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Trad IRA to Roth Conversion Question
Old 01-15-2016, 09:08 AM   #1
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Trad IRA to Roth Conversion Question

Would this be a good week to perform a conversion for this year ( Trad to Roth IRA) ?
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Old 01-15-2016, 09:18 AM   #2
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Well, it is better today than it was last week. Who knows what next week will bring. :-)

You could do multiple conversions over the course of the year and employ recharacterization strategies to optimize: https://www.irs.gov/publications/p59...link1000230671
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Old 01-15-2016, 10:23 AM   #3
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This certainly seems like a good day to do a partial conversion.

Maybe convert a small chunk (maybe $10-20K?) on days you think are the bottom (keep each one in a separate account/fund so you don't mix monies). Then near year's end (or at the start of next year), keep the conversion(s) with the lowest price and recharacterize the rest (again, to a separate account/fund).
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Old 01-15-2016, 11:13 AM   #4
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If I move money from tIRA to Roth and to keep the same allocation I move to the same fund, what difference does it make if it is in an up market or down market?
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Old 01-15-2016, 11:47 AM   #5
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Quote:
Originally Posted by SoReady View Post
If I move money from tIRA to Roth and to keep the same allocation I move to the same fund, what difference does it make if it is in an up market or down market?
You have to pay taxes on the conversion, unless you can convert in the 0% tax bracket. So if you move on a down day you'll pay less tax. But if you are staying within the 15% bracket the difference probably won't be significant, so it really doesn't matter that much, unless like many of us you like to play tax savings games. Or if the market drop is huge.
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Old 01-15-2016, 11:54 AM   #6
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If I move money from tIRA to Roth and to keep the same allocation I move to the same fund, what difference does it make if it is in an up market or down market?
Taxes.

Say for the same asset, assuming 25% marginal bracket.:

April price: $15/share -> convert 1,000 shares for $15,000, tax $3,750
July price: $10/share -> convert 1,000 shares for $10,000, tax $2,500
October price: $5/share -> convert 1,000 shares for $5,000, tax $1,250

Alternately:

April price: $15/share -> convert 1,000 shares for $15,000
July price: $10/share -> convert 1,500 shares for $15,000
October price: $5/share -> convert 3,000 shares for $15,000

Tax for each of those conversions is $3,750 but for the October conversion, you were able to shelter a lot more shares in the Roth than with the April or July conversion.
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