I've long believed that taxes are going to be higher when I retire than they are today. As the deficit balloons, I'm finding a lot of people are beginning to agree with me.

Because I'd rather pay low taxes today than high taxes down the road (who's with me?), I've been focusing my retirement savings on fully funding a Roth IRA each year. A Roth is a retirement account funded with after-tax dollars. The current maximum contribution is $5,000, plus $1,000 catch-up contribution for folks 50 and older. I put what I can in a 401(k) after making my Roth contribution.

If I could convert my old 403(b) money into a Roth today, I would. But currently if your household income is above $100,000, you can't.

But that's set to change come 2010, when everyone will be allowed to convert money from pre-tax IRAs and 401(k)s to Roths.

Why not convert? Converting means paying tax on your pre-tax dollars. And experts say that you should try not to whittle down your retirement savings by paying taxes out of that pot.

That's a big challenge. Finding several thousand dollars lying around to pay taxes in the midst of a big ol' recession won't be easy. At least the new rule allows splitting the tax bill in 2010 and 2011.

I wanted to check and see how big a pot of tax cash I'd need to convert. So I consulted Fidelity's new Roth Conversion Evaluator. They are one of many financial institutions out with tools to help you decide whether to convert your IRA.

I plugged in my income, my account balance, my asset mix (aggressive, moderate, etc.) and when I planned to withdraw the money. The tool estimated my state and federal tax brackets, but you accountants out there can adjust Fidelity's estimate if your estimate differs.

What I learned:

  • After plugging in my income, the calculator estimated my family tax bracket and determined My $36,000 403(b) would require a roughly $11,000 tax payment. But I can pay those taxes over two years.
  • My tax bracket today is 32 percent; in retirement, my tax rate is figured to be 35.85 percent. That higher amount doesn't even take into account different tax law changes that could come down the road.
  • The calculator figures that if I earn 6 percent before tax but after inflation, I will end up with $54,124 more to spend than if I didn't convert my account balance.

Not too shabby. I wish the calculator also estimated whether you'd come out ahead if you paid taxes out of your account balance.

For this working mom, converting my pre-tax retirement account to a Roth will depend on whether I can find enough crumbled dollar bills in Mr. Kablog's pockets on laundry day.