Converting money from a Traditional IRA to a Roth IRA can be an important retirement-planning decision. A Roth conversion allows you to move eligible retirement funds into a Roth IRA, potentially changing when you pay income taxes and how your retirement savings are treated in the future. However, the conversion can also create a tax liability, which is why estimating the potential cost before making a decision can be helpful.
Fidelity Roth Conversion Calculator
The Fidelity Roth Conversion Calculator is designed to provide a straightforward estimate of the tax impact of a Traditional IRA conversion. By entering your Traditional IRA balance, the amount you plan to convert, other taxable income, estimated deductions, federal tax rate, and state tax rate, you can estimate the taxable income after conversion, federal and state taxes, total conversion tax, net amount remaining after tax, and effective tax rate.
This calculator is intended as an educational planning tool. It uses the information you provide and applies simple percentage-based calculations. Actual tax liability can be more complicated because federal income taxes generally depend on taxable income and applicable tax brackets, while deductions, credits, filing status, other income, and state rules can affect the final amount owed.
What Is a Fidelity Roth Conversion Calculator?
A Fidelity Roth Conversion Calculator is a retirement planning tool that estimates the potential tax cost of moving money from a Traditional IRA into a Roth IRA.
The calculator focuses on six key results:
- Estimated taxable income after the conversion
- Estimated federal tax
- Estimated state tax
- Estimated total conversion tax
- Estimated amount remaining after tax
- Estimated effective tax rate on the conversion
For example, suppose you have a $200,000 Traditional IRA and are considering converting $40,000. You also have $60,000 of other taxable income and estimate $10,000 in deductions. If you enter estimated federal and state tax rates, the calculator can show how the conversion affects your estimated taxable income and calculate an approximate tax cost on the conversion amount.
This can make a potentially complicated retirement-planning question easier to understand.
What Is a Roth Conversion?
A Roth conversion generally involves moving money from a Traditional IRA or another eligible retirement account into a Roth IRA.
The primary tax consideration is that amounts converted from a Traditional IRA can generally become taxable income, subject to the individual’s circumstances. Instead of waiting to potentially pay taxes when taking taxable distributions from a Traditional IRA later, a person may choose to recognize taxable income during the conversion.
The basic planning question is:
“Is paying taxes on the converted amount now potentially worthwhile compared with paying taxes on withdrawals later?”
There is no universal answer. The appropriate strategy depends on your current tax situation, expected future tax rates, retirement income, investment horizon, other accounts, charitable plans, estate objectives, and many other factors.
That is why estimating the tax impact is an important first step.
How to Use the Fidelity Roth Conversion Calculator
The calculator uses six inputs. Enter the amounts that best represent your current financial situation or the scenario you want to analyze.
1. Enter Your Traditional IRA Balance
The first input is your Traditional IRA Balance.
This is the total account balance from which you are considering making the conversion.
For example:
Traditional IRA Balance = $250,000
The calculator uses this value to make sure the amount being converted does not exceed the available Traditional IRA balance.
2. Enter the Amount to Convert
Next, enter the amount you are considering converting to a Roth IRA.
For example:
Amount to Convert = $50,000
The calculator requires the conversion amount to be greater than zero and no larger than the Traditional IRA balance.
You do not necessarily have to convert the entire account. A partial conversion may be considered when someone wants to manage the amount of taxable income generated by the transaction.
3. Enter Other Taxable Income
Enter your estimated Other Taxable Income for the relevant period.
For example:
Other Taxable Income = $70,000
This helps the calculator estimate your taxable income before adding the Roth conversion.
Other income can include earnings and other taxable sources, depending on your individual circumstances.
4. Enter Estimated Tax Deductions
Enter your estimated tax deductions.
For example:
Estimated Tax Deductions = $15,000
The calculator subtracts the estimated deductions from other taxable income before adding the conversion amount.
If you do not want to account for deductions in your scenario, the calculator can use zero.
5. Enter the Estimated Federal Tax Rate
Enter your estimated federal tax rate as a percentage.
For example:
Federal Tax Rate = 24%
This calculator applies the entered percentage directly to the conversion amount to estimate federal conversion tax.
