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Roth Conversion vs No Conversion
Your amount, your two tax rates, your horizon — the after-tax verdict.
X VS Y COMPARISON · MONEY · TAXES
Roth Conversion vs No Conversion: Should You Pay the Tax Now?
A Roth conversion is a bet on your future tax rate: pay income tax on the dollars today, and they compound tax-free forever — or keep the traditional account, let it grow pre-tax, and pay the tax later. At the defaults — $100,000 converted, 24% now vs 32% in retirement, 20 years, 8% growth, tax paid from outside funds — converting finishes at $466,095.71 of after-tax wealth against $406,406.61 for keeping: a $59,689.10 win, with a break-even retirement rate of just 19.19%. The catch everyone misses: where the conversion tax comes from changes everything. Enter your numbers — and read the December 31 deadline before you touch anything.
How the conversion math works
Both sides start with the same pre-tax dollars and the same growth. The only differences are when the tax is paid and where the tax money comes from:
| Side | After-tax wealth |
|---|---|
| Convert (tax from outside funds) | $100,000 × 1.0820 = $466,095.71 |
| Keep traditional | $466,095.71 × (1 − 32%) + $24,000 of tax money growing in taxable = $406,406.61 |
The $24,000 conversion tax doesn’t vanish in the keep column — it stays invested in a taxable account (modeled with a disclosed 15%-a-year tax drag), because a fair fight compares total after-tax wealth. Even giving the keep side full credit for that money, converting wins by $59,689.10 at the defaults.
The worked example: $59,689.10, line by line
$100,000 converted, 24% now, 32% in retirement, 20 years, 8% growth, tax paid from outside funds:
Convert: $100,000 × 1.0820 = $466,095.71, every dollar of it yours — no tax ever again. The $24,000 tax bill is paid from a taxable account.
Keep: the same $100,000 grows to $466,095.71 pre-tax, then retirement takes 32% → $316,945.08. The unspent $24,000 grows in taxable at 6.8% (8% minus the 15% annual tax drag) for 20 years → $89,461.52. Total: $406,406.61.
The gap: converting wins by $59,689.10. The break-even retirement rate is just 19.19% — below today’s 24%. Why so low? Because paying the tax from outside funds is economically an extra $24,000 Roth contribution that compounds tax-free for 20 years. That bonus alone is worth $111,862.97 versus paying the tax from the converted dollars.
Output · formula · meaning
| Output | Formula | What it means |
|---|---|---|
| Roth after-tax wealth | $A × (1+g)n | $466,095.71 at the defaults — tax paid, never taxed again. |
| Keep after-tax wealth | gross × (1−rret) + taxable | $406,406.61 at the defaults — traditional after tax plus the invested tax money. |
| Conversion gap | Roth wealth − keep wealth | +$59,689.10 at the defaults — the price of waiting. |
| Break-even retirement rate | 1 − (Wc − taxable) ÷ gross | 19.19% at the defaults — convert wins above this rate. |
| Outside-funds bonus | tax × (1+g)n | $111,862.97 — what paying from outside preserves. |
Who uses this
- Peak earners eyeing early retirement: testing whether converting in lower-income gap years beats waiting for RMDs at higher rates.
- 2026 year-end planners: the conversion must complete by December 31 — no April extension, and custodians cut off weeks earlier.
- Pre-Medicare savers: sizing conversions against the IRMAA two-year lookback — a 2026 conversion can raise 2028 premiums.
- Advisors & educators: the break-even rate makes the “bet on your future bracket” concrete — cite it with the block below.
Accuracy & limitations
Models total after-tax wealth with a disclosed 15%-a-year tax drag on the taxable account; real drag depends on turnover, bracket, and asset location. Assumes constant rates and returns; ignores state-tax moves, IRMAA tiers, Social Security taxation, RMDs, and the pro-rata rule (after-tax basis across IRAs changes the taxable slice — use Form 8606). Assumes you have outside funds to pay the tax; if you’d raid the IRA itself, the real answer is worse. Not tax advice.
Cite this calculatorBright Side Kit. “Roth Conversion vs No Conversion: Should You Pay the Tax Now?.” brightoolbox.com, 2026.
Bright Side Kit. "Roth Conversion vs No Conversion: Should You Pay the Tax Now?." https://brightoolbox.com/roth-conversion-vs-no-conversion/ Accessed October 23, 2026.Frequently asked questions
Is a Roth conversion worth it if my tax rate will be the same in retirement?
Mostly yes, modestly — and the calculator shows why. At identical 24% rates the textbook calls it a wash, but converting still wins by $22,401.45 here: paying the $24,000 tax from outside funds is an extra Roth contribution in disguise, and that bonus compounds tax-free for 20 years. The wash is only a wash if you ignore where the tax money comes from.
What is the deadline for a 2026 Roth conversion?
December 31, 2026 — the conversion counts for the year the money leaves the traditional account, with no April extension. Worse, most custodians set internal processing cutoffs in mid-to-late December; a request submitted December 30 may not post until January and blow the deadline. Start early, not late.
Can I undo a Roth conversion if markets drop?
No. The Tax Cuts and Jobs Act eliminated recharacterization for conversions completed after December 31, 2017. Once converted, the tax bill is locked in on the pre-drop value — which is exactly why advisors favor conservative partial conversions over one big sweep.
Should I pay the conversion tax from the IRA itself?
Almost never. Paying from the converted dollars shrinks the Roth by the tax amount — at the defaults that destroys $111,862.97 of tax-free growth. Worse, withheld dollars aren’t converted at all, and under 59½ they can draw the 10% early-withdrawal penalty on top. Only convert what you can pay tax on from outside funds.
How does the pro-rata rule change the math?
If you hold after-tax (nondeductible) dollars alongside pre-tax money across traditional, SEP, or SIMPLE IRAs, the IRS treats every converted dollar as a proportional mix — you can’t cherry-pick just the after-tax slice. That raises the taxable portion of the conversion above what this calculator assumes. Track basis on Form 8606.
Can a conversion raise my Medicare premiums?
Yes, two years later. The conversion inflates your modified adjusted gross income, and Medicare’s IRMAA surcharge looks back two years — a 2026 conversion can raise 2028 Part B and D premiums (the first surcharge tier starts at $109,000 MAGI for single filers in 2026). Size conversions with that calendar in mind, especially in your early 60s.