Analyze whether a Roth conversion makes sense â with two distinct objectives: reducing your own future RMDs, or reducing the tax burden on a child heir under SECURE 2.0's 10-year forced distribution rule. Pair either scenario with a charitable offset strategy to see how a DAF contribution or QCD changes the breakeven analysis.
âšī¸RMD Reduction Mode: The breakeven analysis compares paying tax now at your current rate versus paying at your own projected future rate on forced distributions starting at age 73. The question is whether your retirement marginal rate will exceed your conversion rate â and by enough to justify the upfront cost.
Conversion Parameters
IRA Segmentation
Conversion only makes sense for the portion going to heirs. The charity-destined share should stay in the traditional IRA â charities pay no income tax and receive full value.
Total IRA Balance
$
Portion Intended for Charity0%
$
Heir share: $1,000,000Charity share: $500,000
Only the heir share ($1,000,000) should be considered for conversion. The charity share stays in the traditional IRA â it will pass tax-free to your institution at death.
Conversion Amount
$
Other AGI (non-conversion income)SS, dividends, pension
$
Owner's Current Age
Current Federal Marginal Rate
State Income Tax Rate
%
Expected Annual Return
%
Pay conversion tax from outside assets?
Optimal approach: paying tax from outside assets means the full converted amount enters the Roth and compounds tax-free immediately.
Owner's Future Distribution Rate
Projected Retirement Tax Ratecombined fed + state
%
This should reflect the blended rate you expect when RMDs stack on top of Social Security (85% taxable), investment income, and any pension. For large IRA balances, this often runs 30â38% even for owners who feel "middle income" in retirement.
Time Horizonyears until distribution
yrs
Heir's Distribution Profile (SECURE 2.0)
Under SECURE 2.0, most non-spouse heirs must fully distribute the inherited IRA within 10 years. This compresses distributions into their peak earning years. Model the heir's situation below.
Heir's Current Age
Heir's Current Annual Incomeearned + investment
$
Heir's State Tax Rate
%
Estimating heir's blended rate on inherited distributions...
Time Horizonowner's life expectancy + heir midpoint
yrs
How to set this: estimate owner's remaining years (e.g. 65 â ~20 yrs) plus the midpoint of the heir's 10-year distribution window (~5 yrs). A 62-year-old owner might use 23â27 years. The longer horizon dramatically amplifies the Roth's compounding advantage.
Charitable Offset Strategy
Giving Mechanism
Charitable Gift Amount (FMV)max deductible: 30% AGI
$
Cost Basis of Donated Securities
$
LTCG Rate (including NIIT if applicable)
Donating appreciated securities creates a dual tax benefit: an income deduction against the conversion income, plus permanent LTCG avoidance on the embedded gain. Unrealized gain: $60,000.
A QCD reduces AGI directly â more powerful than a DAF deduction for IRMAA thresholds, Social Security inclusion, and other AGI-sensitive phase-outs. Max: $108,000/year. Requires age 70ÂŊ+.
â QCD requires age 70ÂŊ or older. Adjust age or select a different mechanism.
Bunching multiple years of giving into a DAF in the conversion year captures the deduction at the highest marginal rate of that year. Consider appreciated securities if available â they add LTCG avoidance on top of the income deduction.
Quick Summary
Standard Tax Cost
â
at â effective rate
Net Tax After Offset
â
â
Tax Savings from Gift
â
â
Rate Reduction
â
drop in effective rate
Rate Differential: Owner converts at â effective rate vs. heir's estimated â on forced distributions â a spread of â.
IRA Segmentation Strategy: Total IRA of â split into â (heir-destined, candidate for conversion) and â (charity-destined, should remain traditional IRA). The analysis below applies only to the heir-destined portion. The charity share will pass to your institution with full pre-tax value intact â no income tax to anyone.
Scenario A â No Charitable Offset
Tax Cost
â
Effective Rate
â
Breakeven Future Rate
â
must exceed to justify conversion
Decision Signal
â
vs. projected future rate
Scenario B â With Charitable Offset
Net Tax Cost
â
Effective Rate
â
Breakeven Future Rate
â
lowered threshold
Decision Signal
â
vs. projected future rate
Heir Rate Comparison
Owner Converts At
â
with charitable offset
Heir's Estimated Rate
â
on forced 10-yr distributions
Rate Differential
â
owner pays this much less per dollar
Tax Transferred to Owner
â
heir's tax burden eliminated
Tax Component Breakdown
Component
No Offset (A)
With Charitable (B)
Î Savings
Conversion amount
â
â
â
Gross tax on conversion (fed + state)
â
â
â
Income tax deduction from gift
â
â
â
LTCG tax avoided on donated securities
â
â
â
Net effective tax cost
â
â
â
Effective rate on conversion
â
â
â
Breakeven future rate
â
â
â
Estate & Beneficiary Note: If any portion of this IRA is intended for charitable bequests, converting that share is suboptimal â charities pay no income tax on traditional IRA distributions. The highest-efficiency structure is: leave the traditional IRA to charity â leave Roth and non-IRA assets to heirs.
Charitable Efficiency Reminder: The charity-destined share (â) should not be converted. It passes to your institution at full pre-tax value, generating a charitable deduction for the estate and no income tax for anyone. Only the heir share benefits from conversion. This segmentation is the foundation of an optimized estate plan for donors with both family and philanthropic beneficiaries.
This calculator is for illustrative purposes only and does not constitute tax or legal advice. IRMAA Medicare surcharges, the OBBBA 0.5% AGI floor and 2/37 limitation at the top bracket, Social Security inclusion thresholds, state-specific rules, and estate tax implications are not fully modeled. Heir rate estimates are approximations based on marginal bracket stacking and do not account for heir income growth, filing status changes, or itemized deductions. Consult a qualified tax advisor. Charitable gifts to a DAF are irrevocable.
After-Tax Value Over Time
Comparing three paths over the selected time horizon
Both Roth lines reflect tax-free growth from conversion. "Roth (with charitable)" starts from a lower effective tax cost.