than today’s 22% — the traditional value rises to $170,266.12 and the advantage turns to −$19,348.43: staying traditional wins by $19,348.43. At a 32% future rate the traditional value falls to $131,569.27 and the advantage is $19,348.42 to converting. The rate comparison is the whole decision, and it is symmetric: a 3-point gap either way is worth about $19,348.00 in either direction on $50,000.00 over 20 years at 7%.
The tie: any future rate equal to today’s
The future rate where converting exactly ties staying traditional is 22.00% — your current rate. At a 22% future rate the Roth value is $193,484.22, the traditional value is $150,917.69, the tax is $11,000.00, the tax money would have become $42,566.53, and the net advantage is $0.00 — a tie. So the question “will my future rate be higher than 22%?” is the only question that matters: above it, converting wins; below it, staying traditional wins; at it, the two are exactly even.
How long until the advantage reaches $10,000?
At 29 years the advantage reaches $10,671.38 — the Roth value is $355,712.85, the traditional value is $266,784.64, and the tax money would have become $78,256.83. At 28 years the advantage is $9,973.26 — 28 years is not enough. Time grows the gap: with only 10 years to go the advantage is $2,950.73, and with 0 years it is $1,500.00 — the 3-point rate gap alone, worth 3% of $50,000.00 even today.
When is the best time to convert?
At a 12% current rate — a low-income year — the tax is only $6,000.00, the tax money would have become $23,218.11, and the advantage jumps to $25,152.94. A low-income year is the time to convert: the tax bill is small, and the rate gap is wide. At a 37% current rate — the top bracket — the tax is $18,500.00 and the advantage is −$23,218.11: staying traditional wins by $23,218.11. The conversion amount matters too: $45,454.55 is the amount whose tax is exactly $10,000.00 at 22%, and $51,683.80 is the amount whose Roth value is exactly $200,000.00 in 20 years.
The limits: what the calculation leaves out
The tax is assumed paid from outside savings — if you pay it from the conversion itself, the Roth starts smaller. The 5-year rule means converted money cannot be withdrawn penalty-free for five years if you are under 59½. Conversions are irreversible since 2018, so there is no undoing one. The tax is due in the year of the conversion, so a December conversion is a same-year tax bill. The model uses one flat rate today and one flat rate later, while real tax is bracketed and the conversion itself can push you into a higher bracket. State tax, the 3.8% net investment income tax, and IRMAA surcharges are ignored. This is not tax advice — check with a tax professional before converting.