RMD vs Roth Conversion Calculator: Break-Even

RMD vs. Roth Conversion Calculator: Break-Even Analysis 2026

Calculate the break-even point for Roth conversions vs. RMDs. Determine if paying taxes now is better than mandatory distributions later with IRMAA warnings and legacy value comparisons.

What This Calculator Does

This calculator compares two retirement-income paths side by side: keeping funds in a Traditional IRA and taking Required Minimum Distributions versus converting some or all of those funds to a Roth IRA now and paying the tax upfront. It projects year-by-year account balances for both scenarios, identifies the break-even age where the Roth path overtakes the RMD path in cumulative after-tax value, and flags potential IRMAA surcharges that could increase your Medicare premiums.

Who It Helps:

Pre-RMD retirees (ages 60–72) evaluating whether to convert before mandatory distributions begin, current RMD-age retirees considering partial conversions, and anyone planning a tax-efficient legacy for heirs.
Key Outputs:

Break-even age, cumulative tax savings (or cost), IRMAA impact warning, legacy value comparison for heirs under the 10-year rule, and year-by-year projections for both the Roth and RMD paths.
What It Does Not Do:

The calculator does not model state income taxes, simulate investment volatility, or account for Social Security taxation interactions. It uses flat tax-rate assumptions for both the conversion year and future RMD years.

How the Math Works

The calculator projects two parallel timelines. In the RMD path, the Traditional IRA grows tax-deferred and distributions are taxed at the projected future rate each year. In the Roth path, the conversion amount is taxed upfront at the current rate, then grows and distributes tax-free:

\text{Roth Balance}_n = \text{Conversion Amount} \times (1 + r)^n

Break-even occurs at the year n where the after-tax Roth value exceeds the after-tax Traditional value plus the reinvested opportunity cost of the upfront tax payment.

Opportunity Cost:

The tax dollars paid today could have been invested. The calculator compounds that amount at the expected return rate and subtracts it from the Roth advantage each year. Break-even is delayed until tax-free growth overcomes this lost growth.
IRMAA Check:

If the conversion pushes Modified Adjusted Gross Income above $218,000 (joint) or $109,000 (single), Medicare Part B and D premiums increase. The calculator flags this surcharge and factors it into the net benefit calculation.
Worked Example:

Age 65, $200,000 Traditional IRA, $50,000 conversion at 22% ($11,000 tax paid from cash), 6% return, 22% future RMD rate. Break-even at approximately age 79. Lifetime tax savings: ≈$18,000. Legacy advantage for heirs: ≈$45,000 (tax-free Roth vs. taxed inherited IRA).

How to Use This Calculator

Enter your current Traditional IRA balance and your age. Then specify the amount you are considering converting to a Roth IRA—this can be a partial or full conversion. The calculator determines the upfront tax cost based on your current marginal rate and projects both scenarios forward.

Tax Rates:

Enter your current marginal tax rate (applied to the conversion) and your projected future tax rate (applied to RMD withdrawals). If you expect your bracket to rise due to growing RMDs or the widow's tax, set the future rate higher.
Tax Payment Source:

Specify whether you will pay conversion taxes from cash savings or from the IRA itself. Paying from cash preserves the full conversion amount for tax-free growth and typically reduces break-even age by 3–5 years.
Growth and Inflation:

Set the expected annual investment return and inflation rate. These drive both the Roth and Traditional projections and determine how quickly tax-free growth overcomes the upfront tax cost.
Reviewing Results:

Compare the break-even age, cumulative tax savings, IRMAA warning, and legacy value side by side. The year-by-year table shows when the Roth path begins to outperform the RMD path in after-tax value.

Understanding Roth Conversions vs. RMDs

The Fundamental Trade-Off

Roth conversions require paying taxes today on Traditional IRA funds to convert them to Roth IRAs, which grow tax-free and have no RMD requirements. The trade-off: pay taxes now at your current rate vs. pay taxes later on RMDs at potentially higher rates. The break-even analysis determines when the tax-free growth advantage overcomes the upfront tax cost.

When Roth Conversions Make Sense

Roth conversions are beneficial when: (1) Your current tax rate is lower than your projected future RMD rate, (2) You can pay conversion taxes from cash savings (not IRA funds), (3) You have 10+ years for tax-free growth to overcome the upfront cost, (4) You want to leave tax-free assets to heirs, (5) You're in a 'gap year' between retirement and Social Security (lower income years), or (6) You want to protect against future tax bracket increases.

