Roth IRA Conversion Calculator for Business Sellers

After a business sale, most owners enter the lowest-ordinary-income years of their adult life — the business income is gone, Social Security hasn't started, and RMDs haven't begun. That window is the optimal time to convert pre-tax IRA and 401(k) balances to Roth at today's rates rather than paying higher rates on forced RMDs later. This calculator models your conversion window, annual amounts, and estimated lifetime tax advantage.

How the conversion window works for business sellers

Most business owners structured their companies as S-corps, LLCs, or C-corps and paid themselves W-2 salaries for decades. They could fund a Solo 401(k) up to $24,500 in employee deferrals plus employer contributions up to 25% of W-2 pay (2026), or a SEP-IRA up to $70,000, or a cash balance plan at $150,000–$290,000/year depending on age.¹ By the time of sale, it is common to have accumulated $1M–$3M+ in pre-tax accounts.

After the sale, the business income disappears. If you don't take another high-income job, you may have several years where ordinary income is modest — perhaps just dividend income, some consulting, or investment returns. That creates a window where your marginal federal rate on ordinary income may be 12–24% instead of the 32–37% you paid while the business was running.

The problem: the IRS will not let that pre-tax money sit forever. Required Minimum Distributions (RMDs) begin at age 73 (if born 1951–1959) or age 75 (if born 1960+).² The RMD formula divides your year-end balance by a factor from the Uniform Lifetime Table — which equals roughly 3.8–4.1% of balance in early RMD years. On a $2M IRA at age 73, that forces out roughly $75,000–$80,000 per year — stacked on top of Social Security, portfolio income, and any pensions or consulting fees.

What the calculator models

Each year in the conversion window, the calculator finds how much space remains in your chosen federal bracket after your other ordinary income is counted. It then recommends converting that amount, computes the marginal federal tax on the conversion, and carries forward the remaining pre-tax balance (growing at your assumed return rate).

At the end of the window, it compares the projected first-year RMD with and without conversion, estimates the marginal rate at which RMDs would be taxed, and calculates the net tax savings. The 15-year NPV applies a 5% discount rate to the annual RMD tax savings stream and deducts total conversion taxes paid.

Key strategy decisions the calculator doesn't model

Social Security timing

Converting before Social Security begins is typically more advantageous. Once SS starts, it counts toward the provisional income test that determines how much of your SS benefit is taxable (0–85%). Modeling this interaction precisely requires knowing your SS benefit amount and start date — factors a specialist advisor can incorporate.

IRMAA tier management

Medicare IRMAA surcharges are triggered on MAGI including Roth conversion amounts. The surcharges are "cliff" thresholds — crossing a tier by $1 triggers the full surcharge. A $13,872/year difference between IRMAA tiers makes it worth sizing conversions carefully around the thresholds. The calculator shows conversion amounts that fill your chosen income tax bracket; you should cross-check these against 2026 IRMAA tier thresholds and trim if needed.

QCD alternative for charitable owners

If you are 70½ or older and charitably inclined, Qualified Charitable Distributions (QCDs) of up to $111,000/year (2026) directly from your IRA to charity satisfy RMDs without flowing through your taxable income. A QCD is effectively a tax-free withdrawal. For business sellers with charitable goals, layering QCDs and Roth conversions can reduce lifetime taxes substantially — but the order and sizing require coordination.