Convert Your 401(k) to a Roth IRA: Tax Cost Calculator & When It Pays Off

Rolling a traditional 401(k) into a Roth IRA is one of the most consequential tax decisions a person makes in their working career. You pay ordinary income tax on every dollar you convert — but those dollars and all their future growth come out tax-free for the rest of your life. Whether that trade is worth it depends on your current bracket, your expected future rate, and whether you're in one of the windows where the math tips heavily in favor of converting. This guide walks through all of it, with a calculator using 2026 tax brackets to show you the actual dollar cost.

How it works: two routes from traditional 401(k) to Roth IRA

Most people use a two-step approach, which gives you more flexibility and avoids the mandatory 20% withholding trap:

1. Step 1 — Roll your 401(k) to a traditional IRA. This is a tax-free direct rollover under IRC § 402(c). The money moves from your old employer's plan to a traditional IRA at a custodian of your choice. Zero tax owed. See Direct vs. Indirect Rollover for why you always want a direct rollover here.
2. Step 2 — Convert some or all of the traditional IRA to a Roth IRA. You tell your IRA custodian to convert a specific dollar amount. The converted amount is added to your gross income for the year you convert. Tax is owed at your ordinary income rate; the 10% early distribution penalty does not apply to converted amounts regardless of your age.¹

Some 401(k) plans also allow a direct rollover to a Roth IRA — one step, no intermediate traditional IRA. The tax result is identical. This is a qualified rollover contribution to a Roth IRA under IRC § 408A(e).² Not all plans support it; check with your plan administrator. If they don't allow it, the two-step route works just as well and gives you more time to decide how much to convert.

The tax cost: every dollar is ordinary income

When you convert $100,000 from a traditional IRA to a Roth IRA, the IRS treats it as if you earned $100,000 in additional wages. It layers on top of everything else you earned that year and gets taxed at your marginal rate — which may span more than one bracket if the conversion crosses a bracket boundary.

For most working-age adults, the conversion cost lands somewhere between 22% and 32% effective. For early retirees with little other income, the effective rate on a partial conversion can be as low as 10–15%.

2026 Roth Conversion Tax Cost Calculator

When conversion makes sense: the three best windows

Window 1: The income-gap year at job change

Leaving a high-earning job in the first half of the year means you only have part of your normal salary in your W-2. If you take a few months between roles, you have an unusually low-income year to exploit. Rolling your old 401(k) to a traditional IRA and converting through lower brackets can cost 22% or less — compared to 32–35% in a normal full-employment year.

Example: Marcus, 44, earns $200,000 in a typical year. He leaves his job in April 2026 with year-to-date W-2 income of $62,000. He rolls $310,000 from his old 401(k) to a traditional IRA and converts $80,000 in November — after confirming he won't start a new job until 2027.

Total 2026 income: $142,000. After the $16,100 standard deduction: $125,900 taxable. Federal tax on the $80,000 conversion: approximately $17,550 — an effective rate of about 22%. If he converted the same $80,000 in a normal $200,000 year, the effective rate would be roughly 30.5%, costing about $24,400 — an extra $6,850 in taxes. He has $230,000 remaining in the traditional IRA to continue converting in future lower-income years.

Window 2: Early retirement, before Social Security

The years between retirement and claiming Social Security are often the lowest-income years a household ever has. Pensions may not have started. Investment income can be managed. This creates a Roth conversion runway of five to eight years where you can systematically fill lower brackets before two things push income back up: Social Security (up to 85% taxable) and required minimum distributions at 73 or 75.

Example: Janet and Tom, both 62, retire in 2026. Combined income from part-time work and dividends: $48,000. They have $950,000 in traditional 401(k) and IRA accounts. Without conversions, RMDs beginning around age 75 will exceed $75,000/year, stacked on top of Social Security benefits — likely pushing them into the 22–24% bracket at 75+ anyway, or higher if markets perform well.

They convert $130,000/year. After the $32,200 MFJ standard deduction, their pre-conversion taxable income is $15,800. Adding $130,000 puts them at $145,800 taxable — within the 22% bracket (MFJ 22% runs to $211,400). Federal tax on the conversion: approximately $19,900 per year, effective rate ~15.3%. They stay well under the $218,000 MFJ IRMAA threshold. After five years, $650,000 has moved to Roth accounts at an effective rate that's likely lower than they'd face in their late 70s.

