Roth Conversion worksheet

1. Tax on the conversion: $17,258.00

1. Find the federal tax on your income without the conversion

   $\text{tax before}$$=\mathrm{\$33,398.00}$

2. Find the federal tax with the conversion added on top. The conversion counts as ordinary income

   $\text{tax after}$$=\mathrm{\$48,456.00}$

3. The difference is the federal tax the conversion causes

   $\mathrm{\$48,456.00}-\mathrm{\$33,398.00}$$=\mathrm{\$15,058.00}$

4. Work out the state tax at the rate you entered

   $\mathrm{\$55,000.00}\times \mathrm{4\%}$$=\mathrm{\$2,200.00}$

5. Add them to get the tax you'd pay now

   $\mathrm{\$15,058.00}+\mathrm{\$2,200.00}$$=\mathrm{\$17,258.00}$

6. Divide by the amount converted. This is your true tax rate on the conversion

   $\frac{\mathrm{\$17,258.00}}{\mathrm{\$55,000.00}}$$=\mathrm{31.38\%}$

7. Growth over 15 years multiplies each dollar by this much

   ${\left(1+\mathrm{5\%}\right)}^{15}$$=2.0789$

8. Convert: the whole amount grows in the Roth, and it's tax-free when you take it out

   $\mathrm{\$55,000.00}\times 2.0789$$=\mathrm{\$114,341.05}$

9. Stay: the account is taxed at 19% later, and you keep the $17,258.00, which grows more slowly in a taxable account

   $\mathrm{\$114,341.05}\times \mathrm{81\%}+\mathrm{\$17,258.00}\times 1.894$$=\mathrm{\$125,303.42}$

10. Compare the two. A negative number means staying traditional comes out ahead

    $\mathrm{\$114,341.05}-\mathrm{\$125,303.42}$$=\mathrm{-\$10,962.37}$

11. If your rate later is above this break-even rate, converting wins over this period

    $\text{break-even rate}$$=\mathrm{28.59\%}$

2. Tax on the conversion: $12,600.00

1. Find the federal tax on your income without the conversion

   $\text{tax before}$$=\mathrm{\$24,387.00}$

2. Find the federal tax with the conversion added on top. The conversion counts as ordinary income

   $\text{tax after}$$=\mathrm{\$35,187.00}$

3. The difference is the federal tax the conversion causes

   $\mathrm{\$35,187.00}-\mathrm{\$24,387.00}$$=\mathrm{\$10,800.00}$

4. Work out the state tax at the rate you entered

   $\mathrm{\$45,000.00}\times \mathrm{4\%}$$=\mathrm{\$1,800.00}$

5. Add them to get the tax you'd pay now

   $\mathrm{\$10,800.00}+\mathrm{\$1,800.00}$$=\mathrm{\$12,600.00}$

6. Divide by the amount converted. This is your true tax rate on the conversion

   $\frac{\mathrm{\$12,600.00}}{\mathrm{\$45,000.00}}$$=\mathrm{28\%}$

7. Growth over 16 years multiplies each dollar by this much

   ${\left(1+\mathrm{6\%}\right)}^{16}$$=2.5404$

8. Convert: the whole amount grows in the Roth, and it's tax-free when you take it out

   $\mathrm{\$45,000.00}\times 2.5404$$=\mathrm{\$114,315.83}$

9. Stay: the account is taxed at 20% later, and you keep the $12,600.00, which grows more slowly in a taxable account

   $\mathrm{\$114,315.83}\times \mathrm{80\%}+\mathrm{\$12,600.00}\times 2.0788$$=\mathrm{\$117,645.95}$

