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Author: TMFPMarti Big funky green star, 20000 posts Home Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 120809  
Subject: Re: Should I Convert? Date: 6/19/2011 12:26 PM
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Missing from your narrative was your marginal tax rate, i.e., the rate at which your last dollar of taxable income is taxed. That lets you know what the conversion will cost you.

The question then becomes, what will you do with that money if you don't convert? If you invest it rather than blowing it on Twinkies (I mention no names and make no charges) and your marginal tax rate in retirement is the same as today it doesn't matter. The outcomes are mathematically equal. A lower rate in retirement argues against conversion, a higher rate in retirement favors conversion.

It really all comes down to what you think your rate will be in retirement, and your youth works against you there. (BTW, this same analysis applies to your decision between a deductible traditional IRA contribution and a Roth contribution.)

If you're currently in or below the 15% marginal bracket I'd say convert. Above that, I'd probably leave it alone.

Phil
Rule Your Retirement Home Fool
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