Roth conversion and change asset allocation
It seems that there could be potential traps when trying to do a Roth conversion and recharacaterization. Consider the following scenario:
Convert their IRA into several Roth IRAs with the concept that each Roth will be a different asset type bonds, int’l stock, domestic stock, etc.
After conversion, decide to re-allocate the assets within the Roth. So that now the assets that were converted are no longer the assets held in that account.
If someone changes the holdings, can that person recharacterize the Roth back to a traditional IRA?
Permalink Submitted by mk foss on Wed, 2010-08-11 21:55
A reconversion is done in terms of dollars or accounts. The assets within the accounts are not tracked. The reason that people convert to Roth’s with a specific asset class is to make it easier to reconvert the class. There should be no problem with changes to the asset allocation after the conversion. Normally after the recharacterization deadline, you’d fold the Roth accounts together for ease of management.