What is the break even point for a Roth conversion?

The break-even point for a Roth conversion is the future tax rate (or the number of years) at which the after-tax value of your converted Roth account equals what you would have had by leaving the money in a traditional IRA.

There are two ways to think about this, and they answer slightly different questions:

Break-even tax rate

The most rigorous framing asks: at what future marginal tax rate would converting be neither better nor worse than staying traditional? In the simplest case, where you pay conversion taxes from outside funds and all other variables are equal, this break-even rate is roughly equal to your current marginal tax rate. If your future rate will be higher than today's, conversion tends to add value. If your future rate will be lower, it generally does not. Because real-world factors like required minimum distributions, Social Security taxation, and state taxes complicate the picture, a qualified tax advisor should model your specific projected tax schedule before you commit.

Break-even time horizon

Many investors instead ask how long they must hold the Roth before it catches up to what the traditional IRA would have been worth after taxes. Common estimates from financial planners place this range at roughly 7 to 15 or more years, depending on your current versus future tax rates, investment growth rate, and whether you pay conversion taxes from cash held outside the IRA. Paying the tax bill from outside funds shortens the break-even period considerably; using IRA funds to cover the tax drags it out.

You can run the numbers for your own situation with the IRA Conversion Tax Calculator, or explore more planning context in our Roth IRA conversion guides.