Since the company match is also pretax, the entire balance of the 401(k) will be taxable when you convert it to a Roth option 401(k). Whether or not this makes sense for you is extremely complicated, and you might want to pay for competent advice from a financial planner.
Here are some thoughts, in no particular order.
1. The biggest question is, do you want to pay taxes now or later? If you leave the money in the pretax account, you will pay income tax as you withdraw. If you do the conversion, you will pay the income tax now, and no tax when you withdraw in retirement. Most people will be in a lower tax bracket when they retire. However, you might believe that tax rates will increase, or you might expect such a large retirement income that you won’t have a tax rate difference between now and later.
2. If you convert the money to a Roth 401(k) at some point between now and retirement, Roth accounts do not have an RMD. This gives them an advantage over traditional pretax 401(k)s and IRAs.
3. When you retire, up to 85% of your Social Security benefit may be taxable if you have other taxable income, but if you have no other taxable income then your Social Security benefit is tax free. Therefore, we can imagine a situation where, if your retirement account was pretax, withdrawing money for your living expenses will be taxable plus you will pay taxes on your Social Security, but if your retirement money is in a Roth account, then your withdrawals are not taxable and so your Social Security will also not be taxable.
4. Can you even afford to pay the taxes on the conversion? For example, if you want to convert $100,000 to a Roth account, you will have to come up with a minimum of $22,000 in federal income tax from other sources; you can’t withdraw part of the money as cash to pay the taxes on the rest of the conversion. (you could of course make smaller conversions; if you converted $10,000 a year for the next 10 years, you would have to come up with $2500 per year for the income tax, and that might be affordable for you.)
Ultimately, a decision to do a Roth conversion means paying tax now instead of later. Whether that is right for you depends on many factors.
