▶ Roth Conversion Optimizer

A Traditional 401(k) is a workplace retirement plan where contributions are made pre-tax — they reduce your taxable income in the year you contribute. A Traditional IRA works similarly but is opened individually at a brokerage. Both grow tax-deferred, meaning you pay no taxes on gains each year.

The catch: every dollar you withdraw in retirement is taxed as ordinary income — at whatever rate applies that year. This includes both your original contributions and all the growth.

• 2025 401(k) contribution limit: $23,500 (plus $7,500 catch-up if age 50+)
• 2025 IRA contribution limit: $7,000 (plus $1,000 catch-up if age 50+)
• RMDs begin at age 73 (SECURE 2.0 Act)

Roth accounts are funded with after-tax dollars — you get no deduction when you contribute, but all future growth and withdrawals are completely tax-free (as long as you're 59½ and the account is at least 5 years old).

Key advantages over Traditional accounts:

• No RMDs during your lifetime — you're never forced to withdraw
• Withdrawals don't count as income, so they don't affect SS taxability or IRMAA
• Heirs can inherit tax-free (though they must distribute within 10 years)
• Contributions (not earnings) can be withdrawn at any time without penalty

Roth 401(k)s have the same contribution limits as Traditional 401(k)s. Roth IRA contributions are limited by income (phase-out begins at $236k MFJ in 2025).

A standard investment account with no special tax treatment. You invest after-tax dollars, and the account generates tax events each year — dividends and interest are taxed as ordinary income, and selling investments triggers capital gains taxes.

Long-term capital gains (assets held over 1 year) are taxed at preferential rates: 0%, 15%, or 20% depending on income — much lower than ordinary income rates. This makes taxable accounts more tax-efficient than they might appear.

• Cost basis tracks what you originally paid; only the gain is taxed on sale
• Assets held until death receive a step-up in basis — heirs owe no capital gains on accumulated growth
• No contribution limits, no withdrawal restrictions, no RMDs

Money in checking, savings, money market, or CDs. Fully liquid, no restrictions on withdrawals, and no tax on the principal since it's already been taxed. Interest earned is taxed as ordinary income each year.

In the context of Roth conversion planning, this account is important because conversion taxes must be paid from somewhere. Paying conversion taxes from after-tax cash (rather than from the traditional IRA itself) means more money stays invested and compounding — this is the most efficient way to fund conversions.

The US uses a progressive tax system — different portions of your income are taxed at different rates. Your "marginal rate" is the rate on the last dollar of income. Your "effective rate" is the total tax as a percentage of all income — always lower than the marginal rate.

2025 rates for Married Filing Jointly:

• 10%: first $23,850 of taxable income
• 12%: $23,851 – $96,950
• 22%: $96,951 – $206,700
• 24%: $206,701 – $394,600
• 32%: $394,601 – $501,050
• 35% / 37%: above $501,050

Taxable income = gross income − standard deduction ($30,000 MFJ in 2025). Brackets are adjusted for inflation annually.

A flat dollar amount you can subtract from your gross income before calculating taxes — no itemizing required. In 2025: $30,000 for MFJ, $15,000 for Single. Adjusted for inflation each year.

In early retirement — before Social Security, before RMDs — many couples find their taxable income is low enough that the standard deduction creates a buffer. This buffer is "room" that can be filled with Roth conversion income at 0% or 10%.

The 2017 Tax Cuts and Jobs Act (TCJA) lowered income tax rates and nearly doubled the standard deduction. These provisions were designed as temporary — they were originally scheduled to expire ("sunset") after 2025.

If TCJA expires without Congressional action:

• The 22% bracket becomes 25%
• The 24% bracket becomes 28%
• The standard deduction drops by roughly half
• The top rate rises from 37% to 39.6%

This tool lets you model both scenarios. As of the tool's last update, the outcome remained uncertain — Congress has periodically extended or modified these provisions.

Your filing status determines which tax bracket thresholds apply. Married Filing Jointly (MFJ) brackets are roughly double the single-filer thresholds — giving couples twice the income before hitting each rate boundary.

This creates a serious risk called the survivor tax cliff: when one spouse dies, the surviving spouse must file as Single the following year. The same income that was comfortably in the 22% MFJ bracket may now be in the 32% or 35% Single bracket.

