Press Room

August 16, 2011

Has the Value of Your Roth IRA Declined Since a Recent Conversion?

During the first week of August the Dow Jones Industrial Average and the S&P 500 fell by 11.2% and 13.3%, respectively. This unfortunate situation creates an opportunity for those who may have converted a regular IRA to a Roth IRA in 2010 or an earlier point in 2011.

Over the last two years we have advised that our clients with sizeable balances in their traditional retirement accounts convert these accounts to Roth IRAs for a variety of reasons. The conversion of a traditional retirement account to a Roth IRA causes the balance of the account to be subjected to income tax at the individual’s highest marginal rate. Those who converted to a Roth IRA during 2010 or 2011 can take advantage of the recent substantial drop in account values by recharacterizing the conversion, which essentially reverts the Roth IRA back to its original status. You may then reconvert to a Roth IRA at a lower account value, thereby reducing the tax liability from the conversion.

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