I guess it depends on how you look at it. The below assumes that you start with $10,000 in an IRA and $1,200 in a taxable account... your tax rate until RMDs is 12% and after RMDs is 22% and a 7% rate of return.
If you look at the after-tax values then assuming that your tax rate today is lower than your tax rate once RMDs begin then the Roth conversion is beneficial from day 1... the benefits are initially modest (basically avoiding taxes on taxable account earnings).
If you look at nominal values, then with the Roth conversion you are out for the $1,200 taxes paid and then start benefitting once RMDs begin and you avoid paying 22% taxes on RMDs and taxable account earnings.
Since our heirs are currently and will likely be at 12% or higher it is an easy decision for us.
| After-tax values | | | | Nominal values | | |
| No conv after-tax value | Roth conv value | Roth advantage | | No conv | Roth conv value | Roth advantage |
64 | 10,000 | 10,000 | 0 | | 11,200 | 10,000 | -1,200 |
65 | 10,690 | 10,700 | 10 | | 11,974 | 10,700 | -1,274 |
66 | 11,428 | 11,449 | 21 | | 12,801 | 11,449 | -1,352 |
67 | 12,216 | 12,250 | 34 | | 13,686 | 12,250 | -1,436 |
68 | 13,059 | 13,108 | 49 | | 14,632 | 13,108 | -1,524 |
69 | 13,960 | 14,026 | 65 | | 15,644 | 14,026 | -1,618 |
70 | 14,924 | 15,007 | 83 | | 16,725 | 15,007 | -1,718 |
71 | 15,954 | 16,058 | 103 | | 17,881 | 16,058 | -1,824 |
72 | 15,325 | 17,182 | 1,857 | | 18,967 | 17,182 | -1,785 |
73 | 16,361 | 18,385 | 2,024 | | 20,110 | 18,385 | -1,725 |
74 | 17,459 | 19,672 | 2,213 | | 21,313 | 19,672 | -1,641 |
75 | 18,622 | 21,049 | 2,426 | | 22,578 | 21,049 | -1,530 |
76 | 19,855 | 22,522 | 2,667 | | 23,908 | 22,522 | -1,386 |
77 | 21,160 | 24,098 | 2,938 | | 25,306 | 24,098 | -1,207 |
78 | 22,542 | 25,785 | 3,243 | | 26,774 | 25,785 | -988 |
79 | 24,004 | 27,590 | 3,586 | | 28,315 | 27,590 | -724 |
80 | 25,550 | 29,522 | 3,972 | | 29,932 | 29,522 | -410 |
81 | 27,184 | 31,588 | 4,404 | | 31,628 | 31,588 | -40 |
82 | 28,911 | 33,799 | 4,888 | | 33,406 | 33,799 | 393 |
83 | 30,735 | 36,165 | 5,430 | | 35,269 | 36,165 | 896 |
84 | 32,661 | 38,697 | 6,036 | | 37,220 | 38,697 | 1,477 |
85 | 34,693 | 41,406 | 6,713 | | 39,263 | 41,406 | 2,143 |
86 | 36,837 | 44,304 | 7,467 | | 41,402 | 44,304 | 2,902 |
87 | 39,097 | 47,405 | 8,308 | | 43,642 | 47,405 | 3,763 |
88 | 41,480 | 50,724 | 9,244 | | 45,985 | 50,724 | 4,739 |
89 | 43,991 | 54,274 | 10,283 | | 48,436 | 54,274 | 5,839 |
90 | 46,635 | 58,074 | 11,438 | | 51,001 | 58,074 | 7,072 |
91 | 49,420 | 62,139 | 12,719 | | 53,688 | 62,139 | 8,451 |
92 | 52,351 | 66,488 | 14,137 | | 56,499 | 66,488 | 9,989 |
93 | 55,436 | 71,143 | 15,706 | | 59,442 | 71,143 | 11,700 |
94 | 58,682 | 76,123 | 17,441 | | 62,528 | 76,123 | 13,594 |
95 | 62,096 | 81,451 | 19,355 | | 65,764 | 81,451 | 15,687 |
96 | 65,687 | 87,153 | 21,466 | | 69,159 | 87,153 | 17,994 |
97 | 69,463 | 93,253 | 23,791 | | 72,721 | 93,253 | 20,532 |
98 | 73,433 | 99,781 | 26,348 | | 76,461 | 99,781 | 23,320 |
99 | 77,608 | 106,766 | 29,158 | | 80,396 | 106,766 | 26,370 |
100 | 81,998 | 114,239 | 32,242 | | 84,538 | 114,239 | 29,702 |
101 | 86,613 | 122,236 | 35,623 | | 88,901 | 122,236 | 33,335 |
102 | 91,467 | 130,793 | 39,325 | | 93,499 | 130,793 | 37,294 |
103 | 96,572 | 139,948 | 43,376 | | 98,356 | 139,948 | 41,593 |
104 | 101,943 | 149,745 | 47,802 | | 103,487 | 149,745 | 46,258 |
105 | 107,593 | 160,227 | 52,634 | | 107,701 | 160,227 | 52,526 |
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