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all of you who procrastinated, had superior market forecasting ability, or, for whatever reason, were fortunate
enough not to convert your traditional IRA funds into a Roth IRA during earlier periods of elevated market values,
you now have a double edged opportunity.If you convert now, at the currently lower market values, you will pay less tax because you pay only on the current market value. If, from this point, you experience a recovery of the value and/or a return to historic long-term rates of return, all of that increase in value will come to you tax-free out of the Roth IRA. If the current economic situation has caused you to experience a temporary reduction in income or you can realize a loss elsewhere on your tax return, you can even convert to a Roth IRA at a lower tax bracket than you would have in the past. So if you have any traditional IRA funds you should consider if this is the right time to convert. Don't forget, this opportunity also applies to rollover IRA funds that may have come from a prior employer's 401(k), SIMPLE, or pension plan. So, if you have lost your job or changed employers you should consider first rolling into a traditional IRA and then converting to a Roth IRA while you have the opportunity for lower taxable values and long-term, tax-free growth. Chartered Financial Analyst (CFA®) Jim Haring is Founder and President of Schubert Financial Associates. |
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