Roth conversions
The hidden cost most Roth conversion calculators skip.
A Roth conversion usually gets framed as a tax-rate question: pay tax now, avoid tax later. That is useful, but incomplete.
The tax bill is not the whole cost
If you convert traditional IRA dollars to Roth, the taxable portion is added to income for the year. That creates a tax bill. But the dollars used to pay that bill could have remained invested somewhere else.
That lost growth is the opportunity cost. It does not disappear just because the tax was paid from a bank account instead of withheld from the conversion.
Why BucketSavers shows it
The Roth conversion planner does not treat the tax payment as a footnote. It runs your whole household year by year with and without your conversion plan, and when you pay the tax from outside funds, that money leaves your taxable savings in the year you convert and stops growing there. Whatever those dollars would have earned over the rest of the plan is simply missing from the no-longer-there balance, so the lost growth is counted for real rather than estimated with a formula.
Run the same plan both ways. Paying from the conversion keeps your taxable savings intact but sends less to Roth, and before age 59½ the withheld amount carries a 10% penalty on top. Paying from outside funds sends the full amount to Roth at the cost of the growth those tax dollars would have had. The planner shows the ending after-tax wealth for each, so the comparison includes every dollar, not just the ones that changed accounts.
What the simulation leaves out
The taxable account in the simulation is taxed on the gains it realizes when money is drawn from it, using the cost basis you enter, but not on the dividends and interest it throws off each year. Money that really stayed invested in a taxable account would have paid some tax along the way, so the lost growth on the tax payment is, if anything, slightly overstated. That nudges the comparison against converting, by an amount that depends on how that account is invested; a plan that comes out close either way deserves a second look.
The simple takeaway
A Roth conversion can still be a good move. But the analysis should compare all dollars after tax, including the dollars used to pay the conversion tax.