Left in the plan (or transferred to a Traditional IRA): =FV(6%,10,0,-10000)*0.72 = $12,894.10 Converted to a Roth IRA = =FV(6%,10,0,-7200) = $12,894.10

With or without the Roth conversion, $12,894.10 will be available after-tax in 10 years.

The formula helps to demonstrate to retired clients that the Roth conversion decision often comes down to an arbitrage of income tax rates.

Will the tax rate now on the converted amount be lower than the rate that applies when money is eventually distributed? If so, the Roth conversion can make sense.

One factor in answering this question often is the tax on Social Security benefits.

For middle-income retired people, taxable distributions from qualified plans or Traditional IRAs can cause up to 85% of retired benefits to be included in taxable income and also push the taxpayer's marginal tax rate from 25% to as high as 46.25%. You can learn how, from Michael Kitces.

Since qualified (non-taxable) Roth distributions aren't included in the formula for calculating the taxable portion of Social Security, they can generate retirement income without increasing a retired taxpayer's tax payments or marginal tax rate. 

However, the Social Security system is in bad financial shape and must be fixed – and perhaps clients should consider how. Although qualified Roth distributions aren't taxable, they are reportable on both Form 1099-R (Box 1) and Form 1040 (line 15a).

This would makes it easy for Congress to change the law, so that amounts reported on Line 15a are included in the formula for determining the taxable portion of Social Security benefits.

In that case, Roth conversions would lose some of their tax arbitrage advantage for retired people.

Taxing more Social Security benefits is a viable "fix" because: 1) the tax collected on the taxable portion of benefits goes into the Social Security trust fund, and 2) there is precedent. In both 1983 and 1993, Congress shored up Social Security funding by increasing the taxable portion of benefits.