Window 3: Pre-RMD bracket management (ages 60–72)

Required minimum distributions begin at age 73 (or 75 if born in 1960 or later, per SECURE 2.0 § 107). RMDs are calculated on the entire pre-tax balance and can force large taxable distributions in years when you don't need the cash and may have Social Security running simultaneously. Each dollar converted before RMDs begin reduces the future RMD calculation. Converting at 22–24% now to avoid 28–32% effective rates on forced distributions at 78+ is a straightforward trade for many retirees who haven't fully exhausted the lower brackets.

IRMAA: the Medicare surcharge cliff

If you or your spouse are on Medicare — or will be within the next two years — a large Roth conversion can trigger Medicare IRMAA surcharges. IRMAA is assessed based on income from two years prior, so a 2026 conversion that pushes your modified adjusted gross income (MAGI) above the threshold determines your 2028 Medicare premiums.

The 2026 IRMAA first threshold is $109,000 for single filers and $218,000 for married filing jointly.³ Crossing this threshold by even $1 triggers a surcharge of at least $81.20/month per person on Part B and Part D combined — roughly $975/year per Medicare beneficiary. Multiple tiers exist above this first threshold, with maximum surcharges of $487/month per person at the highest income tier.

The calculator above shows an IRMAA alert when your projected post-conversion income exceeds the first threshold. If you're in your early 60s with income close to the cliff, consider converting to a dollar amount just under it — or spreading the conversion over two calendar years.

The 5-year conversion clock (critical if you're under 59½)

Each Roth conversion has its own five-year holding period for avoiding the 10% additional tax on early distributions. This is a different rule from the Roth IRA's five-year qualified distribution clock — and it only matters if you withdraw before age 59½.

Specifically: if you convert $100,000 in 2026 and withdraw that $100,000 before 2031, the 10% early distribution penalty applies to the amount withdrawn — even though you already paid income tax on it at conversion.⁴ Income tax is not owed again, but the 10% is.

This matters most for people executing a Roth conversion ladder — an early-retirement strategy where you convert each year, wait five years, then begin withdrawing the conversions penalty-free. The math works, but it requires the five-year gap between conversion and withdrawal while under 59½. After 59½, the per-conversion holding period is irrelevant.

When NOT to convert

• Your current marginal rate is significantly higher than your expected withdrawal rate. If you're at 35% now and expect to withdraw at an effective 22% in retirement, paying 35% today to avoid 22% later is a losing trade. Conversion math favors you when future rates are equal or higher; it works against you when current rates are much higher.
• You'd have to pay the tax from the converted funds. Ideally, you pay conversion taxes from after-tax savings — not by withholding from the converted amount. If you convert $100,000 and withhold $24,000 for taxes, only $76,000 lands in the Roth IRA. That $24,000 is a distribution, potentially subject to the 10% penalty if you're under 59½. Conversions are most effective when you have non-IRA funds to cover the tax bill.
• You'll need the money within 5 years and you're under 59½. The per-conversion five-year clock means you'd owe a 10% penalty on any converted amounts withdrawn within the holding period.
• You're near the IRMAA cliff and Medicare-eligible. A conversion that crosses the threshold can add hundreds of dollars per month in Medicare surcharges for two years. The calculator above flags this.
• Your estate will pass to charity or to heirs in a low bracket. If beneficiaries would inherit and withdraw at 10–12%, paying 24–32% today to convert for their benefit is often suboptimal.

Three real scenarios

Scenario 1: Job-change conversion window

See the Marcus example above. Single, 44, leaves $200K job in April, converts $80,000 of his $310,000 old 401(k) during his gap year. Federal tax on the conversion: ~$17,550, effective rate ~22%. Same conversion in a normal year would cost ~$24,400. Savings: ~$6,850 in federal tax. He leaves $230,000 in the traditional IRA for future low-income conversion opportunities.

Scenario 2: Early retiree pre-RMD ladder

See the Janet and Tom example above. Retire at 62, convert $130,000/year into the 22% bracket while income is low, before Social Security and RMDs push them back up. Effective rate ~15.3% on each year's conversion. Over five years, they move $650,000 to Roth accounts at rates likely lower than they'd face in their late 70s.

