Originally Posted by pb4uski
I'm not sure if it makes much of a difference.
Let's say I have $25 in taxable and $100 in tax deferred and my current and later tax rates are 25%.
If decide not to convert at a 7% annual return, the $100 will grow to be $197 in 10 years and the $25 will grow to be $49 in 10 years. If I then withdraw that $197 and pay the 25% tax of $49, I have $197 left to spend.
Alternatively, if I convert the $100 and pay $25 in tax so the taxable account is gone and I have $100 in the tax-free Roth and the roth grows at 7% for 10 years I have $197 to spend.
you are correct. the flaw in most calculations is folks use outside money to pay the taxes on the roth up front but then want to figure paying the taxes on the traditional not from outside money like the roth but pulling it from within the traditional balance .
the advantage of the roth is in other areas.
mostly the fact that our final years income is not what counts when comparing tax rates to retirement. for most of us 40 years of rampping up will have our long term tax bracket average inflation adjusted at a much lower rate than our retirement one which is usually based within spitting distance of our final earning years.
unless you had a career that started you off in the higher tax rates or had a dead end job odds are a roth will leave you with more spending dollars since odds are you retirement tax braccket will typically be higher than your career one.
he other is the fact you will be taxed on any rmd money reinvested forever. the roth stays untaxed.
whether or not you get a medical subsidy or your ss taxed are two other concerns.
all of the above have little to do with whether taxes go up or not.