When RMDs Are Better

Taking RMDs (not converting) is better when: (1) Your current tax rate is higher than your projected future rate, (2) You need the RMD income for living expenses, (3) You're already in the top bracket (37%) with no room to go higher, (4) You're very close to death (limited time for tax-free growth), or (5) A conversion would trigger IRMAA surcharges that outweigh the tax savings.

The Break-Even Analysis

Calculating Break-Even Age

The break-even age is when cumulative Roth tax-free growth exceeds the opportunity cost of upfront taxes plus Traditional RMD taxes. Formula: Roth Balance_n > (Traditional Balance_n - Deferred Taxes_n) + Lost Growth_n, where n is years from conversion. For example, a $100,000 conversion at age 65 with 22% tax ($22,000), paying from cash, with 6% returns and 22% future tax rate, typically breaks even at age 78-82.

The Opportunity Cost Factor

Opportunity cost is the lost growth on money used to pay conversion taxes. If you pay $22,000 in taxes from cash, that $22,000 could have grown at 6% annually. Over 20 years: $22,000 × (1.06)^20 = $70,500 in lost growth. The calculator factors this into break-even analysis, showing when Roth tax-free growth overcomes this opportunity cost.

The Tax Payment Source Impact

Paying conversion taxes from cash savings (vs. IRA funds) reduces break-even age by 3-5 years. Paying from cash preserves the full conversion amount for tax-free growth, while paying from IRA reduces the conversion by the tax amount. A $100,000 conversion with $22,000 tax: cash payment converts $100,000, IRA payment only converts $78,000; a 22% reduction in tax-free growth potential.

2026 Tax Considerations

2026 Tax Brackets

2026 tax brackets (joint): 10% ($0-$25,200), 12% ($25,200-$100,800), 22% ($100,800-$211,400), 24% ($211,400-$431,050), 32% ($431,050-$647,850), 35% ($647,850-$1,008,400), 37% ($1,008,400+). Single brackets are approximately half. The calculator uses these brackets to determine your marginal tax rate on conversions and shows how much room you have in your current bracket.

The Senior Deduction Advantage

The 2026 $6,000 senior deduction (age 65+) reduces taxable income, potentially keeping you in lower brackets for conversions. With $80,000 income and $6,000 senior deduction, taxable income is $74,000, keeping you in the 12% bracket (joint) instead of 22%. This $6,000 'bracket protection' can save $600-$1,200 in conversion taxes, making conversions more attractive for seniors.

The SALT Cap Increase

The 2026 SALT (State and Local Tax) cap increases to $40,000 (from $10,000), providing additional tax deductions for high-tax state residents. This reduces taxable income, potentially keeping you in lower brackets for Roth conversions. Factor this into your conversion planning if you live in a high-tax state.

IRMAA and Medicare Premium Impact

IRMAA Thresholds 2026

IRMAA (Income-Related Monthly Adjustment Amount) increases Medicare Part B and D premiums if your Modified Adjusted Gross Income (MAGI) exceeds $218,000 (joint) or $109,000 (single) in 2026. MAGI includes: Adjusted Gross Income (AGI) + tax-exempt interest. Roth conversions increase AGI, potentially triggering IRMAA surcharges.

The IRMAA Penalty Calculation

IRMAA surcharges are tiered based on how much you exceed the threshold. Rough estimates: $500-$1,200/year per $10,000 over threshold. A $50,000 conversion pushing you $30,000 over the threshold adds approximately $850/year in Medicare premiums. Over 20 years, this $17,000 hidden cost can reduce conversion ROI by 15-20%. Always check IRMAA impact before large conversions.

Strategies to Avoid IRMAA

To avoid IRMAA: (1) Convert smaller amounts over multiple years to stay under thresholds, (2) Time conversions in 'gap years' between retirement and Social Security (lower income), (3) Consider converting before age 63 (IRMAA uses 2-year lookback), (4) Factor IRMAA into break-even analysis, if surcharges exceed tax savings, conversion may not make sense.

Legacy Planning: The 10-Year Rule Advantage

Inherited Traditional IRAs: Tax Burden for Heirs

Non-spouse beneficiaries must fully distribute inherited Traditional IRAs within 10 years (SECURE Act 2.0), potentially pushing them into higher tax brackets. A $500,000 inherited Traditional IRA requires $50,000/year distributions, which can push a beneficiary from the 12% bracket into the 22% or 24% bracket. Total taxes over 10 years: $110,000-$120,000 (22-24% average rate).

