Table 5. Keeping Assets in a Deductible IRA vs. Converting: Current Retirees (A 65-Year-Old Investor Converting $100,000)
Marginal Tax Rate in Retirement
(%)
Total Aftertax Withdrawals in Retirement Conversion Advantage (Disadvantage) When Converting is Worthwhile
Roth IRA
($)
Deductible IRA
($)
Taxable Side Acct
($)
Total Value of Deductible IRA Plus Taxable Side Account
($)
($) (%)
19.75% $205,610 $166,030 $53,653 $219,683 ($14,073) -6.4% Never
28.75 205,610 146,497 53,323 199,820 5,790 2.9 Always
31.60 205,610 140,637 53,224 193,861 11,749 6.1 Always
38.25 205,610 126,964 52,994 179,958 25,652 14.3 Always
The assumptions for this table are the same as for Table 1, except that during accumulation the investor is at the bottom of the 25% federal tax bracket and the $100,000 conversion amount pushes the investor into the 31.6% tax bracket. The total tax due on the converted amount is $29,822, which is the amount that would be invested in the tax savings account if the conversion is not done.

Source: T. Rowe Price Associates, Inc.