Scenario 3: High earner — when it doesn't pencil

Dr. Sarah Chen, 52, attending physician, earns $340,000 in 2026. After the $16,100 standard deduction, taxable income is $323,900 — in the 35% bracket ($256,226–$640,600 for single filers). She has $800,000 in a traditional 401(k) from her residency years.

Converting $100,000 now costs $35,000 in federal tax (purely at the 35% marginal rate, since she doesn't cross into 37%). In retirement at her planned spending of $180,000/year, effective rates — even factoring in Social Security — will likely land in the 22–24% range. Paying 35% to avoid 22% is a net-negative trade of 13 cents on every converted dollar. She should hold the conversion until income drops — at career transition, between jobs, or in early retirement before RMDs begin. An advisor running a 30-year projection may find specific narrow windows even within her high-earning career, but the blanket "convert now" approach at 35% doesn't pencil.

Step-by-step: how to execute

1. Roll your 401(k) to a traditional IRA. Use a direct rollover to avoid mandatory 20% withholding. See Direct vs. Indirect Rollover. Funds typically settle in 3–7 business days.
2. Open a Roth IRA at the same custodian if you don't already have one. Fidelity, Vanguard, and Schwab all support this process online.
3. Initiate the Roth conversion. Log in or call your custodian. Specify the dollar amount to convert. You can convert all of it or a partial amount — you control the size.
4. Decline withholding if you can pay from other funds. The custodian will offer to withhold federal (and sometimes state) tax from the conversion. If you have after-tax savings to cover the tax bill, decline withholding so the full converted amount lands in the Roth IRA.
5. Set aside cash for the tax bill. If you declined withholding, you'll owe taxes when you file. If the converted amount is large, consider making estimated tax payments (Form 1040-ES) to avoid underpayment penalties.
6. Report on Form 8606. Roth conversions are reported on IRS Form 8606. Your custodian will issue Form 1099-R; the conversion amount appears as a distribution from the traditional IRA and as a qualified rollover contribution to the Roth IRA.

Frequently asked questions

Can I convert directly from a 401(k) to a Roth IRA without going through a traditional IRA?

Yes, if your plan allows it. Under IRC § 408A(e), a qualified rollover contribution directly from a 401(k) to a Roth IRA is permitted. The tax result is the same: the converted amount is includible in gross income in the year of the rollover. Many plans now support this; check your plan's Summary Plan Description or call the plan administrator. The two-step route through a traditional IRA is a reliable fallback if your plan doesn't.

Is there a limit on how much I can convert?

No dollar limit. You can convert your entire balance in one year — limited only by your willingness to pay the resulting tax. Most people convert strategically: just enough to fill a target tax bracket without crossing into the next one. The calculator above helps find that breakeven dollar amount for your situation.

Does a Roth conversion count against the annual Roth IRA contribution limit?

No. Roth conversions are not "contributions" under the IRS contribution limits. In 2026, the Roth IRA contribution limit is $7,500 per person ($8,500 if age 50 or older). A conversion is entirely separate — it doesn't count against that limit, and you can make a direct contribution and a conversion in the same year (if your income permits the direct contribution).

What if I have after-tax (non-deductible) contributions in my traditional IRA?

Non-deductible contributions tracked on Form 8606 are not taxed again when converted — you've already paid tax on them. The pro-rata rule applies: when converting, you must include a proportional mix of pre-tax and after-tax dollars from all your traditional IRAs combined. You can't pick and choose which dollars to convert. See Backdoor Roth and the Pro-Rata Trap for the full mechanics of this rule.

Does a Roth conversion affect Social Security taxation?

Yes. Up to 85% of Social Security benefits become taxable when your "combined income" (AGI + nontaxable interest + 50% of Social Security) exceeds $34,000 for single filers or $44,000 for married filers. A large Roth conversion pushes up AGI, which can trigger or increase Social Security taxation in that year. This is one more reason to model conversions carefully once Social Security benefits have started — and another argument for converting before Social Security starts, during the zero-Social-Security window described above.

What's the difference between this and a Roth 401(k) rollover?

A Roth 401(k) rollover moves after-tax designated Roth funds to a Roth IRA — no tax event, because those contributions were already made with post-tax dollars. This guide covers converting traditional (pre-tax) 401(k) money to a Roth IRA, which is fully taxable. They are fundamentally different transactions with different tax treatment.