10. Compare the two. A negative number means staying traditional comes out ahead

    $\mathrm{\$114,315.83}-\mathrm{\$117,645.95}$$=\mathrm{-\$3,330.12}$

11. If your rate later is above this break-even rate, converting wins over this period

    $\text{break-even rate}$$=\mathrm{22.91\%}$

3. Tax on the conversion: $19,386.00

1. Find the federal tax on your income without the conversion

   $\text{tax before}$$=\mathrm{\$14,901.00}$

2. Find the federal tax with the conversion added on top. The conversion counts as ordinary income

   $\text{tax after}$$=\mathrm{\$30,387.00}$

3. The difference is the federal tax the conversion causes

   $\mathrm{\$30,387.00}-\mathrm{\$14,901.00}$$=\mathrm{\$15,486.00}$

4. Work out the state tax at the rate you entered

   $\mathrm{\$65,000.00}\times \mathrm{6\%}$$=\mathrm{\$3,900.00}$

5. Add them to get the tax you'd pay now

   $\mathrm{\$15,486.00}+\mathrm{\$3,900.00}$$=\mathrm{\$19,386.00}$

6. Divide by the amount converted. This is your true tax rate on the conversion

   $\frac{\mathrm{\$19,386.00}}{\mathrm{\$65,000.00}}$$=\mathrm{29.82\%}$

7. Growth over 14 years multiplies each dollar by this much

   ${\left(1+\mathrm{6\%}\right)}^{14}$$=2.2609$

8. Convert: only what's left after tax goes into the Roth, and it grows tax-free

   $\mathrm{\$45,614.00}\times 2.2609$$=\mathrm{\$103,128.87}$

9. Stay: the full amount grows, then it's taxed at 24% when you take it out

   $\mathrm{\$146,958.76}\times \mathrm{76\%}$$=\mathrm{\$111,688.66}$

10. Compare the two. A negative number means staying traditional comes out ahead

    $\mathrm{\$103,128.87}-\mathrm{\$111,688.66}$$=\mathrm{-\$8,559.78}$

11. If your rate later is above this break-even rate, converting wins over this period

    $\text{break-even rate}$$=\mathrm{29.82\%}$

4. Tax on the conversion: $12,500.00

1. Find the federal tax on your income without the conversion

   $\text{tax before}$$=\mathrm{\$15,824.00}$

2. Find the federal tax with the conversion added on top. The conversion counts as ordinary income

   $\text{tax after}$$=\mathrm{\$26,824.00}$

3. The difference is the federal tax the conversion causes

   $\mathrm{\$26,824.00}-\mathrm{\$15,824.00}$$=\mathrm{\$11,000.00}$

4. Work out the state tax at the rate you entered

   $\mathrm{\$50,000.00}\times \mathrm{3\%}$$=\mathrm{\$1,500.00}$

5. Add them to get the tax you'd pay now

   $\mathrm{\$11,000.00}+\mathrm{\$1,500.00}$$=\mathrm{\$12,500.00}$

6. Divide by the amount converted. This is your true tax rate on the conversion

   $\frac{\mathrm{\$12,500.00}}{\mathrm{\$50,000.00}}$$=\mathrm{25\%}$

7. Growth over 14 years multiplies each dollar by this much

   ${\left(1+\mathrm{7\%}\right)}^{14}$$=2.5785$

8. Convert: the whole amount grows in the Roth, and it's tax-free when you take it out

   $\mathrm{\$50,000.00}\times 2.5785$$=\mathrm{\$128,926.71}$

9. Stay: the account is taxed at 22% later, and you keep the $12,500.00, which grows more slowly in a taxable account

   $\mathrm{\$128,926.71}\times \mathrm{78\%}+\mathrm{\$12,500.00}\times 2.2669$$=\mathrm{\$128,898.88}$

10. Compare the two. Converting comes out ahead by this much

    $\mathrm{\$128,926.71}-\mathrm{\$128,898.88}$$=\mathrm{\$27.83}$

11. If your rate later is above this break-even rate, converting wins over this period

    $\text{break-even rate}$$=\mathrm{21.98\%}$

5. Tax on the conversion: $9,280.00

1. Find the federal tax on your income without the conversion

   $\text{tax before}$$=\mathrm{\$24,387.00}$

2. Find the federal tax with the conversion added on top. The conversion counts as ordinary income

   $\text{tax after}$$=\mathrm{\$32,067.00}$

3. The difference is the federal tax the conversion causes

   $\mathrm{\$32,067.00}-\mathrm{\$24,387.00}$$=\mathrm{\$7,680.00}$

4. Work out the state tax at the rate you entered

   $\mathrm{\$32,000.00}\times \mathrm{5\%}$$=\mathrm{\$1,600.00}$

5. Add them to get the tax you'd pay now

   $\mathrm{\$7,680.00}+\mathrm{\$1,600.00}$$=\mathrm{\$9,280.00}$

6. Divide by the amount converted. This is your true tax rate on the conversion

   $\frac{\mathrm{\$9,280.00}}{\mathrm{\$32,000.00}}$$=\mathrm{29\%}$

7. Growth over 12 years multiplies each dollar by this much

   ${\left(1+\mathrm{8\%}\right)}^{12}$$=2.5182$

8. Convert: the whole amount grows in the Roth, and it's tax-free when you take it out

   $\mathrm{\$32,000.00}\times 2.5182$$=\mathrm{\$80,581.44}$

9. Stay: the account is taxed at 32% later, and you keep the $9,280.00, which grows more slowly in a taxable account

   $\mathrm{\$80,581.44}\times \mathrm{68\%}+\mathrm{\$9,280.00}\times 2.3032$$=\mathrm{\$76,169.36}$

