12.28.2006

To convert or not to convert?

For the last several years I've considered rolling my traditional IRA into a Roth IRA, but laziness, indifference, and an abundance of more important things to do than spending time calculating the tax implications of such a move always pushed this activity to the bottom of my list.

This year I have no excuse. And if I did, Jonathan at MyMoneyBlog has again reminded me.

With consideration to the other excuses, time is the main thing that has kept me from acting. It's a pretty cumbersome task to manually calculate whether this is a smart move given the multitude of variables. Well, thank God for the Internet! I Googled "to convert to a Roth IRA or not?" and found this terrific calculator.

I will have to pay ordinary federal income tax on the value of the IRA to be converted, but with some pretty conservative estimates (of my future investment return + a wild-ass guess at what my retirement tax rate will be), it clearly makes sense to convert. Tomorrow is the deadline, so I'll be stopping by Scottrade tomorrow.