2010 Roth Conversion

[Maus]

Is anyone considering a large conversion of funds currently held in a traditional IRA to a Roth before 2010 ends?
I am seriously considering quitting the job I loathe, directing my 401(k) into a traditional IRA and then converting about half that into a Roth. By splitting the tax burden out to 2011 and 2012, when I'll be unemployed, I can keep the taxes to the 15% federal marginal rate. I am researching now whether I can then pull my after-tax conversion amount out without penalty, just as you can pull the annual $5K contribution but not what it has earned.
I've also learned that I can use withdrawals from the remaining traditinal IRA balance to pay for my medical insurance premium without penalty. So I can get 18 months of COBRA, then switch to California's new Pre-existing Condition Insurance Exchange after a six-month lapse.
Edit: clicked to fast and this got addes to Admin Stuff. @Jacob -- can you fix that?

[Robert Muir]

Excellent idea Maus! I did convert my traditional IRAs to Roth, but I'm paying the tax this year because my income will not be much lower in 2011/2012 and taxes may be higher then.
I'm keeping my Simple and my wife's SARSEP in tax deferred accounts to add flexibility later. I love that once the money is in the Roth, future earnings are tax free. Of course, with my luck, they'll enact a VAT or federal sales tax.

[Mo]

Maus the conversion sounds like a good idea-- if you can get to your earnings with a tax rate under 15%, I think you're doing pretty well.
I'm sure you've already run the numbers regarding the cost of your insurance and the tax savings. My insanity would also lead me to calculate things like the reduced nest egg by retiring 2 years earlier, and the reduced SS benefit, but there is also a value to 2 years of ERE.

[George the original one]

Maus, none of us need to confirm for you that you're on target there.
I just feel sorry for all the people who are falling for the conversion thinking that their tax rates in retirement will be higher than they are now, as if their retirement income really will be in the same tax bracket. It may be true for the really high earners, but not most people.

[Robert Muir]

Don't forget those with pensions George.

[Kevin M]

This isn't a primary source, but I believe you can now directly convert from 401(k) to Roth IRA and avoid the usual withholding (if done trustee to trustee which is always best anyway). I also believe you'd be taxed 10% on the Roth distribution if taken out before the 5 year waiting period.
http://www.investopedia.com/articles/re ... k-roth.asp
Also found it on irs.gov - (Pub 590)

http://www.irs.gov/publications/p590/ch ... 1000230961