The result is therefore a simplified estimate rather than a complete federal income-tax calculation.
6. Enter the Estimated State Tax Rate
Finally, enter your estimated state tax rate.
For example:
State Tax Rate = 5%
If state income tax does not apply to your scenario, a value of zero may be used.
Once all values have been entered, select Calculate to see the estimated results.
Understanding the Calculator Results
The calculator provides several important outputs.
Estimated Taxable Income After Conversion
This result estimates your taxable income after subtracting deductions from other taxable income and adding the proposed conversion.
The basic calculation is:
Taxable Income Before Conversion = Other Taxable Income − Estimated Deductions
If the result would be negative, the calculator uses zero instead.
Then:
Taxable Income After Conversion = Taxable Income Before Conversion + Conversion Amount
For example:
- Other taxable income = $70,000
- Deductions = $15,000
- Conversion = $50,000
Taxable income before conversion:
$70,000 − $15,000 = $55,000
Taxable income after conversion:
$55,000 + $50,000 = $105,000
The calculator would display an estimated taxable income after conversion of $105,000.
Estimated Federal Tax
The calculator estimates federal tax using:
Federal Tax = Conversion Amount × Federal Tax Rate
Suppose the conversion is $50,000 and the estimated federal tax rate is 24%.
$50,000 × 24% = $12,000
The estimated federal tax would therefore be:
$12,000
This is a simplified calculation because the tool applies one rate to the entire conversion amount.
Estimated State Tax
The state tax calculation follows the same principle:
State Tax = Conversion Amount × State Tax Rate
For a $50,000 conversion and a 5% state tax rate:
$50,000 × 5% = $2,500
The estimated state tax would be:
$2,500
Estimated Total Conversion Tax
The calculator adds estimated federal and state taxes:
Total Conversion Tax = Federal Tax + State Tax
Using the example above:
$12,000 + $2,500 = $14,500
Therefore, the estimated total conversion tax would be $14,500.
Estimated Amount Remaining After Tax
This result estimates how much of the conversion amount remains after subtracting the estimated taxes.
The formula is:
Net Conversion = Conversion Amount − Total Conversion Tax
Using the same example:
$50,000 − $14,500 = $35,500
The estimated amount remaining after tax is therefore $35,500.
Effective Tax Rate on Conversion
The effective tax rate represents total estimated conversion taxes as a percentage of the conversion amount.
The formula is:
Effective Tax Rate = (Total Conversion Tax ÷ Conversion Amount) × 100
Using $14,500 of total tax on a $50,000 conversion:
($14,500 ÷ $50,000) × 100 = 29%
The estimated effective tax rate is therefore 29%.
This is particularly useful when both federal and state taxes are included.
Fidelity Roth Conversion Calculator Formula
The calculator uses several related formulas.
| Calculation | Formula |
|---|---|
| Taxable Income Before Conversion | Max(0, Other Income − Deductions) |
| Taxable Income After Conversion | Taxable Income Before Conversion + Conversion |
| Estimated Federal Tax | Conversion × Federal Rate ÷ 100 |
| Estimated State Tax | Conversion × State Rate ÷ 100 |
| Total Conversion Tax | Federal Tax + State Tax |
| Net Conversion | Conversion − Total Tax |
| Effective Tax Rate | Total Tax ÷ Conversion × 100 |
These formulas make it possible to estimate the impact of a conversion quickly.
Complete Roth Conversion Example
Consider an investor with the following situation:
| Input | Example Amount |
|---|---|
| Traditional IRA Balance | $250,000 |
| Amount to Convert | $50,000 |
| Other Taxable Income | $70,000 |
| Estimated Deductions | $15,000 |
| Estimated Federal Tax Rate | 24% |
| Estimated State Tax Rate | 5% |
Step 1: Calculate taxable income before conversion
$70,000 − $15,000 = $55,000
Step 2: Add the Roth conversion
$55,000 + $50,000 = $105,000
Estimated taxable income after conversion:
$105,000
Step 3: Calculate federal tax
$50,000 × 24% = $12,000
Step 4: Calculate state tax
$50,000 × 5% = $2,500
Step 5: Calculate total conversion tax
$12,000 + $2,500 = $14,500
Step 6: Calculate amount remaining after estimated tax
$50,000 − $14,500 = $35,500
Step 7: Calculate effective tax rate
$14,500 ÷ $50,000 × 100 = 29%
The calculator would therefore produce an estimated effective conversion tax rate of 29%.
