There is another option here. And it is to your advantage, because of how penalties are calculated.
First, remember you must take the RMD from the IRA before you can do any conversion.
Then, do the conversion and have taxes withheld (12-22% in most cases, plus a percentage for the state). Then you will make up the difference by a separate rollover from the savings account.
For example, suppose you want to convert $10,000. You could convert $10,000 and then make an estimated tax payment on the IRS web site of $2200. But instead, suppose you convert $10,000 with 22% withholding. That will result in $7800 being added to the Roth IRA. Then, within 60 days after the conversion, you will deposit $2200 from the taxable savings account into the Roth IRA. It is important that you tell the Roth IRA custodian that this is a rollover/conversion, not a contribution. The custodian does not need to know or care that this is part of the other conversion, that is up to you to certify when you file your tax return. Same net $10,000 goes into the Roth IRA, the difference is that the IRS gets $2200 as withholding instead of as an estimated payment.
If you do your conversion in the second half of the year, this is to your advantage because of the different ways that the under-payment penalty is calculated for withheld payments vs estimated payments. If you make a large conversion and estimated payment late in the year, you will likely be assessed an underpayment penalty unless you include form 2210 with schedule AI (the annualized income method of estimating payments). Having the taxes withheld and making up the difference avoids this situation. (I can give you the full technical description if you want.)
It is important, if using this method, that your separate deposit clears in 60 days or less from the direct conversion. And, you can only use this method once per calendar year.
On the other hand, if you do the conversion in the first quarter of the year (Jan 1-March 31), you can spread out your estimated payment without risk of penalty. That is, if you convert $10,000 in January without withholding, you can make your estimated payment of $2200 in 4 installments of $550, which are due April 15, June 15, Sept 15 and Jan 15 of the next year. This would allow you to keep your money in the interest-bearing account as long as possible. Again, this is because of how the penalties are calculated and I could give you a longer technical explanation if you want.
