retiredjg wrote:1) Paying 25% now vs paying 25% later is a wash. It will result in the same amount of money for you to spend. There is no magical compounding going on in a Roth account. This means you have nothing to lose by waiting if you feel you will be in the 25% bracket later. But it could also mean if you expect taxes to go up between now and then, getting in at 25% now could be attractive.
2) If you drop into the 15% bracket when fully retired, paying 15% later is better than paying 25% now. If your pension is small, you might drop into the 15% bracket. If your pension is large, you may not drop into the 15% bracket. If your wife ends up with a pension too, it is less likely you will drop into the 15% bracket.
#1 is incorrect if you have other money with which to pay the tax on the conversion. For example, assuming a constant 25% tax rate, if you have, say, $40,000 in your traditional IRA and your taxable account, and you convert, you have a $40,000 Roth IRA. Over some period of time, it will grow to $80,000. If you didn't convert, your $40,000 traditional IRA would grow to $80,000, or $60,000 after taxes. You would still have your $10,000 taxable account, but it will grow to something less than $20,000 since the income and gains will be taxable each year.
There are other advantages to the Roth conversion, including no required distributions at 70 1/2.
So if you expect that you and your beneficiaries will always be in a 25% bracket, the Roth conversion would make sense (to the extent you can convert without going much higher than 25%), assuming you have other money with which to pay the tax on the conversion.
However, if you expect to be in the 15% bracket in retirement, you might wait until then to convert, or to begin to convert. Often there's a window between retirement and age 70 1/2 where people can convert in a relatively low tax bracket.
I suggest creating a spreadsheet to compare the choices, making some reasonable assumption as to investment returns in the IRA, after-tax in the taxable account, and how long everyone will live, and running it through the point when the beneficiaries will take their last required distribution.