We believe financial software should be a glass box, not a black box. Our mission at RothConversionTool.com is to provide you with absolute transparency regarding how we calculate your estimated retirement taxes, RMDs, and legacy wealth. Below is the exact step-by-step logic, sequence of operations, and standardized proxy assumptions our progressive tax engine uses to simulate your financial future.
The calculator runs a dynamic yearly loop starting in 2026. It stops running when the primary user (if single) or the last surviving spouse (if joint) reaches their inputted Life Expectancy, capping at a maximum of 100 years of age. Each year (t), the tool establishes three compound multipliers based on your market inputs to ensure money accurately reflects future purchasing power and tax realities:
Our tax engine actively models current United States tax law for the 2026 base year and beyond. Because the One Big Beautiful Bill Act (OBBBA) permanently extended the Tax Cuts and Jobs Act (TCJA), our engine utilizes the permanent 10%, 12%, 22%, 24%, 32%, 35%, and 37% marginal tax brackets.
Furthermore, the tool explicitly accounts for the OBBBA Senior Deduction. Before any conversions take place, the tool calculates your baseline financial footprint. It checks your age, and if you are 65 or older, it automatically applies the temporary $6,000 OBBBA senior deduction (subject to phase-outs) alongside standard age 65+ catch-ups.
A critical flaw in most free online calculators is that they assume a married couple will live and die at the exact same time. Our engine features independent mortality tracking. If you input a Life Expectancy of 85 for Person 1, and 95 for Person 2, the engine will dynamically trigger the Widow's Tax Trap in year 86.
When one spouse passes away, the engine automatically transitions the surviving spouse from "Married Filing Jointly" to "Single" filing status. This instantly cuts their standard deduction in half and drastically shrinks their tax brackets. Simultaneously, the engine executes a Social Security Survivor Step-Up, dropping the lower benefit and allowing the surviving spouse to retain the higher benefit.
Many basic calculators assume a flat maximum of 85% of your Social Security benefits are taxable. This is mathematically imprecise and penalizes users in lower-income years. Instead, our engine calculates the exact taxable portion of your Social Security benefits for every single year of the simulation using the IRS Provisional Income formula.
Provisional Income is calculated as: Your MAGI (excluding Social Security) + 50% of your Total Social Security Benefit.
By recalculating this dynamically, the tool accurately models the "Tax Torpedo" effect, ensuring that your Roth conversions aren't artificially restricted in low-income years.
Having a $0 MAGI does not mean you are living on $0. The tool explicitly models real-world cash flow. If your inputted Living Expenses exceed your income, the tool drains your Outside Cash/Brokerage account.
The tool uses your inputted "Unrealized Gain %" to determine the cost basis of your withdrawals. It applies a flat 15% Long-Term Capital Gains (LTCG) tax strictly to the growth portion of the withdrawal. If your MAGI crosses the fixed, un-indexed Net Investment Income Tax (NIIT) thresholds ($250k Joint / $200k Single), an additional 3.8% tax is applied. Realized capital gains from living expenses are seamlessly added back into your MAGI before Roth conversions are optimized.
If the "Protect ACA Subsidies" feature is enabled, the tool actively checks if anyone in the household is under the age of 65. If true, it establishes a secondary ceiling at 400% of the Federal Poverty Level (using a conservative base proxy of $15,060 for a single individual plus $5,380 per additional member, indexed to inflation). The tool will aggressively restrict the conversion amount to ensure your final MAGI does not cross the 400% FPL cliff.
Medicare Part B/D premium surcharges (IRMAA) are calculated with a strict 2-Year Lookback. The tool checks your simulated MAGI from two years prior. If it exceeded the inflated cliff threshold ($218k Joint / $109k Single base), a penalty proxy is applied ($2,300 Joint / $1,150 Single) directly against your cash flow.
When the loop concludes at life expectancy, the tool calculates the "Final Legacy Wealth" (the After-Tax value passed to heirs). It sums the tax-free Roth and Cash balances directly. However, it assumes a flat 25% inheritance tax cut on any remaining Pre-Tax IRA funds to represent the burden placed on your beneficiaries under the SECURE Act's 10-year depletion rule.