Davidson Securities
Jon Davidson
4721 Ridge Road
Cazenovia, NY 13035

Advanced Roth IRA 2010 Conversion Calculator
Advanced Roth IRA 2010 Conversion Calculator

Beginning in 2010, you can convert a traditional IRA to a Roth IRA regardless of income level or filing status. With a Roth conversion, the taxable portion of your traditional IRA (deductible contributions and earnings) is normally subject to tax in the year of conversion. However, a special rule applies to Roth conversions in 2010: half of the resulting taxable income is reported on your 2011 federal income tax return, and the other half on your 2012 federal income tax return, unless you elect otherwise.

This calculator compares two scenarios: (1) The full or partial conversion of a traditional IRA to a Roth IRA in 2010, and (2) No traditional-to-Roth conversion in 2010, The calculator assumes that you'll pay the conversion taxes from other assets, and determines (for scenario 2) the amount you could have earned on that "side fund" had you not converted. For both scenarios, all required minimum distributions (RMDs) are also invested in the side fund. The calculator estimates the IRA accumulation and RMD distributions for the IRA owner and up to three beneficiaries (you can specify one spouse beneficiary and up to two non-spouse beneficiaries). Total after-tax dollars are compared.

A quick video tutorial of this calculator is available (Apple’s QuickTime Player required to view). View tutorial (high bandwidth option). View tutorial (low bandwidth option).
Part One: General Information
Age in 2010
End projection for IRA owner at age
Current traditional IRA balance $
Nontaxable amount allocated to IRA* $
Percent of IRA to be converted %

You can elect to forego the special tax treatment for 2010 Roth conversions. Select "Yes" if you wish to recognize the resulting conversion tax on your 2010 federal income tax return.

Part Two (Optional): Show distributions to beneficiaries?

Select "Yes" if you want to project amounts for beneficiaries

Spouse beneficiary -- % of IRA proceeds at death** % Age in 2010
Nonspouse beneficiary(ies)
Beneficiary 1-- % of IRA proceeds at death % Age in 2010
Beneficiary 2-- % of IRA proceeds at death % Age in 2010

* If you have multiple traditional IRAs, you must pro-rate your nontaxable balance among them. The IRS provides a worksheet in Publication 590.

** Assumes rollover to own IRA.

Conversion Taxes are paid from other assets.

IRA owner turns 70½ in the same year he or she reaches age 70.

First lifetime RMD paid in the year IRA owner reaches age 70½; lifetime RMD calculation does not account for special rules that apply when spouse is more than 10 years younger than IRA owner.

Death occurs on last day of the year; Conversion occurs at beginning of year; All taxes are paid at end of year incurred.

Federal estate tax and possible credit for estate taxes paid are not accounted for; state income and death taxes and credits are also not taken into account.

RMDs are deposited into a side fund and grow at the specified annual rate of return. Amount(s) equivalent to any conversion tax that would be owed as a result of the Roth conversion are also deposited into the side fund and grow at the specified annual rate of return.

Assumes spouse beneficiary rolls over inherited IRA to own IRA, and RMDs start when spouse reaches age 70½.

Does not take into account special rule that says RMDs can be taken over owner's remaining life expectancy if longer then the beneficiary's. Assumes separate accounts established for beneficiaries - beneficiaries own life expectancy is used for RMDs.

This is a hypothetical example intended for illustration purposes only, and does not represent the performance of any specific investment or portfolio, nor is it an estimate or guarantee of future value. The calculations above assume that earnings are compounded annually, and that distributions from the Roth IRA will be tax free. Investment fees and expenses have not been deducted. If they had been, the results would have been lower. When making an investment decision, investors should consider their personal investment horizons and income tax brackets, both current and anticipated, as these may further impact the results of this comparison.

Jon Davidson is a  Registered Representative offering securities through Cadaret, Grant & Co Inc., member FINRA/SIPC. Davidson Securities and Cadaret Grant are separate entities.

Prepared by Broadridge Investor Communication Solutions, Inc. Copyright 2019.