Your point is well taken and well illustrated.When converting part of my IRA to a Roth I made sure that I had sufficient assets remaining to take early and comfortable retirement and initiate SEPPs out of the traditional IRA calculating a potential return considerably below what it has returned in the last few years. The funds in the Roth are in rather aggressive mutualfunds (Janus) which if they returned only historical stock market returns of about 12 percent (adjust that upwards when considering ANY tax bracket), would return far more over the course of my life and my children's lives then the taxes paid would have returned had the money used for the taxes been invested and taxed. Part of my reason for converting included my children's option as my beneficiaries, to withdraw the assetsat a rate using their life expectancy over the course of their lives. Their 14 and 15 years old.I do have a modest income outside of SEPP and expect to remain in a higher tax bracket for some time. In the short time I have had the Roth, it has returnedSIGNIFICANTLY more then the taxes that will be paid on it over four years with no tax liability on the gain. Allowing for a downturn I believe the long term prospects for the US and global economywill return at least the historical stock market average of about 12 percent, if not the spectacular returns of the last few years. Combine the 12% with tax savings at even the lowest bracket for a very respectable tax free return for the ROTH. In short I have a "Fools" faith in the long term viability of the US/global economy which I couple with a buy and hold approach for about 85% of my portfolio. My ultimate goal for my traditional IRA is to convert additional amounts over the years to the Roth for my children's benefit while still maintaining enough to insure a comfortable life for me. Of course market conditions will ultimately influence just how much of this goal I accomplish. And thanks to this board I learned that I cannot convert while making SEPP withdrawls without incurring the 10% penalty! So I wait untill I have completed those. That's my daydream for my Roth.
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