Example: a couple with $120,000 in retirement income pays MFJ taxes. After a spouse passes, the survivor has the same $120k income but it's now taxed as Single — potentially $10,000–20,000 more in annual taxes.

You can claim Social Security as early as age 62 or as late as age 70. Your Full Retirement Age (FRA) is 66–67 depending on birth year. Claiming before FRA permanently reduces your benefit; delaying past FRA permanently increases it.

• Before FRA: benefit reduced ~6.67%/yr (5/9% per month for first 36 mo, 5/12% after)
• After FRA: benefit grows 8%/yr in delayed credits up to age 70
• Delaying from 62 to 70 can increase your monthly benefit by 70–80%

For married couples, the higher earner's benefit is especially important because the survivor inherits it. Delaying the higher earner's SS — even while the lower earner claims early — is a common strategy.

Social Security benefits are not automatically tax-free. How much is taxable depends on your provisional income (also called combined income):

Provisional income = AGI + tax-exempt interest + 50% of SS benefits

• MFJ below $32,000: 0% of SS is taxable
• MFJ $32,000–$44,000: up to 50% of SS is taxable
• MFJ above $44,000: up to 85% of SS is taxable

The SS torpedo occurs in the phase-in zones. Every extra dollar of income (from conversions, RMDs, etc.) causes 50 cents more of SS to become taxable — effectively adding ~8–10% to your real marginal rate on top of the stated bracket rate. This can push effective marginal rates well above 30% even in the 12% or 22% brackets.

The IRS requires you to withdraw a minimum amount from traditional IRAs and 401(k)s each year starting at age 73 (per SECURE 2.0, enacted 2022). The RMD amount is calculated by dividing your prior year-end account balance by a life expectancy factor from the IRS Uniform Lifetime Table.

At age 73 the factor is 26.5, so a $1,000,000 balance produces an RMD of ~$37,736. As you age, the factor decreases and the RMD grows — both because the divisor shrinks and because the balance may grow faster than you withdraw.

• RMDs are taxed as ordinary income — no preferential rate
• Missing an RMD triggers a 25% excise tax on the missed amount
• Roth IRAs have no RMDs during the owner's lifetime
• RMDs cannot be rolled into a Roth (but other traditional IRA money can be converted in the same year)

A QCD is a direct transfer from your IRA to a qualified charity. Available once you reach age 70½, up to $105,000/yr per person (inflation-adjusted). The transferred amount:

• Counts toward satisfying your RMD for the year
• Is excluded from your taxable income entirely — unlike a regular charitable deduction
• Doesn't affect provisional income for SS taxability
• Doesn't trigger IRMAA

For charitably inclined retirees, QCDs are one of the most powerful tax tools available — they're essentially a way to make deductible charitable contributions even if you take the standard deduction.

IRMAA (Income-Related Monthly Adjustment Amount) is a surcharge added to your Medicare Part B and Part D premiums when your income exceeds certain thresholds. It is assessed per person — so a married couple can owe IRMAA on both spouses' premiums if both are on Medicare.

2025 IRMAA tiers for Married Filing Jointly:

• Tier 0 (≤ $206k): standard premium only — no surcharge
• Tier 1 ($206k–$258k): +$1,052/person/yr
• Tier 2 ($258k–$322k): +$2,644/person/yr
• Tier 3 ($322k–$386k): +$4,236/person/yr
• Tier 4 ($386k–$750k): +$5,827/person/yr
• Tier 5 (> $750k): +$6,357/person/yr

Single filer thresholds are roughly half of MFJ thresholds.

Medicare determines your IRMAA surcharge using your tax return from 2 years prior. Your 2027 Medicare premiums are based on your 2025 MAGI. This creates a meaningful planning complication:

• A large Roth conversion done in 2025 won't hit your Medicare premiums until 2027
• If you retire in 2026 with much lower income, you may still owe IRMAA in 2026–2027 based on your high working-year income
• You can appeal IRMAA if you've had a "life-changing event" (retirement, divorce, death of spouse) that reduced income — SSA Form SSA-44

This tool models IRMAA based on current-year MAGI (the planning-forward view) rather than the 2-year lag. In practice, size your conversions with the lag in mind — especially in the 2–3 years before age 65.

