In 1997, the Roth IRA was introduced. This new IRA allowed for contributions to be made on an after-tax basis and all gains (or growth) to be distributed completely tax-free. Since then, people with incomes under $100,000 have had the option to convert all or a portion of their existing Traditional IRAs to Roth IRAs. Beginning in 2008, participants with funds in eligible employer sponsored plans could also roll those funds directly over to a Roth IRA in a qualified rollover if their income did not exceed the $100,000 threshold. Starting in 2010, all IRA owners and participants in eligible employer sponsored plans, regardless of income level, are eligible to convert their Traditional IRA and pre-tax funds in an employer-sponsored plan [401(a)/(k), 403(b) and governmental 457(b)] to a Roth IRA. Is this a good option for you? A conversion has both advantages and disadvantages that should be carefully considered before you make a decision. This calculator compares two alternatives with equal out of pocket costs to estimate the change in total net-worth, at retirement, if you convert your Traditional IRA into a Roth IRA.
It is important to remember that these scenarios are hypothetical and that future rates of return can't be predicted with certainty and that investments that pay higher rates of return are generally subject to higher risk and volatility. The actual rate of return on investments can vary widely over time, especially for long-term investments. This includes the potential loss of principal on your investment. It is not possible to invest directly in an index and the compounded rate of return noted above does not reflect sales charges and other fees that funds and/or investment companies may charge.
|Filing Status and Income Tax Rates 2013*|
|Tax Rate||Married Filing Jointly or Qualified Widow(er)||Single||Head of Household||Married Filing Separately|
|10%||$0 - $17,850||$0 - $8,925||$0 - $12,750||$0 - $8,925|
|15%||$17,850 - $72,500||$8,925 - $36,250||$12,750 - $48,600||$8,925 - $36,250|
|25%||$72,500 - $146,400||$36,250 - $87,850||$48,600 - $125,450||$36,250 - $73,200|
|28%||$146,400 - $223,050||$87,850 - $183,250||$125,450 - $203,150||$73,200 - $111,525|
|33%||$223,050 - $398,350||$183,250 - $398,350||$203,150 - $398,350||$111,525 - $199,175|
|35%||$398,350 - $450,000||$398,350 - $400,000||$398,350 - $425,000||$199,175 - $225,000|
|39.6%||over $450,000||over $400,000||over $425,000||over $225,000|
*Caution: Do not use these tax rate schedules to figure 2012 taxes. Use only to figure 2013 estimates. Source: 2013 preliminary tax brackets subject to correction http://www.irs.gov
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