I understood the benefit of the 401K to be that you saved the money now while in a relatively high tax bracket, intending to take it out after retirement when your income is low, thus reducing the tax bite. I never really understood the Roth. Dave Ramsey likes it, I guess because once you pay the vig, the money is all yours. I’d say for certain types of ‘found’ money it could be good but it wouldn’t make sense for me to transfer from 401K to Roth while I’m working.
Now, if you’re not working, might be a perfect time.
I agree - a financial advisor (who I didn't end up using) recommended converting to a Roth. Their spiel always is that you know your tax rate now, but you don't know what it will be when you retire.
Sure, that's true, but I'm pretty sure I'm paying a higher rate now than when I will when I retire in 2036+. No, I don't know for sure, but if I'm paying a higher rate when living off retirement funds with a smaller house and no kids, then there's a lot more wrong going on...
So why would I pay that out now, while trying to raise 4 kids and save for college - doesn't make sense.
I also don't trust that Roth's will remain tax free by the time I would withdrawal - it's just too tempting of a pot of money for the government.
IMHO, the Roth IRA was a bit of budget trickery that contributed to the few year(s) where we had a budget surplus. The govenment got a lot of extra tax revenue from people converting to Roth's during that time window - it was a back door way for them to tap into retirement money and appear to balance the budget without any spending cuts. But it was practically a one-shot deal.
They need more money now and have opened up a window again for doing IRA/401K conversions, so they can tap some more IRA/401K money now rather than wait for it later.
Just another example of borrowing from future generations...