Medicare Part B covers outpatient medical care (doctor visits, lab work, etc.). The standard monthly premium in 2025 is $185.00/person. IRMAA is an additional surcharge on top of this.

Medicare Part D covers prescription drugs. Premiums vary by plan, but IRMAA adds a flat surcharge on top of whatever plan premium you pay.

This tool models the IRMAA surcharge only — not the base Part B/D premiums. The base premiums are a fixed cost regardless of conversion strategy, so they don't affect the comparison between strategies.

A Roth conversion is the act of moving money from a Traditional IRA or 401(k) into a Roth IRA. The converted amount is added to your taxable income in the year of conversion and taxed as ordinary income. After the conversion, that money grows tax-free forever.

There are no limits on conversion amounts (unlike annual Roth contributions which are income-limited). You can convert as much or as little as you want each year.

The mechanics: your IRA custodian moves funds from the traditional account to the Roth account. You report the converted amount on Form 8606 with your tax return. Taxes are typically paid from outside funds (not the converted amount) for maximum efficiency.

The conversion window — sometimes called the "golden window" — is the period of years between retirement and age 73, when RMDs begin. This is when conversions are most powerful because:

• Work income has stopped — your ordinary income is at its lowest point
• Social Security may not have started yet — even lower income
• No RMDs yet — you control every dollar of income you report
• Tax brackets are wide open — you can fill them deliberately

A couple retiring at 62 and starting SS at 67 has a 5-year window of very low income where every dollar converted may be taxed at 10–12% instead of the 22–24% they'll face once RMDs kick in at 73.

Bracket management means deliberately sizing your Roth conversion each year to fill your current tax bracket — converting up to (but not past) the top of a target bracket. This keeps your marginal rate controlled and predictable.

Example (MFJ 2025): if your retirement income is $40,000 (pension + partial SS), the top of the 12% bracket is $96,950 of taxable income. After the $30,000 standard deduction, your gross income can reach $126,950. You have roughly $87,000 of "room" to convert at 12%.

The strategies in this tool automate this calculation:

• 12% bracket: converts just enough to reach the 12%/22% boundary
• 22% bracket: converts to the 22%/24% boundary
• 24% bracket: most aggressive — fills to the 24%/32% boundary

When you pay taxes on a Roth conversion, those dollars leave your investment accounts and stop compounding. This is the hidden cost of converting — the foregone future growth on the tax payment itself.

Example: converting $50,000 at 22% costs $11,000 in taxes. If that $11,000 had stayed invested for 20 years at 6%, it would have grown to ~$35,000. That $35,000 of foregone growth is the opportunity cost you're accepting in exchange for tax-free treatment of the $50,000 converted.

This tool accounts for it implicitly — when taxes are paid from the taxable account, that balance is reduced and earns less growth in all future years. The final net worth comparison between strategies reflects this effect.

The SECURE Act (2019) eliminated the "stretch IRA" for most non-spouse beneficiaries. Heirs who inherit a Traditional or Roth IRA must now distribute the entire account within 10 years. For Traditional accounts, these distributions are taxable — potentially at the heir's peak earning-year tax rate.

Heirs who inherit a Roth IRA must also distribute within 10 years, but all distributions are tax-free. This is a dramatic difference in after-tax value.

• Inheriting a $500k Traditional IRA: heir pays ordinary income tax on every dollar over 10 years
• Inheriting a $500k Roth IRA: heir receives all $500k (plus growth) tax-free

Roth conversions are not always the right move. Conversion is likely a poor choice when:

• You'll be in a lower bracket in retirement than you are today — paying taxes now at a high rate to avoid lower taxes later is counterproductive
• You need the converted funds soon — conversions are most valuable when money has years to grow tax-free; short time horizons reduce the payoff
• You'd have to cross a high IRMAA tier — the surcharge can exceed the tax benefit of converting
• You'd cross into the SS provisional income torpedo zone — effective marginal rates spike unexpectedly
• You'd need to sell other investments at a loss to pay the conversion taxes
• Your state has high income taxes — state taxes increase the conversion cost without a corresponding future benefit (if you'll live in the same state)