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Tax Savings from Converting a Regular IRA to a Roth IRA
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This spreadsheet compares the taxes due
upon converting a regular IRA to a Roth IRA to the present value of total
taxes saved in retirement on the distribution from a regular IRA. If the net present value of taxes saved is
positive, it may be advantageous for you to convert. If the net present value of taxes saved is
negative, it may not be advantageous for you to convert. Please consult with your tax advisor to
determine if you should convert your traditional IRA to a Roth IRA.
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Input Variables:
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Current Age
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Assumed Investment Return
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Current Marginal Tax Rate (Federal and State)
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Effective Tax Rate in Retirement (Federal and State) on Retirement Plan
Distributions
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Regular IRA Account Value
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Cumulative After-Tax Contributions
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Results:
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A. Taxes Due Upon Conversion:
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Amount of Gain at Conversion
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Taxes Due Upon Conversion
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B. Present Value of Total Taxes Saved:
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Fair Market Value of Regular
IRA Account at the Age of 70
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Total Amount of Distributions
(Begin at age 70 and go for 30 years)
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Annual Distribution Amount
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Less: Basis
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Taxable Gain per Year
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Taxes Saved per Year in
Retirement
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Total Amount of Taxes Saved in
Retirement
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Present Value of Total Taxes
Saved in Retirement at the age of 70
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Present Value of Total Taxes
Saved in Retirement at your current age
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C. Net Present Value of Taxes Saved:
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Present Value of Total Taxes
Saved in Retirement at your current age
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Less: Taxes Due Upon
Conversion
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Net Present Value of Taxes
Saved (If positive - Convert, If Negative - Do not)
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