Roth Conversion vs Mortgage Payoff Calculator
Should you use spare cash for a Roth conversion or pay down your mortgage? This calculator compares 30-year wealth under both scenarios and gives you a clear, data-backed verdict.
Roth Conversion vs Mortgage Payoff: The Core Trade-Off
Both strategies use the same liquid cash, but they work in opposite directions. Paying off your mortgage provides a guaranteed, risk-free return equal to your mortgage rate — currently around 6.5–7% for many homeowners. A Roth conversion deploys after-tax dollars into a tax-free growth vehicle that, if invested in equities, has historically returned 7–10% annually over 30 years — but with volatility. The decision hinges on three factors: expected return vs mortgage rate spread, current vs future marginal tax rate, and risk tolerance. Last updated: May 2026.
Key Decision Framework
| Scenario | Better Choice | Why |
|---|---|---|
| Mortgage rate > expected return | Pay off mortgage | Guaranteed return beats market |
| Expected return > mortgage rate by 2%+ | Roth conversion | Tax-free compounding wins long-term |
| Tax rate rising in future | Roth conversion | Pay tax at lower rate today |
| Near retirement, risk-averse | Pay off mortgage | Guaranteed cash flow freedom |
The Tax Angle: Why Roth Timing Matters
A Roth conversion triggers ordinary income tax now in exchange for permanent tax-free growth. If you're in a low-income year (early retirement, gap year, business loss year), the conversion tax is cheapest — making it the best window to convert. Compare your current marginal rate versus the rate you expect to pay in retirement. If you expect RMDs to push you into a higher bracket at 73+, converting now at a lower rate creates lasting tax efficiency. The mortgage payoff provides no such tax advantage — mortgage interest deductions benefit only itemizers, and fewer than 10% of filers itemize since the 2018 TCJA standard deduction increase.