Benefits of a Roth versus a regular after-tax IRA

Someone asked if they should recharacterize an after-tax IRA to a Roth. Basically was it worth the trouble to do so.

Here's two, no make it, three, lines of reasoning on the benefits of recharacterizing, from which you can decide yourself.

1) Tax savings.
Let's figure out how much you'll save on taxes.
1a) Let's assume for simplicity you have 40 years for this money to grow, say you are 30 and won't withdraw this until you're 70.
For a somewhat conservative estimate, assume your money doubles every 10 years (a 7.2% return -- using the rule of 72),
so your money has grown to 16X of the current value of 4K => 64K. The taxable portion is the gain, which is 64K - 4K = 60K.

Non-roth tax-deferred distributions are taxed as ordinary income and I'll assume you'll be in a mid-high bracket at the age of 70, due
to your accumulated wealth. Again, I'll assume incremental tax rates of today, so say you pay 30% of %60K, which is $18K.

1b) If your return were slightly better, say 9% a year, you would double every 8 years and your IRA would be 32X, and then you'd save roughly double of (1a) in taxes, say $36K.

2) Tax simplicity.
A Roth frees you from all the paperwork of calculating taxes on that IRA, since you're not taxed again. Ever.
If it remains a non-Roth IRA, when you get distributions, you're forced to assume you're getting a proportional amount
from your basis (the 4K on which you've paid taxes) and the gains (for which you owe taxes).

3) Flexibility.
If it is a Roth, you're not subject to mandatory distributions (I think), so you can pass it along after your death, possibly
having the recipient get a stepped up basis.

It's anybody's guess if the 2010 law letting anyone recharacterize a traditional IRA to a Roth will stand until then.

Were it me, I'd recharacterize.