* If you select funds outside your IRA, an amount equal to the tax due is added to the
non-sheltered account corresponding to the regular IRA. In other words, if your rollover
amount is $100,000 and you pay the tax on conversion from other funds, the Traditional IRA
amount is equal to the $100,000 plus the amount of tax liability created by the
conversion. Payment of tax due upon conversion with funds from the IRA may result in a 10%
tax penalty. If a taxpayer meets the eligibility requirements for converting a Traditional
IRA into a Roth IRA, the question remains, will the conversion be beneficial. In order to
make this determination, estimates must be made for certain parameters. These parameters
include the number of years to retirement, the tax rate at retirement, and the estimated
IRA contributions during the pre-retirement period.
The following calculator will help you determine whether conversion from
an existing IRA into a Roth IRA is beneficial. The results show the post-tax
income resulting from each IRA if you were to withdraw everything your first
year in retirement. Please be advised that there are many aspects of a taxpayer's
financial situation that must be analyzed before a conversion decision can
be reached. In general, conversion is most beneficial if a taxpayer's current
tax bracket is lower than the taxpayer's bracket when the IRA funds are
withdrawn. The results provided by this calculator are intended for illustrative
and hypothetical purposes only. |
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