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Rayvt writes (in part) (emphasis mine):

For converting an regular IRA to a Roth, we have two alternative options:
1) Do it. Pay taxes now. Maybe don't pay taxes later.
2) Don't do it. Don't pay any taxes now. Pay taxes later.

In both cases, you pay taxes once for sure. The equivalent amount of taxes in either case. But in case #1, there is a non-zero chance that you'll *also* pay taxes in the future.


I reply:

The emphasized statement appears wrong. In option 1, you pay taxes now on the current value of your account. In option 2, you pay taxes later on the value of your account as augmented by your investment gains, which will far outstrip (presumably) inflation. Thus, it seems to me that the present value of the taxes you risk paying down the line by not converting substantially exceeds the present value of the taxes you will pay by converting.

One other point should be made. When converting, you do not pay taxes on the amount of your after-tax contributions, because you've already been taxed on that money. Therefore, for those of us who did not have the option of making non-deductible contributions, the choice is between (1) paying taxes now on a few years of gains with the chance of never paying taxes again on that money, and (2) paying taxes later on many years of compounded gains. I haven't run any numbers, but my sense is that conversion is the right move to maximize your expectation value unless you have a very high estimate of the probability that Congress will tax Roth money before you take it out of a Roth account. --Bob
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