Uhg, some more researching has made the decision a lot more complicated.
I have about $15,000 already in a rollover IRA from my former employer's 401k plan. It rolled over at about a $3000 balance a few years ago and I managed to do some market timing to get it up to $15000 (really was just playing around with it since I didn't consider it serious money at the time).
I just read that the IRS will treat all IRAs as one account for a Roth rollover in determination of tax liability. So if I contribute 5000 in 2009 to a non-deductable IRA then try to roll over that $5000 to a Roth in 2010, the IRS will make me take a percentage of the $5000 out of the 401k rollover IRA I already have and a percentage out of the non-deductable IRA I created in 2009. Most of the money would come out of the taxable rollover IRA since it has a much higher balance. Thus I would end up having to pay a pretty high tax now on the rollover.
So I think it might only make sense to do the Roth for my wife, who has a 401k with her employer, but no other IRA.
