I got off on a wild hair (or is it hare?) and wanted to check my earlier work, so this came at it from a different angle to see if spending Investment shares with a higher cost basis to pay Income Tax on the conversions would offer any advantages.
This set of calculations are based upon an SP of 850, a Rollover value of $150,000 and performing the Rollover IRA conversion to Roth.
This aims to demonstrate how growth in the Roth for 5 years including cost of shares sold to pay the tax compares to doing nothing over the same period.
Rollover IRA = $150,000
Income Tax Due = $ 64,045
Calculations to pay Income Tax from selling shares held in an Investment Account
64045/850SP = ~75 Shares
75 Shares at SP $850 = $63,750 (plus some out of pocket)
Cost Basis on most recent 75 Shares held = $33,732
25% Tax on the Capital Gains = $7504.5
Sell 9 more shares to cover the above (Shares = $7650) + ($830 CapGains Tax) = $8480
Grand Total to pay Income Tax on Roth Conversion = $ 79,735 (63750 + 7505 + 8480)
Gains in either the Roth or Rollover* at 25%/year for 5 years = $457,764
Gains on 84 Investment Account shares at 25%/year for 5 years = $243,332
Rollover* Income Tax cost (based on 2020 Tax Table) over 5 years if not converted? $154,262
The Rollover Gains after Income Tax = $303,502 (457,764 - 154,262)
Add to that the gains 89 Shares make over 5 years @25%/yr (less15% Cap Gains Tax on amount > basis) = $178,160
Total gains after taxes "just letting it ride" = $481,662 (303,502 + 178,160)
Roth Gains less the cost of Shares sold to pay Income Tax on Rollover conversion (including CapGains tax) = $378,029
The Roth still came out in arrears for total gains over such a short period (@25%/year) by a margin of
-$103,633 (457,764 - 303,502)
I really thought that selling shares with a higher cost basis to pay Income Tax might have made a difference, but, TANSTAAFL rules again. (There ain't no such thing as a free lunch)
Coming into the dance late, it is clear how "Just letting it ride" is still the "Winner, winner, chicken dinner!" bet for me by a wide margin.
If any math junkies find errors in the madness above, let me know.
Oh, and I promise not to do this again.