Inherited Roth IRAs: Tax-Free Legacy

Inherited Roth IRAs are tax-free to beneficiaries, regardless of the 10-year rule. A $500,000 inherited Roth IRA provides $50,000/year tax-free distributions with zero tax burden. This creates a $100,000-$150,000 legacy advantage over inherited Traditional IRAs, making Roth conversions especially valuable for legacy-focused parents.

The Legacy Value Calculation

To calculate legacy value: compare after-tax value of inherited Traditional IRA vs. inherited Roth IRA. Traditional: $500,000 × (1 - 0.24) = $380,000 after-tax. Roth: $500,000 × 1.0 = $500,000 tax-free. Legacy advantage: $120,000. This advantage increases with larger balances and higher beneficiary tax brackets.

The Widow's Tax Protection

Understanding the Widow's Tax

The 'Widow's Tax' occurs when a surviving spouse is pushed from a lower Joint bracket (12%) into a higher Single bracket (22%) after their spouse dies. This happens because Single brackets are approximately half of Joint brackets, so the same income is taxed at a higher rate. For example, $50,000 income is taxed at 12% (joint) but 22% (single), a 83% tax rate increase.

How Roth Conversions Protect Surviving Spouses

Roth conversions protect against the Widow's Tax by providing tax-free income that doesn't increase taxable income. A $200,000 Roth provides $8,000/year tax-free (4% withdrawal), while the same Traditional balance generates $8,000 RMD taxed at 22% = $1,760/year tax. Over 20 years, this saves $35,200 in taxes for the surviving spouse.

The Widow's Tax Calculation

To calculate Widow's Tax impact: compare tax on RMDs for Joint vs. Single brackets. Example: $200,000 Traditional IRA, $8,000/year RMD. Joint (12%): $960/year tax. Single (22%): $1,760/year tax. Annual increase: $800. Over 20 years: $16,000 additional tax burden. Roth conversions eliminate this risk by providing tax-free income.

RMD Sequencing Rules

The RMD First Rule

If you're already at RMD age (73+ in 2026), you must take your RMD before converting any additional amounts to Roth. RMDs cannot be converted, they must be withdrawn and taxed as ordinary income. After taking your RMD, you can convert additional Traditional IRA funds to Roth. This sequencing rule means conversions for RMD-age retirees are limited to amounts beyond the required minimum.

Conversion Timing Strategies

For RMD-age retirees: (1) Take RMD early in the year to maximize conversion window, (2) Convert in 'gap years' between RMD and Social Security (lower income), (3) Convert smaller amounts over multiple years to stay in lower brackets, (4) Factor RMD into taxable income when calculating conversion tax brackets. The calculator accounts for RMD sequencing if you're already at RMD age.

Pre-RMD Conversion Advantage

Converting before RMD age (before 73+) provides maximum flexibility: (1) No RMD sequencing restrictions, (2) More years for tax-free growth, (3) Lower break-even age, (4) Ability to convert larger amounts before RMDs begin. If you're 65-72, consider converting before RMDs begin to maximize conversion benefits.

Tax Bracket Arbitrage Strategies

The Bracket Filler Strategy

The 'Bracket Filler' strategy converts amounts that fill your current tax bracket without pushing you into the next bracket. For example, if you're at $80,000 (12% bracket, joint) with $20,800 room until 22% bracket, convert $20,000 to maximize 12% rate. Converting $30,000 would push $9,200 into the 22% bracket, increasing conversion cost. The calculator shows your bracket room and optimal conversion amount.

Gap Year Conversions

'Gap years' are low-income years between retirement and Social Security (typically ages 62-70). These years provide ideal conversion opportunities: (1) Lower taxable income = lower brackets, (2) No RMDs yet (if under 73), (3) More years for tax-free growth, (4) Lower IRMAA risk. Convert during gap years to maximize conversion benefits and minimize tax cost.

Multi-Year Conversion Strategy

Instead of one large conversion, convert smaller amounts over multiple years to: (1) Stay in lower tax brackets, (2) Avoid IRMAA thresholds, (3) Spread tax burden, (4) Maximize bracket room. For example, convert $30,000/year for 5 years instead of $150,000 in one year. This keeps you in lower brackets and avoids IRMAA penalties.

FAQ

Is it better to do a Roth conversion or take RMDs?

It depends on your current tax bracket vs. expected future tax bracket, age, and whether you can pay conversion taxes from cash savings. A Roth conversion is beneficial if: (1) Your current tax rate is lower than your projected RMD rate, (2) You can pay taxes from cash (not IRA funds), (3) You have 10+ years for tax-free growth to overcome the upfront tax cost, and (4) You want to leave tax-free assets to heirs. Use the calculator to find your break-even age and projected lifetime savings.