Again, this is a simplified scenario using the rates entered by the user.
Why People Consider Roth Conversions
There are several reasons an investor might investigate Roth conversions.
One potential reason is the desire to pay taxes during a period when the investor expects their taxable income or applicable tax rate to be relatively favorable.
Another consideration is retirement tax diversification. A person with substantial Traditional IRA assets may prefer to have some retirement savings in accounts with different tax characteristics.
Roth retirement assets can also be attractive for long-term planning because qualified Roth distributions can receive favorable tax treatment under applicable rules. However, eligibility and tax treatment depend on the specific account, transaction, age, holding period, and other factors.
A Roth conversion can therefore be part of a broader retirement strategy rather than simply a decision to move money from one account to another.
Partial Roth Conversion vs. Full Conversion
You do not always have to convert the entire Traditional IRA.
For example, assume an IRA has a balance of $300,000.
You could evaluate different conversion scenarios:
| Conversion Amount | Federal Rate | State Rate | Estimated Total Rate |
|---|---|---|---|
| $25,000 | 22% | 5% | 27% |
| $50,000 | 22% | 5% | 27% |
| $75,000 | 22% | 5% | 27% |
| $100,000 | 22% | 5% | 27% |
Under the calculator’s simplified fixed-rate model, the total estimated tax increases proportionally with the conversion amount.
For example, converting $25,000 at a combined estimated rate of 27% produces:
$25,000 × 27% = $6,750
Converting $100,000 at the same rate produces:
$100,000 × 27% = $27,000
In real tax planning, however, the applicable marginal tax rate may change as taxable income changes. That is one reason why a fixed-rate calculator should be treated as a planning estimate rather than a complete tax-return simulation.
Why Conversion Size Matters
The amount converted can significantly affect the tax consequences of the transaction.
A small conversion may produce a relatively manageable tax bill. A very large conversion can create a much larger tax liability and potentially change the taxpayer’s overall tax situation.
Consider a $20,000 conversion compared with a $100,000 conversion.
At a combined estimated tax rate of 25%:
$20,000 × 25% = $5,000
while:
$100,000 × 25% = $25,000
The larger conversion creates five times the estimated tax under the same simplified rate.
This illustrates why investors sometimes evaluate several possible conversion amounts rather than considering only an all-or-nothing decision.
How Other Income Affects Roth Conversion Planning
Other taxable income matters because a Roth conversion may increase total taxable income.
Suppose two people each convert $50,000.
Person A has $30,000 of other taxable income.
Person B has $100,000 of other taxable income.
Even though the conversion is identical, their overall tax situations can be very different.
This is why the calculator asks for other taxable income before calculating estimated taxable income after conversion.
When planning a conversion, consider the broader income picture rather than looking only at the IRA balance.
Role of Deductions
Deductions can reduce taxable income before the conversion is added in the calculator’s model.
For example:
Other Income = $80,000
Deductions = $20,000
Taxable income before conversion becomes:
$60,000
Adding a $40,000 conversion gives:
$100,000
The deduction therefore changes the estimated starting point for the conversion calculation.
Actual tax rules are more nuanced, and not every financial deduction works the same way. The calculator should therefore be used with realistic estimates rather than as a substitute for a detailed tax calculation.
Federal and State Taxes
The total estimated tax in the calculator consists of two components:
Federal Tax + State Tax
For example:
- Federal tax = $10,000
- State tax = $2,000
Total estimated conversion tax:
$12,000
This is why considering only federal taxes can underestimate the overall cost of a conversion for taxpayers who live in states that impose applicable income taxes.
State rules can vary significantly, and some jurisdictions may have different treatment of retirement income. Always evaluate your specific state circumstances.
