Recently an investment adviser was providing free consultations at my wife's workplace. He advised us to convert some 401K's from previous employers and traditional IRA's to Roth IRA's. He did this based on projections he did that show that with our retirement fund balances and a continuation of contributions at the current rate, we will have enough retirement income that we'll stay in our current tax bracket (25% on the last dollar). Also, our taxable adjusted gross income is well below the top of our current tax bracket, so the conversions would not bump us into a higher bracket if we spaced them out over several years. If we make these conversions at the rate he's advising, we would need to pay the taxes on the converted amount from the 401K principal that is being converted, as we don't have that much money in any other savings.
However, another financial adviser (from our credit union) advised against this, saying it wouldn't be worth the tax hit now and loss of principal. He also pointed out that tax laws could change before we retire. The guy who does our taxes says it's not such an easy thing to decide as the two advisers make it seem.
Our situation: We're in our early 50's and have a child in grade school. Currently my 401K contributions are at the maximum for my age (I'm utilizing the catch-up contribution) - it's a stretch for us financially, but 401K's and Social Security are the only retirement money I expect to have ... and I'm not so sure about SS. My wife has a job that will provide a modest pension and also has 10% going to 401K's. The first adviser is recommending retirement at 62 - that might work for my wife, since she'll have maxed out her pension and has health issues; also she might take on a second career. However, since we'll be paying for college right then, I don't think it's feasible for me (I earn about 60% of our gross income) to retire before 64; more likely, I'd "down shift" to a lower paying job for a few years at that point.
It has occurred to me that we could convert smaller amounts than the first adviser is suggesting. This would be small enough amounts that we could afford to pay the taxes from other monies and keep the entire principal that is being converted.
So, at this point, I'm looking for insight into how to decide if we should do this and how. Are there any calculations I could do that would help with this decision? Is there a movement to change the relevant laws?