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Variation on ROTH horse race conversion method
Old 01-09-2017, 02:21 PM   #1
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Variation on ROTH horse race conversion method

Originally Posted by GrayHare View Post
Per another thread, it's even better to convert at market lows.
Given the mention of the "horse race method" of ROTH conversions I was pondering a related scheme:

1. Convert the amount I want to convert this year early in the year.

2. IF the market declines (say by more than a few percent), do another conversion. Later recharacterize old conversion back to tIRA. Each conversion would be into a "fresh" ROTH IRA, which can be consolidated later.

Repeat until year end.

This would allow me to do the ROTH conversion at (roughly) the market low for the year.

Anyone see any issues with this?
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Old 01-09-2017, 02:31 PM   #2
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Well, for one thing it's tedious IMO. Also, the recharacterization rule was implemented to permit people to correct tIRA / Roth contributions should their earned income estimate be off. If enough people use recharacterization for other purposes, the IRS will notice and add limits, similar to what they did to thwart people who were rolling over IRAs multiple times per year so they could hold the money outside their IRA for 60 days.
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Old 01-09-2017, 02:35 PM   #3
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What you describe has been called the "leapfrog" technique and has been discussed extensively in the BH forum and also by Michael Kitces. It's not at all that hard, but if you're going to do it, you must be careful to do it correctly (don't want those nasty IRS people nullifying your efforts). I did the horse race last year but will use the leapfrog technique going forward.

Here's a prior post with links:
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