What is the break-even point for a Roth conversion?

The break-even point is the age when the cumulative tax-free growth of a Roth account surpasses the opportunity cost of taxes paid today. For example, a $100,000 conversion at age 65 with a 22% tax rate ($22,000 tax) may break even at age 78-82, depending on returns and future tax rates. The calculator projects both scenarios to find your exact break-even age.

How does IRMAA affect Roth conversions?

IRMAA (Income-Related Monthly Adjustment Amount) increases Medicare Part B and D premiums if your Modified Adjusted Gross Income (MAGI) exceeds $218,000 (joint) or $109,000 (single) in 2026. A large Roth conversion can push you over these thresholds, adding $500-$1,200/year in Medicare premiums. This hidden cost can reduce conversion ROI by 10-20%, so factor it into your decision.

Should I pay Roth conversion taxes from my IRA or cash savings?

Always pay from cash savings if possible. Paying from the IRA reduces your conversion amount and eliminates the opportunity cost advantage. For example, a $100,000 conversion with $22,000 tax: paying from cash converts the full $100,000, while paying from IRA only converts $78,000. The cash payment strategy typically reduces break-even age by 3-5 years.

What is the 'Widow's Tax' and how does Roth conversion help?

The 'Widow's Tax' occurs when a surviving spouse is pushed from a lower Joint bracket (12%) into a higher Single bracket (22%) after their spouse dies. Roth conversions protect against this by providing tax-free income that doesn't increase taxable income. A $200,000 Roth balance provides $8,000/year tax-free (4% withdrawal), while the same Traditional balance would generate $8,000 RMD taxed at 22% = $1,760/year tax.

How does the 10-year rule affect inherited IRAs vs. inherited Roth IRAs?

Non-spouse beneficiaries must fully distribute inherited IRAs within 10 years (SECURE Act 2.0). A $500,000 inherited Traditional IRA requires $50,000/year distributions, potentially pushing beneficiaries into 22-24% brackets. The same $500,000 inherited Roth IRA is tax-free, providing $50,000/year with zero tax. This creates a $100,000-$150,000 legacy advantage for Roth conversions.

Can I convert to Roth if I'm already taking RMDs?

Yes, but you must take your RMD first before converting any additional amounts. RMDs cannot be converted to Roth, they must be withdrawn and taxed. After taking your RMD, you can convert additional Traditional IRA funds to Roth. The calculator accounts for this RMD sequencing rule if you're already at RMD age (73+ in 2026).

What is the 2026 senior deduction and how does it affect Roth conversions?

The 2026 senior deduction is $6,000 for taxpayers age 65+. This reduces your taxable income, potentially keeping you in a lower tax bracket for Roth conversions. For example, with $80,000 income and $6,000 senior deduction, your taxable income is $74,000, keeping you in the 12% bracket (joint) instead of 22%. This makes conversions more attractive for seniors.

How do I calculate the opportunity cost of paying conversion taxes?

Opportunity cost is the lost growth on money used to pay taxes. If you pay $22,000 in conversion taxes from cash, that $22,000 could have grown at 6% annually. Over 20 years, that's $22,000 × (1.06)^20 = $70,500 in lost growth. The calculator factors this into the break-even analysis, showing when Roth tax-free growth overcomes this opportunity cost.

What tax bracket should I use for future RMD projections?

Use your expected marginal tax rate in retirement, typically 22-24% for most retirees. However, RMDs can push you into higher brackets as distributions increase. Consider: (1) Your current bracket, (2) Social Security taxation (up to 85% becomes taxable), (3) Potential bracket increases due to RMD growth, and (4) Widow's tax risk (Single brackets are higher). The calculator allows you to adjust this assumption to see how it affects break-even.

Current standing

Conversion scenario

Assumptions

Break-even read

Key metrics

After-tax wealth crossover

Bracket stack (illustrative)

Bracket arbitrage

Filing status changes

Legacy / 10-year rule

Strategic Roth Conversion Insights

The Break-Even Age Calculation: When Tax-Free Growth Wins

The Cash Payment Advantage: Preserving Full Conversion Amount

The IRMAA Penalty: Medicare Premium Surcharge Risk

The Tax Bracket Arbitrage: Current Rate vs. Future Rate

The Widow's Tax Protection: Bracket Jump Risk Mitigation

The 10-Year Rule Legacy Advantage: Tax-Free Heir Distributions

The RMD Sequencing Rule: Must Take RMD First

The Senior Deduction Advantage: Bracket Optimization Tool