Does this Roth conversion strategy work: I am 65 and will retire in a few months. I roll over $100,000 from my 401(k) to a Vanguard variable annuity with a so-called “Guaranteed Lifetime Withdrawal Benefit,” also known as a “GLWB.” (If you don’t know what this is, see https://personal.vanguard.com/us/whatweoffer/annuities/guaranteed-lifetime-withdrawal-benefit .)

When I retire in a few months, I begin taking annual guaranteed distributions at 5%–that is, $5,000 per year. The GLWB rider on the Vanguard account guarantees me that I will receive a minimum annual amount of $5,000 for the rest of my life, although annual distributions possibly could increase if the value of the Vanguard portfolio rises above $100,000. Assume, however, that the portfolio goes the other way and drops to, say, $10,000 in a couple of years. Under the GLWB guarantee I would still be entitled to receive annual distributions of $5,000 because the guaranteed distribution is keyed off the $100,000 amount that I initially invested and is not reduced if the portfolio value drops (even if the portfolio drops to zero!). Lastly, assume that when my Vanguard portfolio has dropped to a value of $10,000 I decide at that time to convert the account from a traditional rollover IRA to a Roth IRA.

Here’s my question: In this scenario do I have only $10,000 of taxable income to report as a result of the Roth conversion, even though I’m still entitled to receive (and in fact am receiving)annual distributions of $5,000? If this strategy works, it would mean that the $5,000 annual distributions to me would be tax free forever and (on these assumptions) at a tax cost of including only $10,000 in my taxable income as a result of the Roth conversion.