Roth Conversions & Recharacterizations

Many retirees can increase their future income and achieve significant estate planning benefits by converting tax-deferred traditional IRAs into tax-free Roth IRAs. For our clients, we illustrate the income tax and estate benefits that a Roth IRA conversion may provide.

As you may know, clients who convert traditional IRAs into Roth IRAs must pay income taxes when doing so. Because no one knows what tax rates will be from year to year, the annual benefits of converting are always uncertain.

Fortunately, a Roth IRA Recharacterization can be used as a “do-over” if tax rates change, or if the market takes a turn that might have meant a lower tax bill. Roth IRA recharacterizations allow taxpayers to undo Roth conversions within a specified time window.  

A well-designed Retirement Income & Spending Plan, utilizing Roth conversions and Roth recharacterizations, can add years of longevity to a retiree’s investment portfolio while possibly benefiting heirs and beneficiaries.

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