Strategies for Evaluating a Roth Conversion
One useful approach is to compare several conversion scenarios.
For example, you might evaluate:
$10,000 conversion
$25,000 conversion
$50,000 conversion
$75,000 conversion
$100,000 conversion
Record the estimated tax, net amount, and effective rate for each scenario.
This can help you understand how changing the conversion amount affects your estimated tax cost.
Another useful strategy is to review your expected income for the year before deciding how much to convert. A conversion may be more attractive in some years than others depending on your overall financial picture.
Should You Pay the Conversion Tax From the IRA?
The calculator estimates the amount remaining after tax, but it does not determine how you will actually pay the tax.
An investor may have outside funds available to cover the tax liability, or may consider other sources.
Using money outside the IRA to cover taxes can be an important planning consideration because using part of the retirement account itself can reduce the amount ultimately moved into the Roth IRA and may create additional complications depending on the circumstances.
Because the correct approach depends on age, account type, tax situation, and retirement objectives, this decision is worth evaluating carefully.
Roth Conversion Tax Planning Tips
Compare Multiple Conversion Amounts
Do not automatically assume that converting everything is the best approach. Run several scenarios and compare the estimated taxes.
Consider Your Other Income
Your salary, business income, investment income, pension income, and other taxable sources may influence the overall tax consequences.
Think Beyond the Current Year
A Roth conversion is generally a long-term retirement decision. Consider how the conversion fits into your expected retirement income and future withdrawals.
Account for State Taxes
Federal tax is only one part of the potential liability. Include an appropriate state estimate when applicable.
Avoid Treating the Estimate as a Tax Return
The calculator uses simplified assumptions. Your actual tax liability may differ because real tax calculations can involve tax brackets, credits, deductions, filing status, investment income, and other factors.
Review the Numbers With a Qualified Professional
A tax professional or financial adviser can help determine whether a conversion makes sense for your particular circumstances and help you understand the tax consequences.
Common Roth Conversion Mistakes
Converting Without Estimating the Tax
Moving a large amount from a Traditional IRA without considering the potential tax bill can create an unexpected financial obligation.
Assuming One Tax Rate Applies in Every Situation
Tax circumstances can change as income changes. A simple calculator estimate should not be confused with a full marginal-bracket calculation.
Ignoring State Taxes
A federal-only estimate may understate the total potential tax burden where state income tax applies.
Converting Too Much at Once
A full conversion is not always necessary. Smaller conversions can be compared to larger conversions to evaluate different scenarios.
Forgetting About Other Income
A conversion does not occur in isolation. Your total taxable income is important.
Treating the Calculator Result as Guaranteed
A calculator provides an estimate based on the information entered. It cannot know every detail of your personal tax situation.
Benefits of Using a Roth Conversion Calculator
The main advantage of a Roth conversion calculator is speed.
Instead of performing several separate calculations manually, you can enter your financial assumptions and quickly estimate:
- The taxable income after conversion
- Federal tax
- State tax
- Total tax
- Net converted amount
- Effective tax rate
It is also useful for comparing scenarios. You can change the conversion amount or estimated rates and observe how the results change.
For retirement planning, the ability to compare scenarios can be more valuable than looking at one isolated calculation.
Fidelity Roth Conversion Calculator Quick Reference
| Item | What It Represents |
|---|---|
| Traditional IRA Balance | Available IRA balance considered for the conversion |
| Amount to Convert | Amount planned for Roth conversion |
| Other Taxable Income | Estimated taxable income from other sources |
| Estimated Deductions | Amount deducted from other income in the calculator |
| Federal Tax Rate | Estimated federal rate applied to conversion |
| State Tax Rate | Estimated state rate applied to conversion |
| Taxable Income After Conversion | Estimated taxable income after adding conversion |
| Federal Tax | Estimated federal tax on conversion |
| State Tax | Estimated state tax on conversion |
| Total Conversion Tax | Federal plus state estimated tax |
| Net Conversion | Conversion amount minus estimated tax |
| Effective Tax Rate | Total estimated tax as a percentage of conversion |
Frequently Asked Questions
1. What is the Fidelity Roth Conversion Calculator?
The Fidelity Roth Conversion Calculator is a planning tool that estimates the potential tax impact of converting money from a Traditional IRA to a Roth IRA using the financial assumptions entered by the user.
