Undoing that Conversion

by Joe on October 11, 2012

Early on, we discussed the Roth IRA Conversion, and soon after, the Roth IRA Recharacterization.

It’s important that you know the deadline to recharacterize any conversion you made in 2011 is fast approaching. Monday October 15th is the deadline, and if for whatever reason you with to take a do-over on any or all of the money you converted, it’s time to move fast. You don’t need any particular reason to do so, the forms to do this don’t ask why, just what (assets to recharacterize) and where (which accounts are involved).

I’ll offer the two top reasons you might want to do this – The value of the stock or fund you converted has dropped, why pay tax on $25000 when the investment is now worth only, say, $20,000? Or, you prefer not to take the ta hit just yet. A large conversion can result in a large tax bill, and you may not have the money to cover the bill you realized you created for yourself this past April.

Remember, you can wait 30 days and convert again. You’ll then have until next October to decide if your really meant it this time.

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