Roth IRAs: To Recharacterize or Not? - Part 2

Roth IRAs: To Recharacterize or Not? - Part 2

In Part 1, we looked at some positive provisions of the Pension Protection Act of 2006 (see the infographic).

3 Reasons to Consider Recharacterizing Your Roth IRA

Here are several reasons why an individual should consider recharacterizing his or her Roth IRA:

  1. Poor investment returns post Roth Conversion: the investment in the Roth IRA underperformed of had negative returns. We highly advise to never pay tax on a loss.
  2. Unprepared for the taxes: payment for the tax liability should never come from assets within the IRA or a home equity line.
  3. Significantly low tax bracket in future years: If a tax-payer projects future income to be less in future years, paying tax now may not be in their best interest.

In order to recharacterize a Roth back to a traditional IRA, the owner of the account should contact the custodian for the proper documentation. Please note that although the deadline for recharacterization is October 17, 2011, certain IRA custodians will require up to one week to process a recharacterization.

If you are uncertain whether you should recharacterize, please contact Coyle Financial Counsel for a complimentary Roth/Recharacterization analysis:

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