This was the year long debate in our household. In 2010, the federal government dropped the income limit for moving savings from a traditional to a Roth IRA. Additionally, you had a one-time option to pay taxes on the current value of the converted funds over a two-year period. The converted asset then grows tax-free.
To get this tax break off any future earnings of the converted funds, you have to pay income tax on the value of the funds moved.
From Kelly Greene's Wall Street Journal article on 9.30.2011, "The federal government allows the tax-law equivalent of a do-over, says Maria Bruno, an investment analyst at fund giant Vanguard Group, whose customers converted more than 230,000 traditional IRAs to Roths last year, and which has processed 3,900 do-overs this year, as of Monday."
We are one of the 3,900 who converted back. This was a highly contested move in our household. Bob is sure with the current level of the national debt, that by the time we withdraw the retirement savings, we will be under the burden of a significantly higher tax rate. Kristy is pretty convinced we most likely will never retire so it will be a tax that our kids can cover when inheriting the asset. In the final hours.... Kristy won.