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The basics
A Roth conversion is a transfer, not new spending money. The converted amount leaves an eligible pre-tax retirement account, is included in ordinary income for that year, and lands in Roth. The model taxes the conversion now, grows the destination as Roth, and applies its Roth tax and early-access rules when the plan later withdraws it.
Illustrative numbers
A deliberately simplified $100,000 conversion
Amount moved$100,000 from pre-tax to Roth
Effective tax now25% = $25,000
Modeled later withdrawal rate35% = $35,000 per $100,000
Paying $25,000 now instead of a modeled $35,000 later creates a $10,000 gross tax-timing advantage before growth, funding, RMD, Medicare, and other full-plan effects. If the tax must be funded expensively or the future rate is lower, the conversion can lose instead.
Calculation transparency
How it works in MoneyWhatIf
- 01
The conversion is posted as a transfer from an eligible traditional account to a matched Roth destination. It is not cash to spend: the amount is included in ordinary income and its conversion tax is added in that year.
- 02
Required minimum distributions come first, and a conversion does not satisfy an RMD. The solver then fills only the bracket room left by settled income, withdrawals, and the limits selected on this page.
- 03
The destination grows under the model’s Roth rules and later withdrawals use its modeled Roth tax and access treatment. Because the source pre-tax balance is smaller, future required minimum distributions may also be smaller.
- 04
The full-plan rerun recomputes federal, state, and local tax; taxable Social Security; capital gains; NIIT; Medicare IRMAA; funding withdrawals; account balances; shortfalls; and permitted property sales.
- 05
Each schedule is compared with converting nothing. The page recommends a schedule only when the full-plan improvement also passes its shortfall and forced-sale safety checks.
Keep in mind
Model limits
The model cannot confirm whether a particular provider or workplace plan permits the conversion or rollover needed to make it.
Future tax law, returns, and transaction timing are uncertain, and five-year and early-access rules are represented only to the detail documented in the model.
This is educational planning output rather than individualized tax or investment advice.
This explanation documents the planning model. It is educational, not individualized tax, legal, Medicare, or investment advice.
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The words behind it
Related financial terms
Plain-English definitions, with 2026 figures and worked examples, from the financial terms glossary.