what if the rates increase to 43% in 2010 and Smith decided to wait to convert?
This is Example 3, and the increased tax burden upon conversion reduces the overall value of the Roth IRA to $4,352,696. While that’s still better than not converting at all, failing to take advantage of the opportunity to convert in 2008 would have cost the Smith family $780,946 when compared to Example 1. That is, by waiting to convert and converting at a time that income tax rates were higher, there is a reduction of $780,946 in after-tax value. Clearly, there may be situations where it would make sense to convert today based on increasing income tax rates. And in a time of growing revenue needs for entitlement spending, such as Social Security and Medicare, the risk of increasing income tax rates may well be a real concern for many individuals. Another reason to consider converting now and not waiting for 2010 would be a change in law eliminating the repeal of the conversion income limits. The modeling here assumes Smith is eligible to convert in all years, but there is no guarante
