Roth IRA Conversion Calculators

Most of you know that 2010 presents a tremendous opportunity for baby boomers with higher incomes to open a Roth IRA and/or to convert a conventional IRA to a Roth. The reason is that the current income limitations on Roth contributions and conversions will be lifted.

Under present law, only taxpayers with a modified adjusted gross income less than $100,000 may convert from a traditional IRA to a Roth IRA.  Under the new law,  regardless of income, contributions can be made to a traditional IRA in 2009 (and prior years) and then rolled over into a Roth IRA in 2010.

The remaining question is whether executing a Roth IRA conversion is the right move for you. That’s where a conversion calculator can help. Here are some online Roth conversion calculators that I have learned about:

RothRetirement.com was one of the first to publish a complete website about Roth conversions, including a conversion analysis calculator. The output from the calculator can be confusing, which may be intentional.

Fidelity Investments has introduced its version of a conversion evaluator but you will have to sign up to use it.

Dinkytown is well-known for offering a multitude of different financial calculators, including a very simple Roth conversion calculator with an easy to understand graphical output.

SmartMoney Magazine has an online site including an electronic worksheet for Roth IRA conversions. I like that the output includes a definite “yes” or “no” recommendation.

Vanguard Investments also has a conversion calculator but it seems not to know about the rule change for 2010.

The TIAA-CREF Roth IRA conversion calculator is unremarkable and does not appear as comprehensive as some of the others.

The Bank of America conversion calculator is the most interactive because it uses sliders for input with the results instantly displayed on the same page.

Overall, of the online Roth IRA conversion calculators that I have tried, I like the RothRetirement.com and SmartMoney versions the best.

What are your plans for a IRA conversion in 2010?


Comments

  1. BadDiver says

    At age 55, I went through and used nearly all of these calculators, with mixed results. the RothRetirement.com calculator gave me a big YES … convert now message. SmartMoneyMagazine.com made no sense to me. Dinkeytown calculator was the clearest of all the ones that I tried, especially when you click on the “view report” button at the bottom; it opens a new window very clearly detailing all of the assumptions and calculations. It also indicated that a Roth conversion would NOT be in my best interests at my age.

  2. says

    Of course, if you’ve never made any Traditional IRA contributions, and you earn more than the Roth IRA contribution limit, it’s a great idea to make non-deductible IRA contributions and quickly convert. In such a case, you won’t need a calculator because no tax liability in retirement is better than the taxable withdrawals of a Traditional IRA.

  3. Brian says

    The problem that I have with most of these calculators is that they:

    1. do not take into account State taxes
    2. do not take into account the higher tax rate they it will put you in for this year, and then pay higher tax on all your other income.
    3. it seems to be that if you have $100k or so to convert, and having to pay 35K+ in taxes now, you will likely have to sell other assets to come up with the taxes, which again creates more taxes.

    That’s too big a hole to make up in my opinion. Especially if you already have a mix of both Roth and non Roth for your retirement.

    If we were talking less than 20K to convert, and I wasn’t in a 9% income tax state, I would be PRO convert.

    Would love to hear others opinions. This is just mine.

    Brian

  4. Randy says

    Consider converting assets that should have large increases in future value. Using a self-directed IRA (non-Roth), I purchased a subdivision lot 2 years ago that is now worth $110,000 less than what I paid. My response was to purchase a second lot this year at the lower price, also using the self-directed IRA. Next year I will convert to Roth and pay taxes on the lower amounts. Living in Utah with limited private land near the population areas and with a population doubling time of 30 years, I expect these currently devalued lots to increase in value much more quickly than the stock market.

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