10. Compare the two. Converting comes out ahead by this much

    $\mathrm{\$80,581.44}-\mathrm{\$76,169.36}$$=\mathrm{\$4,412.08}$

11. If your rate later is above this break-even rate, converting wins over this period

    $\text{break-even rate}$$=\mathrm{26.52\%}$

6. Tax on the conversion: $14,175.00

1. Find the federal tax on your income without the conversion

   $\text{tax before}$$=\mathrm{\$13,624.00}$

2. Find the federal tax with the conversion added on top. The conversion counts as ordinary income

   $\text{tax after}$$=\mathrm{\$25,174.00}$

3. The difference is the federal tax the conversion causes

   $\mathrm{\$25,174.00}-\mathrm{\$13,624.00}$$=\mathrm{\$11,550.00}$

4. Work out the state tax at the rate you entered

   $\mathrm{\$52,500.00}\times \mathrm{5\%}$$=\mathrm{\$2,625.00}$

5. Add them to get the tax you'd pay now

   $\mathrm{\$11,550.00}+\mathrm{\$2,625.00}$$=\mathrm{\$14,175.00}$

6. Divide by the amount converted. This is your true tax rate on the conversion

   $\frac{\mathrm{\$14,175.00}}{\mathrm{\$52,500.00}}$$=\mathrm{27\%}$

7. Growth over 11 years multiplies each dollar by this much

   ${\left(1+\mathrm{6\%}\right)}^{11}$$=1.8983$

8. Convert: the whole amount grows in the Roth, and it's tax-free when you take it out

   $\mathrm{\$52,500.00}\times 1.8983$$=\mathrm{\$99,660.67}$

9. Stay: the account is taxed at 20% later, and you keep the $14,175.00, which grows more slowly in a taxable account

   $\mathrm{\$99,660.67}\times \mathrm{80\%}+\mathrm{\$14,175.00}\times 1.7283$$=\mathrm{\$104,227.80}$

10. Compare the two. A negative number means staying traditional comes out ahead

    $\mathrm{\$99,660.67}-\mathrm{\$104,227.80}$$=\mathrm{-\$4,567.12}$

11. If your rate later is above this break-even rate, converting wins over this period

    $\text{break-even rate}$$=\mathrm{24.58\%}$

7. Tax on the conversion: $12,486.00

1. Find the federal tax on your income without the conversion

   $\text{tax before}$$=\mathrm{\$16,712.00}$

2. Find the federal tax with the conversion added on top. The conversion counts as ordinary income

   $\text{tax after}$$=\mathrm{\$27,398.00}$

3. The difference is the federal tax the conversion causes

   $\mathrm{\$27,398.00}-\mathrm{\$16,712.00}$$=\mathrm{\$10,686.00}$

4. Work out the state tax at the rate you entered

   $\mathrm{\$45,000.00}\times \mathrm{4\%}$$=\mathrm{\$1,800.00}$

5. Add them to get the tax you'd pay now

   $\mathrm{\$10,686.00}+\mathrm{\$1,800.00}$$=\mathrm{\$12,486.00}$

6. Divide by the amount converted. This is your true tax rate on the conversion

   $\frac{\mathrm{\$12,486.00}}{\mathrm{\$45,000.00}}$$=\mathrm{27.75\%}$

7. Growth over 13 years multiplies each dollar by this much

   ${\left(1+\mathrm{7\%}\right)}^{13}$$=2.4098$

8. Convert: the whole amount grows in the Roth, and it's tax-free when you take it out

   $\mathrm{\$45,000.00}\times 2.4098$$=\mathrm{\$108,443.03}$

9. Stay: the account is taxed at 22% later, and you keep the $12,486.00, which grows more slowly in a taxable account

   $\mathrm{\$108,443.03}\times \mathrm{78\%}+\mathrm{\$12,486.00}\times 2.1199$$=\mathrm{\$111,054.46}$

10. Compare the two. A negative number means staying traditional comes out ahead

    $\mathrm{\$108,443.03}-\mathrm{\$111,054.46}$$=\mathrm{-\$2,611.43}$

11. If your rate later is above this break-even rate, converting wins over this period

    $\text{break-even rate}$$=\mathrm{24.41\%}$

8. Tax on the conversion: $11,310.00

1. Find the federal tax on your income without the conversion

   $\text{tax before}$$=\mathrm{\$26,198.00}$

2. Find the federal tax with the conversion added on top. The conversion counts as ordinary income

   $\text{tax after}$$=\mathrm{\$35,558.00}$

3. The difference is the federal tax the conversion causes

   $\mathrm{\$35,558.00}-\mathrm{\$26,198.00}$$=\mathrm{\$9,360.00}$

4. Work out the state tax at the rate you entered

   $\mathrm{\$39,000.00}\times \mathrm{5\%}$$=\mathrm{\$1,950.00}$

5. Add them to get the tax you'd pay now

   $\mathrm{\$9,360.00}+\mathrm{\$1,950.00}$$=\mathrm{\$11,310.00}$

6. Divide by the amount converted. This is your true tax rate on the conversion

   $\frac{\mathrm{\$11,310.00}}{\mathrm{\$39,000.00}}$$=\mathrm{29\%}$

7. Growth over 18 years multiplies each dollar by this much

   ${\left(1+\mathrm{7\%}\right)}^{18}$$=3.3799$

8. Convert: the whole amount grows in the Roth, and it's tax-free when you take it out

   $\mathrm{\$39,000.00}\times 3.3799$$=\mathrm{\$131,817.36}$

9. Stay: the account is taxed at 16% later, and you keep the $11,310.00, which grows more slowly in a taxable account

   $\mathrm{\$131,817.36}\times \mathrm{84\%}+\mathrm{\$11,310.00}\times 2.864$$=\mathrm{\$143,118.97}$