2. What information do I need to use the calculator?
You need your Traditional IRA balance, proposed conversion amount, other taxable income, estimated deductions, estimated federal tax rate, and estimated state tax rate.
3. Can I convert my entire Traditional IRA?
It may be possible to consider a full conversion, depending on your account and circumstances, but you should evaluate the potential tax consequences first. The calculator can also be used to analyze partial conversions.
4. How is federal conversion tax calculated by the tool?
The calculator multiplies the conversion amount by the federal tax rate you enter.
Federal Tax = Conversion Amount × Federal Rate ÷ 100
5. How is state conversion tax calculated?
The tool multiplies the conversion amount by the state tax rate you enter.
State Tax = Conversion Amount × State Rate ÷ 100
6. What is the total estimated conversion tax?
The total estimated conversion tax is the sum of the calculator’s federal and state tax estimates.
Total Tax = Federal Tax + State Tax
7. What does net conversion mean?
Net conversion is the conversion amount minus the calculator’s estimated federal and state taxes.
Net Conversion = Conversion Amount − Total Tax
It represents the estimated portion remaining after the modeled tax expense.
8. What is the effective tax rate on a Roth conversion?
The effective tax rate is the total estimated tax divided by the conversion amount and expressed as a percentage.
For example, $10,000 of estimated tax on a $40,000 conversion equals a 25% effective rate.
9. Does the calculator calculate my exact federal income tax?
No. It provides a simplified estimate based on the federal tax rate entered by the user. Actual tax calculations can involve tax brackets, filing status, deductions, credits, and other factors.
10. Should I enter my gross income or taxable income?
Use an estimate consistent with the calculator’s requested Other Taxable Income input. The tool then subtracts the deductions entered and adds the proposed conversion.
11. Why does the calculator ask for deductions?
Deductions are used to estimate taxable income before the conversion. Entering deductions can therefore change the estimated taxable income after conversion.
12. Can I use the calculator for a partial Roth conversion?
Yes. Enter the specific amount you are considering converting. You can run several different scenarios to compare potential tax costs.
13. What happens if my conversion amount is greater than my IRA balance?
The calculator does not accept a conversion amount that exceeds the Traditional IRA balance you entered. The conversion should be based on the amount actually available for conversion.
14. Does a Roth conversion calculator tell me whether I should convert?
No. The tool provides numerical estimates. Whether a Roth conversion is appropriate depends on your personal financial, tax, retirement, and estate-planning circumstances.
15. Is the Fidelity Roth Conversion Calculator an official Fidelity tax calculation?
The calculator described here is a general educational estimation tool. Its results should not be considered an official Fidelity tax calculation, personalized financial advice, or a substitute for professional tax guidance.
Final Thoughts
A Fidelity Roth Conversion Calculator can be a useful starting point when you are exploring whether a Traditional IRA to Roth IRA conversion fits into your retirement strategy. By entering your IRA balance, conversion amount, other taxable income, deductions, and estimated federal and state rates, you can quickly estimate the potential tax cost.
The most useful feature of this type of calculator is scenario analysis. Instead of asking only whether you should convert or not, you can compare different conversion amounts and see how the estimated tax changes. For example, comparing a $25,000 conversion with a $50,000 or $75,000 conversion can help you understand the financial impact of changing the size of the transaction.
Keep in mind that the calculator uses a simplified percentage-based model. Actual tax liability can differ considerably depending on filing status, taxable income, marginal tax brackets, deductions, credits, state taxation, other sources of income, and numerous individual circumstances.
For that reason, use the calculator as a planning and educational tool, not as a guarantee of your final tax bill.
Before completing a significant Roth conversion, consider reviewing your assumptions and discussing the transaction with an appropriately qualified tax or financial professional. Careful planning can help you understand both the immediate tax cost and the longer-term role a Roth conversion may play in your retirement strategy.