SecondCor521
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
It depends on why you are paying more in taxes later. If it's because tax rates have increased, there's no correlation with being more wealthy. You may in fact be in that "much worse" situation because you are paying higher taxes when you'd have been better off paying taxes at a lower rate earlier.
I think you probably based the above paragraph on returns in your tIRA. If you have good returns you may pay more in taxes but it's fine because you have more money. I don't disagree, but I only keep fixed income investments in my tIRA, so I expect my results to be unspectacular and fairly stable, depending on interest rates.
My point is that future returns aren't the only factor in how much you pay in taxes in the future. Maybe I misunderstood your point.
You're correct that future returns aren't the only factor. I think the asymmetric risk argument still applies even if tax rates change (as they are set to do in a few years as we both know).
I probably didn't articulate the idea very well. Let me try again with hopefully better clarity on my part:
An investor is looking at Roth conversions now and believes in the rate arbitrage idea behind them (better to pay taxes at a lower rate now rather than a higher rate later). To execute on that strategy, they have to figure out that "higher rate" later. To do that, they basically need to predict their tax situation later, which is *mostly* but not entirely a function of the tax brackets then and their investment returns between now and then. (*)
Time passes and it's now "later". The investor's assumptions about returns and tax rates (and the other stuff (*)) turn out to have been, in aggregate, either too optimistic or too pessimistic.
If the assumptions were too optimistic - "I'll pay taxes at 20% now to avoid 32% later because my investments will grow and tax rates will be higher", then they paid too much in taxes earlier, and those tax dollars are dollars they probably wished they now had because their investments did not return as much as they thought so they have less money, AND the arbitrage didn't work out as well as they hoped because tax rates "later" weren't as bad as predicted.
If the assumptions were too pessimistic - "I won't do Roth conversions at all because my investments won't grow and tax rates will be the same or lower", then their investments grew and tax rates were higher, and they missed an opportunity, but at least their growing investments are there to pay the higher taxes at higher rates.
That's the idea as I've understood it. I'm not saying the outcomes are always that starkly different or clear. I'm just saying that is why, if my age 80 marginal rate is 25% or whatever, I don't convert now up to 24%; I'll stop a few percentage points below. I'm still doing conversions and still making progress but I personally err on the lower side because of the above idea.
HTH.
(*) It also needs to take into account the rest of their financial picture, such as SS, pensions, inherited IRAs, etc. of course.