Should you convert your traditional IRA to a Roth IRA? A key factor in this decision is taxes. If you expect to be in a higher tax bracket during retirement than you are now, a conversion may make perfect sense. But if you anticipate being in a lower tax bracket then, you could decide to sit tight.

With a traditional IRA, contributions may be wholly or partially deductible, but distributions generally are taxed at ordinary income rates. You never can deduct Roth contributions, but payouts from a Roth after five years are tax-free if you've reached age 59½ by then. The trick is to figure out whether the promise of future tax-free distributions is worth the current tax price on a conversion. The amount you convert will be treated as a distribution and taxed at your rate for ordinary income.

As you weigh your options, don't overlook the favorable tax rates for joint filers. For instance, a taxable income of $200,000 puts you in the 33% bracket as a single filer, but if you're married, that same income level puts you in only the 28% bracket as a joint filer. Remember, though, that if one spouse is significantly older than the other or in ill health, a surviving spouse may end up paying higher tax in retirement as a single filer. Similarly, an inheritance could push you into a higher bracket at that point.

Consider the tax variables carefully. They could create an incentive to convert to a Roth before your golden years.