10. Compare the two. A negative number means staying traditional comes out ahead

    $\mathrm{\$131,817.36}-\mathrm{\$143,118.97}$$=\mathrm{-\$11,301.61}$

11. If your rate later is above this break-even rate, converting wins over this period

    $\text{break-even rate}$$=\mathrm{24.57\%}$

9. Tax on the conversion: $14,850.00

1. Find the federal tax on your income without the conversion

   $\text{tax before}$$=\mathrm{\$12,744.00}$

2. Find the federal tax with the conversion added on top. The conversion counts as ordinary income

   $\text{tax after}$$=\mathrm{\$24,844.00}$

3. The difference is the federal tax the conversion causes

   $\mathrm{\$24,844.00}-\mathrm{\$12,744.00}$$=\mathrm{\$12,100.00}$

4. Work out the state tax at the rate you entered

   $\mathrm{\$55,000.00}\times \mathrm{5\%}$$=\mathrm{\$2,750.00}$

5. Add them to get the tax you'd pay now

   $\mathrm{\$12,100.00}+\mathrm{\$2,750.00}$$=\mathrm{\$14,850.00}$

6. Divide by the amount converted. This is your true tax rate on the conversion

   $\frac{\mathrm{\$14,850.00}}{\mathrm{\$55,000.00}}$$=\mathrm{27\%}$

7. Growth over 12 years multiplies each dollar by this much

   ${\left(1+\mathrm{7\%}\right)}^{12}$$=2.2522$

8. Convert: the whole amount grows in the Roth, and it's tax-free when you take it out

   $\mathrm{\$55,000.00}\times 2.2522$$=\mathrm{\$123,870.54}$

9. Stay: the account is taxed at 28% later, and you keep the $14,850.00, which grows more slowly in a taxable account

   $\mathrm{\$123,870.54}\times \mathrm{72\%}+\mathrm{\$14,850.00}\times 1.9538$$=\mathrm{\$118,200.15}$

10. Compare the two. Converting comes out ahead by this much

    $\mathrm{\$123,870.54}-\mathrm{\$118,200.15}$$=\mathrm{\$5,670.38}$

11. If your rate later is above this break-even rate, converting wins over this period

    $\text{break-even rate}$$=\mathrm{23.42\%}$

10. Tax on the conversion: $12,960.00

1. Find the federal tax on your income without the conversion

   $\text{tax before}$$=\mathrm{\$18,464.00}$

2. Find the federal tax with the conversion added on top. The conversion counts as ordinary income

   $\text{tax after}$$=\mathrm{\$29,024.00}$

3. The difference is the federal tax the conversion causes

   $\mathrm{\$29,024.00}-\mathrm{\$18,464.00}$$=\mathrm{\$10,560.00}$

4. Work out the state tax at the rate you entered

   $\mathrm{\$48,000.00}\times \mathrm{5\%}$$=\mathrm{\$2,400.00}$

5. Add them to get the tax you'd pay now

   $\mathrm{\$10,560.00}+\mathrm{\$2,400.00}$$=\mathrm{\$12,960.00}$

6. Divide by the amount converted. This is your true tax rate on the conversion

   $\frac{\mathrm{\$12,960.00}}{\mathrm{\$48,000.00}}$$=\mathrm{27\%}$

7. Growth over 11 years multiplies each dollar by this much

   ${\left(1+\mathrm{7\%}\right)}^{11}$$=2.1049$

8. Convert: the whole amount grows in the Roth, and it's tax-free when you take it out

   $\mathrm{\$48,000.00}\times 2.1049$$=\mathrm{\$101,032.89}$

9. Stay: the account is taxed at 28% later, and you keep the $12,960.00, which grows more slowly in a taxable account

   $\mathrm{\$101,032.89}\times \mathrm{72\%}+\mathrm{\$12,960.00}\times 1.8885$$=\mathrm{\$97,218.28}$

10. Compare the two. Converting comes out ahead by this much

    $\mathrm{\$101,032.89}-\mathrm{\$97,218.28}$$=\mathrm{\$3,814.61}$

11. If your rate later is above this break-even rate, converting wins over this period

    $\text{break-even rate}$$=\mathrm{24.22\%}$